OpenID Federation – The Missing Link for Scalable Trust in Data, AI, and Wallet Ecosystems

As our Raidiam colleagues prepare to demo Raidiam's OpenID Federation implementation at Internet Identity Workshop (IIW), we feel it’s important to highlight just how powerful OpenID Federation can be. Although still a relatively new specification, it promises to fundamentally reshape how digital ecosystems establish trust, manage identity, and enable secure interoperability at scale.

Digital ecosystems today—from open banking, open insurance networks to AI agent marketplaces and wallet-based credential systems—are increasingly complex and multi-stakeholder. Organizations, applications, and autonomous agents must interact seamlessly across domains, yet traditional trust models struggle to scale. Manual configuration and static relationships are simply insufficient for ecosystems that span industries, countries, and regulatory regimes.

OpenID Federation addresses this challenge by providing a cryptographically verifiable, decentralized trust framework. It allows organizations and their technical resources—identity providers, relying parties, wallets, or AI agents—to discover, authenticate, and interact with each other automatically. In doing so, it becomes the backbone for scalable, secure, and policy-driven collaboration across modern digital ecosystems.

In this article, we’ll explore how OpenID Federation works, why it matters for open data, agentic AI, and wallet ecosystems, and how it enables trust to scale without manual intervention.

Understanding OpenID Federation

OpenID Federation extends the OpenID Connect (OIDC) and OAuth 2.0 standards with a trust layer. It defines how organizations can automatically exchange and verify metadata, keys, and policies through trust anchors–trust registries–authorities, and federation entities.

Instead of manually configuring trust relationships (which doesn’t scale), OpenID Federation allows organizations to bootstrap trust dynamically via signed metadata structures. These structures describe participants — such as identity providers, relying parties, trust anchors — and can automatically verify each other using strong cryptographic signatures and established federation hierarchies.

In simpler terms, OpenID Federation acts like a digital trust fabric — it ensures that when an organization, service, or agent says “I am who I claim to be,” others can verify this automatically without relying on a centralized gatekeeper.

→ Need to know how trust is resolved? Read about OpenID Federation Trust Chain

The Trust Fabric Model

At the heart of OpenID Federation are three core roles:

• Federation Entity: An organization that publishes metadata describing its endpoints, capabilities, and keys.

• Federation Operator: The system that governs one or more entities, often representing an industry or national authority.

• Trust Anchor: The root authority that digitally signs federation metadata and defines mandatory policies (e.g., cryptographic requirements, allowed algorithms).

Each layer in this hierarchy can delegate trust to lower levels, allowing complex ecosystems to remain interoperable yet decentralized. For example, a national-level trust anchor may delegate authority to sector-specific operators (banking, insurance, energy), which in turn verify participants within their domains.

OpenID Federation Use Cases

Open Data Ecosystems

In initiatives like Open Banking, Open Insurance, or Open Finance, many independent participants–financial institutions, third-party providers, and regulators–must exchange data securely and according to policy. Each participant needs to trust the credentials and endpoints of the others, which can become complex when multiple government branches manage different aspects of open data systems.

OpenID Federation simplifies this by enabling automated onboarding through signed metadata, distributing policy controls across the ecosystem, and establishing trust chains that span national and sectoral boundaries. Even with diversified authorities, organizations can be brought together under a single national federation, creating a multilateral trust network.

Example: An insurance provider within Open Insurance could securely access customer-permissioned medical records from a healthcare provider participating in an Open Health initiative, with federated trust ensuring that both participants and their policies are verified automatically.

Implementing an Open Data Ecosystem?

For highly regulated systems, OpenID Federation alone may not be sufficient. Raidiam Connect provides additional infrastructure to help you build a complete ecosystem from scratch. Ensure that only accredited and vetted participants join the data exchange, verify compliance of authorization servers, APIs, and applications, and publish APIs so data recipients can discover them automatically — all while maintaining a secure and governed environment.

Contact us or get started right away.

Agentic AI Ecosystems

As organizations deploy agentic AI systems that act autonomously—fetching data, making decisions, invoking APIs—establishing which agents can be trusted becomes a key governance challenge.

OpenID Federation serves as a trust governance backbone by allowing AI agents to participate as verified entities within a federated ecosystem:

• Agent registration – Each AI agent can be registered with signed metadata describing its capabilities, permissions, and compliance posture.

• Federated verification – Organizations can automatically verify external agents before granting access to internal or partner APIs.

• Policy enforcement – Federation operators define authentication methods, token policies, and even trust scores or isolation boundaries.

The result is a secure, interoperable marketplace where AI agents from different vendors can interact under shared, verifiable trust rules — paving the way for scalable and regulated AI ecosystems.

