What Is eID?

Short for electronic identity, eID is a method whereby an individual or organisation can digitally confirm their identity. Whether on a government portal, online bank, or a private platform, an eID allows a person to authenticate themselves in a secure way via a government-issued or government-recognised credential.

Established under eIDAS, eID schemes enable cross-border authentication throughout the EU. This means that users have a secure way to access online services or transactions across the bloc.

National eID schemes can vary quite a bit in form. Some countries have a physical smart card with a chip inside. In others, such as Denmark's MitID, eIDs are primarily mobile or app based. Here, we'll explore how eIDs work in practice, what regulatory schemes they fall under, and what they mean for financial services.

How does eID work?

eID speeds up any kind of authentication that would have historically needed to be done in person. When you want to access a service that requires identity verification, such as opening a bank account, you authenticate using your eID instead of presenting a physical document.

Now, how you authenticate depends on the type of eID your country uses. With a smart card, for example, you might need to use a card reader or tap it against your phone. With an app-based eID, you’d likely open the app and approve the login directly on your device.

On a technical level, an eID works like this: your eID credential is cryptographically signed by the authority that issued it. This means that the entity receiving the signal can verify it is genuine without needing to contact the issuer directly, making it both fast and secure.

Under the current eIDAS framework, each member state running an eID scheme can notify it to the European Commission. This makes it eligible to be recognised across borders, meaning other member states are obliged to accept that eID for access to public services online.

Levels of assurance

It might not be a surprise to learn that not all eID credentials are created equal. eIDAS defines three levels of assurance (LoA) that describe how much trust can be placed in a given electronic identification method.

Low assurance applies in situations where the identity of the eID holder has been verified to a basic standard. This level is for lower-risk services where the consequences of a false identity are limited.

Substantial assurance applies where identity has been verified more rigorously, typically through a mix of identity document checks and a live interaction of some sort. Cross-border mutual recognition under eIDAS is mandatory from this level upward.

High assurance is the most rigorous standard, requiring robust identity confirmation and strong authentication mechanisms. This is the level required for the most sensitive services — including financial services. It's also the level at which the EUDI Wallet is certified to operate.

eID and the road to eIDAS 2.0

The original eIDAS regulation from 2014 made the EU-wide recognition of notified eID schemes mandatory, yet allowed member states to decide whether they wanted to operate a national eID scheme. This led to substantial variations in adoption levels, with some countries building widely used national systems and others lagging behind.

eIDAS 2.0, entering into force in May 2024 as Regulation (EU) 2024/1183, addresses this by making digital identity wallets mandatory for all member states by December 2026. Rather than replacing national eID schemes, the EUDI Wallet effectively builds on them: national PID providers issue a Person Identification Data (PID) into the EUDI Wallet. The national eID handles the high-assurance authentication event at the point of Wallet setup. Once established, the wallet takes over for day-to-day credential presentations, such as age verification, without requiring the national eID system to be involved in every single transaction.

What eID means for financial services

For regulated financial institutions, eID schemes are essential for meeting Know Your Customer (KYC) and, by extension, Anti-Money Laundering (AML) obligations. It means less reliance on manual document verification, enabling fully digital onboarding flows. Over the long term, this will reduce overhead costs and speed up signups and re-KYC for customers and businesses alike.

However, because of the fragmented nature of eIDAS, some financial institutions will have some catching up to do to prepare for accepting eIDs from across Europe.

From 2027, the acceptance obligations introduced by eIDAS 2.0 will require large organisations in regulated sectors, which includes financial services, to accept the EUDI Wallet as a valid means of authentication wherever Strong Customer Authentication (SCA) is required. If your institution has already integrated a national eID scheme, you’ll be well positioned to extend that integration to EU-wide eID and, eventually, EUDI Wallet acceptance.

Understanding the levels of assurance applicable to different eID schemes is also an ongoing compliance consideration. A mismatch between the assurance level of an accepted credential and the risk profile of the service it is used to access can create regulatory exposure.

FAQs

What is the difference between eID and the EUDI Wallet?

An eID is a national electronic ID credential used for confirming who a person is online. The EUDI Wallet is a digital application that stores and presents a broader range of verified credentials. The two are complementary: eID authenticates the user and the wallet then handles routine credential presentations.

Does every EU country have an eID?

Not all EU member states have notified an eID scheme under the current eIDAS. However, eIDAS 2.0 mandates that every member state provide a digital identity wallet to all citizens and residents by December 2026, which will significantly close the gap in coverage.