Never Heard of 'eIDAS'? Here's Why This Regulation Will Benefit Europe's Cross-Border Economy

It is the common legal framework for trust services in the EU. Here is what you need to know about it.
Never Heard of 'eIDAS'? Here's Why This Regulation Will Benefit Europe's Cross-Border Economy
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Co-CEO of WebID Solutions GmbH
6 min read
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On September 28, 2018, the European Union obliged its 28 member states to recognize a new rule that was first introduced in late 2014. The regulation concerning eIDAS, which stands for electronic identification, authentication and trust services, has been shaped to revolutionize cross-border collaboration, as well as to reduce the time and effort needed for various administrative tasks.

With our world being in a significant technological shift while transforming into the fourth industrial revolution, this piece of legislation can have a powerful impact on the economy and future law-making in the European Union. However, despite being a beneficial complement to everyday business practices, hardly anyone has heard of it, let alone made use of it.

This is a quite unfortunate situation, as almost every entrepreneur who is engaging in European business should be interested in it.

The thoughts behind eIDAS.

Practically every single person in industrialized countries, particularly entrepreneurs, are required to verify their identity in person from time to time. Do you intend to rent a new apartment? Please visit our office and sign on the dotted line. Need to submit your annual tax report? Print it, sign it, send it to the tax department.

While this might not seem to be a tremendous hurdle at first, things can get complicated once transnational components are involved. Registering your business in another country, signing up at a foreign university or finishing contracts with international companies may get tricky and time-consuming if a personal signature is necessary.

By introducing the eIDAS regulation, that urged all EU member states to recognize electronic signatures and seals, qualified digital certificates, as well as timestamps with the identical legal standing as paper transactions, the European Commission was looking to spark digitalization and innovation within the EU.

Moreover, since several EU members, like Germany and the United Kingdom, already accepted digital signatures for about a decade, the rule is also seen as a legal framework to support interoperability, transparency and security of electronic identities (eIDs). The vision behind the eIDAS concept is not only that members of the European Union acknowledge eIDs from other member states, but also to ensure the authenticity and safety of digital identification methods.

How it works.

In order to guarantee a secure and credible signature, the eIDAS regulation consists of four crucial elements. From a legal standpoint, the so-called advanced electronic signature (AES) is a basic digital signature that contains unique information to identify its signatory, such as the name, birth date and address. An advanced signature turns into a qualified electronic signature (QES) if it is created by a qualified electronic signature creation device, which is similar to a TAN generator in online banking.

Both signatures require a qualified digital certificate, which is issued by a qualified trust service provider and attests the authenticity of an electronic signature. A trust service is undoubtedly the most critical link in the chain, as it is responsible for verifying the information and data submitted by the owner of a digital signature. In order to verify the information required for a digital signature and to optimize user satisfaction, trust service providers collaborate with identification services.

Once an electronic signature has been successfully created and verified, it is possible to sign all kinds of documents or contracts conveniently from at home or even with your smartphone while traveling -- no matter if the issuer of the paper is situated in the United Kingdom or Spain.

eIDAS and new chances.

Obviously, a transnational regulation concerning electronic signatures is a massive step forward for trust service providers, as well as identification services. Since QES and co. are now Europe-wide accepted, competition for providing the best digital signatures has been ignited across the continent.

Additionally, there are at least half a dozen other industries that will be heavily influenced by the rise of electronic signatures. Two of the most prominent instances include the insurance and finance sectors. So far, both insurance and financial services are domains that are usually handled in domestic environments only. Yet, the current situation might be primed for a change.

Given that a German insurance company -- in collaboration with a trust service -- can now offer insurances to Italian citizens online, the whole industry will be subject to sharply increased rivalry. From now on, it is no longer legally relevant in which country a service provider resides, but instead if the quality of the service and products is actually more convincing.

By stimulating the digital single market, eIDAS will urge finance and insurance companies, which are often regarded as participants of quite slowly advancing industries, to step up their game and focus on improving their offerings. As usual, the most convincing technical and customer-oriented solutions will dominate.

A multi-billion-euro regulation.

Digital IDs are expected to significantly cut costs and time resources needed for various administrative tasks. According to the European Commission, the growing use of eIDs will save EU businesses north of €11 billion per year, as there is no longer a need to print documents and categorize them manually. This equals a reduction of expenses by 80 to 90 percent in contrast to traditional methods.

Furthermore, by collaborating with an identification service instead of having a direct link to a trust service, it is possible to optimize user satisfaction, to increase conversion rate and to diminish operation costs even further. Since identification services collaborate with several trust services at the same time, they are often able to offer better pricing structures. Many WebID clients, such as Barclaycard and Check24, were also able to increase conversions and to benefit of the ability to immediately switch their trust service provider during a breakdown.

Nevertheless, the hoped-for boom has not occurred so far. To achieve a faster adoption in the European business world, the European Commission is appealing to small and medium-sized enterprises in Europe. ”I would like to see SMEs in particular make more use of eID and electronic signatures, to protect and improve their activities across Europe,” said Andrus Ansip, the current European Commissioner for Digital Single Market and Vice President of the European Commission.

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