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Digital Credentials & Passkeys: Transforming the Payments Landscape
Digital credentials are quickly becoming a foundational element in streamlining online interactions, with the ability to verify identity, age or payment authority securely and efficiently. Combined with passkeys, digital credentials are starting to reshape the payments industry by providing passwordless, phishing-resistant authentication that benefits both users and merchants.
What Are Digital Credentials in Payments?
Digital credentials refer to verifiable digital attestations, such as digital IDs, payment cards or membership cards, that prove a person’s identity, qualifications, or permissions. In the context of payments, digital credentials serve as digital proxies for physical cards or traditional payment methods, allowing for frictionless transactions in both e-commerce and in-person scenarios.
How Passkeys Enable Secure Authentication
Passkeys utilize public-key cryptography to replace passwords with a safer and easier user experience. A passkey stays securely on the user’s device and is never shared, eliminating risks of theft or interception. For payments, passkeys allow users to quickly authorize transactions using their device’s biometric sensors or a PIN, making checkout processes markedly faster and less susceptible to phishing attacks compared to traditional authentication solutions.
Advantages for Merchants and Consumers
Passkeys and digital credentials together provide several key benefits in payment flows:
- Reduced Fraud & Chargebacks: Because passkeys are phishing-resistant and tie authentication to the user’s device, they lower the risk of compromised accounts or unauthorized transactions.
- Streamlined User Experience: No need to remember passwords or enter card details; a biometric tap can authenticate and approve payments in seconds.
- Lower Abandonment Rates: Faster checkouts mean fewer users drop out during payment, directly improving conversion rates for merchants.
- Interoperability: Digital credentials can work across platforms and devices, enabling a consistent experience for users.
Implementation Trends: How Leading Platforms Leverage Passkeys
Major technology ecosystems such as Apple, Google and Microsoft are already embedding support for passkeys and leading e-commerce platforms are experimenting with digital credentials for payments. For example:
- Apple Pay and Google Wallet use device-based authentication to authorize payments without passwords.
- Emerging solutions in the European Union are integrating digital IDs and payment credentials to comply with eIDAS 2.0 regulations, making seamless and secure digital transactions easier across borders.
- The FIDO Alliance standardizes passkey tech, enabling merchants to adopt passwordless payment authentication globally.
Challenges and Considerations
Despite these advances, there are several challenges to address:
- Widespread Adoption: Many online merchants still rely on legacy systems that require passwords or SMS-based 2FA, limiting immediate support for passkey-based checkouts.
- User Education: Consumers and developers alike must adapt to new workflows and device-based security models.
- Data Privacy: Managing digital credentials requires compliance with regional data protection laws and careful handling of sensitive user information.
Outlook: Moving Toward a Passwordless Payment Future
As both consumer expectations and regulatory frameworks evolve, the integration of passkeys and digital credentials will play a crucial role in making digital payments faster, more secure and widely accessible. Developers and product managers building payment workflows should start exploring how to integrate passkey authentication and digital credentials into their systems now to stay ahead of the curve.
To learn more about how passkeys and digital credentials are transforming the payment industry (and practical tips for implementation), find out more on our blog: https://www.corbado.com/blog/digital-credentials-payments