Why European Business Wallets Need the LEI to Connect Identity Compliance Dots

Most corporate treasurers and financial institutions know that the European Business Wallet (EBW) is imminent. From 2028, when EU-wide adoption will begin, it is expected to become a foundation of Europe’s digital economy and a catalyst for its growth.

As a core element of the European Commission’s digital package, the EBW aims to streamline administrative and compliance tasks for businesses, by giving organizations one single digital identity that can be used across all 27 EU Member States. The intended result? That it will be easier to ‘do business’ across Europe. Management teams will spend less time on ops and compliance as identity-related checks and tasks that were once manual are automated by using the EBW. This frees up more time to innovate.

While it all seems well intentioned and considered on the surface, there are many complexities involved in building an identity tool that will become essential to corporate treasurers and financial institutions across Europe. And this is the crux of it. The success of the EBW will be dependent on how much value it delivers, because private sector adoption will not be mandated. Only public sector bodies will be legally required to accept EBW-based identities under the EUDI Framework. Beyond that, it’s up-take will be driven by market demand. It therefore needs to add value by addressing existing challenges faced by those expected to use it.

So what is a key challenge faced by corporate treasurers and financial institutions? In one word, compliance.

If the EBW is to become an essential identity tool in Europe’s new trust services framework, it has to connect the identity compliance dots – across eIDAS, EU and global financial services regulation. The Legal Entity Identifier (LEI) is well established within EU and global financial services regulation as an obligatory compliance layer for entities engaging in, or facilitating, financial transactions. Its inclusion within the EBW is therefore critical if the wallet is to be useful and useable.

Presently however, the LEI is recognized within the EUDI framework architecture as an entity identifier that may optionally be included in Legal Person Identification Data (LPID). Its presence is not mandatory within EBWs. Whether or not the LEI will be included is a decision that will be taken by individual EU Member States as they develop their national wallets. The risk with this approach is that technical decisions are being made now without the critical input of the communities expected to use the wallets. The unintended result may be limitations on how the wallets can be used in the future – and as a result, how successful they will be.

For corporate treasurers and financial institutions, the value of the EBW will lie in it reflecting their identity and compliance needs. And ensuring that the LEI is a mandatory EBW attribute will result in the following benefits:

• Compliance with EU and global financial services regulation

The LEI will act as a digital compliance layer within EBWs, allowing it to be used for conformance with financial services regulation not just in Europe, but across the world.

By connecting the EU and global compliance dots across onboarding, payments, capital markets, transaction reporting and anti-money laundering requirements, it uniquely supports digital trade across borders.

When an LEI is embedded in EBW credentials, it enables verified entity data to be extracted automatically from the Global LEI Index. It also provides access to continuously updated reference information, allowing automated updates and alerts. This moves onboarding and KYC processes away from traditional, time-consuming and error-prone manual checks and verification, providing onboarding efficiencies for all organizations involved.

• Enhanced downstream transactions

As digital business grows, and ecosystems expand and become more connected, the presence of a trust infrastructure that facilitates cross-border and cross-sector trade becomes more critical. Inclusion of LEIs within EBWs can support fraud reduction in payment verification, automated reporting, and streamlined eInvoicing workflows. It provides an established, universal, and interoperable trust mechanism that can be used across separate systems and digital public infrastructures.

There will be plenty of new EBW use cases that emerge in the years ahead. Wallets that have the LEI as a mandatory attribute can support the automated generation of verifiable LEI (vLEI) credentials. The vLEI is particularly relevant for complex, high-assurance use cases, where enhanced verification and stronger interoperability standards are required and the mitigation of risks, automation of processes, and transparency are essential. It is highly valuable within supply chain management (e.g. Digital Product Passports) and digital assets activity (e.g. smart contract execution).

Corporate treasurers and financial institutions are encouraged to make their needs known. This is a time-sensitive issue which is pivotal to the effectiveness of the wallet as an invaluable trust tool capable of simplifying regulatory requirements and automating due diligence processes.

It is crucially important that technical decisions taken while national wallets are being developed support the business requirements of future wallet users. It is equally important that the LEI becomes an essential attribute in the EBW ecosystem and that it is considered in the upcoming implementing acts of the European Business Wallet Regulation.