#basics_Digital wallet

From Barter to Digital Wallet: The Evolution of Payment Systems and New Models of Identification

The evolution of payment systems is a fascinating journey that spans from primitive bartering to modern digital wallets, marking a steady progress towards increasingly efficient and secure transaction methods.

Evolution of Payment Systems

Payment systems have undergone radical transformations throughout history:

- Primitive currency: Initially, societies used valuable objects like shells for bartering.

- Metal coins: With the advent of civilizations, gold and silver coins became standard mediums of exchange.

- Banknotes: The introduction of banknotes by banks further facilitated trade.

- Digital systems: In the digital age, payments can be made quickly and securely via the internet and mobile devices.

Digital Payment Systems Today

Today, digital payment systems have become an integral part of our daily lives. Methods like credit cards, online bank transfers, electronic wallets, and cryptocurrencies have made payments more convenient and accessible. Additionally, smartphones have introduced digital wallets, which can store credit and debit cards as well as other loyalty cards. Among the most well-known digital wallets are Apple Pay and Google Pay, which allow users to make secure payments with their smartphones. These systems represent just the beginning of an era in which digital payments will become increasingly integrated with other digital services, including those for user identification.

Popular Digital Wallets

The already mentioned wallets from the most well-known smartphone companies are among the most widely used in the world. Both offer the possibility of storing credit and debit cards in their systems, allowing contactless payments via smartphone or smartwatch. Security is a central element: both services use tokenization technologies that replace sensitive card data with a unique identifier, making it harder for fraudsters to access the information.

- Apple Pay: Deeply integrated into the Apple ecosystem, offering a smooth and intuitive user experience. It allows payments in physical stores, apps, and websites, using Face ID or Touch ID for authentication.

- Google Pay: Known for its flexibility and compatibility with a wide range of Android devices. Besides payments, Google Pay also allows money transfers between users, storing event tickets, and loyalty cards.

These digital wallets represent a growing trend towards the adoption of contactless payment technologies, offering not only convenience but also greater security compared to traditional payment methods.

Beyond Payments

The European Union is making significant strides towards the digitization and security of its citizens' data. One of the most significant initiatives in this context is the introduction of the European Digital Wallet under the eIDAS 2 (electronic IDentification, Authentication, and trust Services) regulation. The eIDAS 2 regulation aims to provide a clear and secure legal framework for digital identification and electronic trust services in the EU. This update to existing regulations intends to strengthen trust in cross-border digital services and facilitate access to a wide range of public and private services across Europe.

eIDAS 2: Enhancing Digital Trust

The new eIDAS 2 regulation, approved in 2023, marks a significant advancement in digital identity verification and trust services. Key updates include:

- Unified Digital Identity: The regulation mandates that all EU member states provide a European Digital Identity (EUDI) Wallet to their citizens, standardizing digital identification across Europe.

- Cross-border Recognition: Ensures that digital identities and signatures are recognized and accepted across all member states, promoting seamless interactions.

- Enhanced Security Measures: Introduces stronger authentication methods and data protection measures to safeguard user identities and transactions.

- Inclusion of Private Services: Extends the scope of trusted services to include not only public services but also private sector services, such as banking and e-commerce, thereby broadening the usability and acceptance of digital identities.

European Digital Identity (EUDI) Wallet

The EUDI Wallet is an ambitious EU project that aims to provide European citizens with a digital wallet containing all their identity documents. This wallet, similar in some respects to the Italian SPID system, will allow citizens to store and use documents such as the electronic identity card, passport, voter card, driver's license, and health card. In addition to this, it seems that the EUDI Wallet will also allow for managing payments, possibly through Digital Euro.

Benefits of the EUDI Wallet

The EUDI Wallet offers several advantages, including:

- Accessibility and Convenience: Users will always have their essential documents at hand, eliminating the risk of losing or forgetting them.

- Security: The infrastructure will be protected against fraud and identity theft, ensuring a robust authentication system.

- Versatility: It will allow a wide range of operations, such as paying taxes, signing contracts, opening bank accounts, and checking into hotels.

- Interoperability: Documents will be recognized in every European country, simplifying travel and cross-border interactions.

The EUDI Wallet project is in an advanced stage. After starting work in 2021 and concluding negotiations in November 2023, the EU plans to establish all technical specifications within 6-12 months. The official launch and initial testing will likely begin in 2024, with full implementation expected by 2025.

Thus, a bright future awaits digital wallets, which will represent a new model of customer data management and play a key role in the evolution of future banking payments.