How digital identity verification will improve financial inclusion
August 8, 2020
It’s believed there are over 1 billion individuals (World Bank) around the world who don’t have official identification and 1.7 billion people who are considered financially excluded.
The global pandemic has resulted in an increasing demand for digital identity verification solutions to ensure inclusion for all, even those with limited or no identification.
There are more areas to consider when looking to make banking, or any form of financial services accessible for the underserved; you have to provide consumers with multiple ways to verify themselves in order to open a new account. As financial institutions drive to improve financial inclusion it’s clear this cannot be achieved without digital identity verification.
Barrier’s to financial inclusion
In a recent survey, it was found that over 20 percent of consumers who did not have access to financial services cited the reason was due to a lake of identification. Without having proof of their identity, consumers cannot meet the KYC requirements necessary to open a bank or financial services account. A lack of financial inclusion is a big issue which impacts minorities, immigrants, low-income, elderly consumers and young people with limit financial history. These types of consumers are left in limbo as they’re unable to apply for a mortgage, bank account, they’re business opportunities are limited, and they have access to limited or no credit.
Establishing a global digital identity
Given the drive for inclusion, many countries across the globe are working tirelessly to develop national identity cards to bring visibility to those underserved. For example, Pakistan and Uganda, where women are given very little control over their financial affairs, have made great leaps towards implementing digital identities. In Pakistan, millions of women have been empowered through the disruption of Computerized National Identity Cards (CNIC), this has resulted in them gaining more independence from their male relatives. Like Pakistan, Uganda to has made national IDs more accessible to women, enabling them to quickly and easily verify their identities when accessing banking or financial services, and other opportunities.
The key role digital and alternative data plays for personal identification
For many years now, financial institutions have heavily relied on traditional data from credit bureaus when performing identity verification checks. This approach excludes millions of consumers with thin or no credit files. Institutional standards have to adopt a modern and digital identity verification process if they wish to effectively improve financial inclusion for everyone.
Digital and alternative data, consisting of information being gathered from a range of sources such as a social profile, utility and telecom providers, payments, eCommerce, and public records. Working together, these sources can act as a catalyst for creating digital identities and improving financial inclusion. There are further benefits for an organisation when using these data sources as they provide additional insights into a consumer’s behaviour, likes, dislikes and background.
What digital identification means for consumers, and the economy
Implementing a robust digital identity verification process can positively impact the economic opportunities of those excluded from gaining financial services. Creating opportunities for these types of individuals can:
- Provide a means for those looking to open a bank account. The use of digital identity documents can also enable them to meet documentation and KYC requirements easily.
- Put to use already established digital footprints and alternative data like utility and telecom bills to support proof of identity and address verification.
- Allow those financially excluded to pursue new opportunities like setting up a mortgage, bank account or even gain business ownership.
- Provide financial institutions with the means to identify more potential customers. With millions of consumers who are excluded and lack appropriate means of identifying themselves, altogether there are large revenue opportunities out there.
How we can help
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