Fraud is a persistent issue in electronic payments. Every year, businesses and consumers lose billions due to unauthorized transactions, phishing attacks, and payment fraud. The financial industry has spent years building security layers to combat these threats, but the methods used today are often clunky and disruptive to users.
Dynamic linking changes this. It adds a layer of security that directly ties the authentication process to the specific details of a transaction. This makes it nearly impossible for an attacker to modify a payment without invalidating the authentication, significantly reducing fraud risk.
Under the PSD2 regulation, dynamic linking requires that each electronic payment authorization is directly tied to the transaction details, specifically the recipient and the amount. If any of these details change during processing, the authentication fails, preventing unauthorized modifications.
For example, when you authorize a payment of €100 to a specific vendor, a unique authentication code is generated and linked to that exact transaction. If an attacker tries to alter the amount or change the recipient, the authentication becomes invalid. This ensures that payments remain secure from manipulation.
The European Digital Identity Wallet (EUDI Wallet) integrates dynamic linking directly into its authentication process. Instead of relying on one-time passwords (OTPs) or app-based approvals, which can be intercepted or manipulated, the EUDI Wallet binds transaction data to cryptographic authentication, making the process tamper-proof.
When a payment request is initiated, the wallet displays the exact transaction details to the user before authentication. The user confirms the transaction using biometric authentication or a secure PIN, and the wallet then generates a cryptographically bound approval. If any element of the transaction is changed, the authentication is rejected automatically.
For banks and payment service providers (PSPs), integrating dynamic linking through the EUDI Wallet simplifies compliance with PSD2 while improving security. Instead of implementing complex multi-step verification processes, they can rely on the wallet’s built-in authentication system to verify transactions securely.
This also reduces friction for users. Traditional multi-factor authentication methods often introduce delays and frustration, leading to increased transaction abandonment. Dynamic linking eliminates unnecessary steps while maintaining security, allowing users to approve payments quickly and without hassle.
Man-in-the-middle attacks, phishing attempts, and payment tampering all rely on the ability to alter transaction details unnoticed. Dynamic linking stops these attacks by ensuring that any unauthorized change immediately invalidates the payment authorization. This prevents fraud at the source rather than detecting it after the fact.
Because dynamic linking is cryptographically enforced within the EUDI Wallet, even advanced attacks that attempt to bypass traditional security layers are ineffective. Fraudsters cannot modify transaction details or intercept approvals without detection.
The EUDI Wallet and dynamic linking aren’t just security upgrades, they represent the next step in digital payments across the EU. As eIDAS 2.0 regulations roll out, banks and PSPs will need to adapt. Those that integrate dynamic linking early will not only meet compliance requirements but also provide a superior user experience and stronger fraud prevention.
Payment security is always evolving. The combination of dynamic linking and digital identity wallets ensures that transactions remain safe, fast, and user-friendly. This is where the future of secure payments is headed. Now is the time to start integrating these changes into your payment systems.
