KYC remains a critical pillar for security and compliance, supported by multiple types of evidence—documentary, biometric, behavioral, and contextual—that enable robust risk assessment. However, one of its most costly components from an operational and user-experience standpoint is the repeated capture and validation of identity documents, which is replicated in every digital onboarding, even when the underlying evidence has not changed.
The Limits of Traditional KYC
In most organizations, KYC has become a simultaneous bottleneck for conversion and regulatory compliance. Manual or semi-manual verification multiplies response times, operating costs, and the duplication of personal data, while compliance teams struggle to keep pace with new AML/CFT and identity integrity requirements.
Added to this regulatory pressure is the rise of identity fraud, deepfakes, and document impersonation, which forces tighter controls without a truly standardized framework across entities and jurisdictions. This fragmented model requires a significant share of operational effort to be spent on repeated, low–value-added verifications, rather than focusing on advanced risk signals such as behavioral biometrics, device intelligence, and contextual analysis—key to detecting sophisticated fraud and impersonation in digital environments.
From “Always Verify” to “Verify Once”
In this context, a new identity paradigm emerges: not stopping verification for each service, but avoiding the repeated issuance and validation of the same evidence at every onboarding. Reusable digital identities allow a credential—issued once after a robust verification aligned with regulatory requirements—to be reused as reliable evidence across multiple onboarding processes, without replacing onboarding or the entity-specific controls each organization applies.
The strategic impact is twofold. On the one hand, organizations reduce the cost and friction associated with repeatedly capturing already validated evidence, relying on credentials issued by trusted third parties. On the other, onboarding still exists but is simplified: instead of rebuilding identity from scratch, it relies on a verified base on which each entity applies additional controls for risk, context, and behavior.
Verifiable Credentials and Identity Wallets
A verifiable credential is, in essence, a cryptographically signed digital certificate issued by a trusted entity—a government, bank, university, or qualified provider—that the user stores in an identity wallet under their exclusive control.
From that wallet, individuals can share only the strictly necessary attributes in each interaction—from proving age or residence to confirming the validity of a document—without exposing the rest of their personal information. Cryptography ensures authenticity, integrity, and non-repudiation, while advanced techniques such as Zero-Knowledge Proofs make it possible to prove sensitive claims—for example, “I am over 18”—without revealing the date of birth or other underlying data.
How KYC Is Transformed with Reusable Identity
Applied to KYC and onboarding, this model introduces significant changes:
Users obtain a digital identity credential through an independent issuance process carried out by an authorized issuer—public or private—that performs a high-assurance identity verification supported by biometrics and advanced document validation. This issuance process is distinct from the KYC each entity performs during its own onboarding, except where the entity itself acts as the credential issuer.
From there, organizations can consume verifiable credentials issued by third parties as identity evidence, replacing repeated document capture—front, back, and associated checks—with a standardized, cryptographically verifiable format.
KYC and onboarding processes still take place at each entity, but they rely on already validated evidence, reducing response times, user friction, and the risk of human error in document handling.
Organizations no longer store redundant copies of documents and sensitive data across multiple internal systems, reducing their attack surface and exposure to data breaches.
User identity becomes dynamic and updatable: if a data point changes (for example, an address), the issuing credential can be updated instead of replicating the change across dozens of databases.
The outcome is not a shared KYC, but a more efficient use of identity evidence within KYC. Verifiable credentials are not the result of KYC; they are a standardized way to represent a previously verified identity that can be reused as reliable evidence across different onboarding processes.
For compliance teams, this translates into better traceability of the evidence used and clearer, more consistent audit processes. For the business, the impact is not about removing controls, but about accelerating time-to-yes by reducing operational friction in document validation within digital products.
Regulatory Momentum: eIDAS 2.0 and EUDI Wallets
Europe is positioning itself as one of the main catalysts of this new digital identity framework. With eIDAS 2.0, approved in 2024, EU Member States must provide citizens and businesses, from 2026 onward, with a European Digital Identity Wallet (EUDI Wallet) interoperable across the EU.
This EUDI Wallet will allow users to store and manage verified credentials issued by both public administrations and qualified private providers, and to share them with any public or private service within the single market, with granular control over which attributes are disclosed in each interaction. For highly regulated sectors—financial services, insurance, online gaming, telecommunications, healthcare—it offers a direct path to reducing reliance on manual document-handling processes and fragmented controls, replacing them with standardized, auditable, and legally recognized verifiable identities across all Member States.
Strategic Advantages for Banking, Fintech, and the Public Sector
Adopting reusable digital identity is not merely a technological evolution; it is a strategic decision about compliance architecture and customer experience. Key benefits include:
- Less friction and higher conversion in critical processes such as digital onboarding, remote contracting, or service expansion, by reducing forms, document uploads, and waiting times.
- Lower operating costs by optimizing document evidence management within KYC, reducing repeated document capture and associated validations, and easing the burden of manual reviews caused by inconsistencies, reprocessing, or documentation errors.
- More robust compliance, supported by standardized, auditable credentials aligned with frameworks such as eIDAS 2.0, AMLD, and national sector regulations.
- Reduced risk surface and less sensitive data stored in internal systems, lowering the potential impact of cybersecurity incidents and simplifying data governance.
- A more coherent omnichannel experience, where identity travels with the user across services, countries, and devices without requiring them to repeatedly prove who they are.
A Decade Shaped by Reusable Identity
The adoption of reusable digital identities does not replace KYC; it is a continuity innovation at one of its most operational layers: the capture and validation of identity evidence, particularly identity documents. While it does not redefine KYC as a global framework, it introduces a structural improvement in how evidence is managed within identification and verification processes.
For banking, fintech, and the public sector, anticipating this shift means beginning to integrate verifiable credentials, identity wallets, and distributed trust models into their digital transformation roadmaps.
Organizations that lead this evolution will be able to combine three objectives that have long seemed in tension: maximizing security, reducing friction, and accelerating growth. The key is not to replace KYC, but to modernize how identity evidence is captured and managed—evolving from repeated handling of physical documents or isolated captures toward verifiable digital formats that coexist with advanced risk signals such as behavioral biometrics, device intelligence, and contextual analysis.