→ Learn more about Securing Agentic AI Access. Add Trust, Identity, and Authentication for AI Agents.

Wallet and Credential Ecosystems

In wallet-based ecosystems, trust must be distributed among issuers (who issue credentials), verifiers (who consume them), and wallets (which hold and present them). In this model, trust registries define who is authorized to issue, verify, or manage credentials.

OpenID Federation provides the foundation for this model through:

• Interoperable trust registries – defining which organizations can act as verifiers, issuers, or wallet providers.

• Dynamic metadata discovery – enabling wallets to automatically identify valid issuers and verifiers via signed metadata.

• Scalable governance – allowing authorities to delegate oversight to federation operators (such as national trust anchors) and extend governance across regions or sectors.

• Providing dynamic policy distribution to maintain compliance with data protection, revocation, or key rotation rules.

This aligns closely with initiatives like OpenID for Verifiable Credential Issuance (OpenID4VCI), positioning OpenID Federation as the structural trust layer underpinning interoperable wallet ecosystems.

Ready to get started?

Enterprise Ecosystems and Sensitive API Access

In large enterprises, trust isn’t just an external challenge — it’s an internal necessity. Different business units, regional subsidiaries, technology partners, and customer-facing applications often operate as semi-independent entities, each with its own policies, infrastructure, and governance requirements.

When sensitive APIs power critical data flows between them, ensuring that only authorized and compliant participants gain access becomes a major operational hurdle. Traditional onboarding — involving manual certificate exchanges, approval workflows, and one-off integrations — is slow, error-prone, and impossible to scale.

OpenID Federation transforms this process by enabling automated, verifiable onboarding across organizational boundaries. Each business unit or partner can register as a trusted entity within a shared federation, publishing signed metadata that declares its capabilities, endpoints, and compliance posture. The corporate trust anchor then verifies and governs these relationships dynamically, applying uniform security and policy controls across the ecosystem.

This approach lets enterprises onboard internal divisions, external partners, or even customer systems quickly and securely, without sacrificing oversight. Sensitive APIs remain protected under consistent governance, while developers and integration teams gain the agility to connect, test, and deploy at scale.

In short, OpenID Federation turns complex enterprise onboarding into a policy-driven trust automation process, ensuring that every new participant — human or system — is recognized, verified, and authorized by design.

Other Emerging Use Cases

The potential of OpenID Federation extends far beyond open data, AI, and wallet ecosystems. Any domain where independent organizations must collaborate securely while retaining autonomy can benefit from its trust model.

Across cross-border digital identity networks, for example, national identity providers and service portals often struggle to recognize each other’s credentials. Each country operates under its own legal and technical framework, yet citizens increasingly expect seamless access to services abroad. OpenID Federation can bridge these fragmented systems, allowing them to verify one another automatically through shared trust anchors — without sacrificing sovereignty or compliance.

A similar challenge appears in IoT and edge environments, where countless devices need to authenticate and exchange data without human oversight. Here, federation can serve as a scalable verification layer, ensuring that every device — whether a smart meter, connected vehicle, or manufacturing sensor — can prove its legitimacy cryptographically.

Even sector-specific networks like energy, education, or transport face growing pressure to open data access while maintaining policy control. OpenID Federation enables them to align around common trust frameworks, so that participants can interact securely, discover each other’s APIs, and share verified information under consistent rules.

In all these cases, the principle remains the same: when trust must scale beyond organizational borders, OpenID Federation provides the governed decentralization needed to make that possible.

The Federated Trust Advantage

Across all these domains, OpenID Federation brings a unifying principle: trust that scales.

Key advantages include:

• Elimination of manual onboarding: Participants can self-register and prove trustworthiness via digital signatures verified through federation chains.

• Decentralized policy enforcement: Operators can maintain compliance and cryptographic agility without centralized intermediaries.

• Cross-domain interoperability: Multiple sectors can share or link trust anchors, connecting finance, insurance, energy, and AI ecosystems under one governance fabric.

• Cryptographic assurance: Every interaction and participant claim is verifiable using established public key infrastructures and signed metadata statements.

Summary

OpenID Federation is more than an identity protocol extension — it’s a trust automation framework for the interconnected digital world. Whether used to link financial institutions, regulate AI agents, power credential wallets, or unify cross-sector infrastructures, it enables:

• Scalable trust through dynamic metadata and signed relationships.

• Policy-driven governance that adapts without central control.

• Interoperability across organizations, industries, and borders.

As ecosystems evolve toward greater autonomy and regulation, OpenID Federation will underpin the next generation of digital cooperation — where authenticity, accountability, and scalability coexist by design.

Ready to try OpenID Federation yourself? Get Sandbox Access.