Page 14 - FIGI: e-KYC use cases in digital financial services

E-KYC use cases in digital financial services

1 INTRODUCTION

Lack of legal identification is a major challenge to customers, this verification may not be always possi-
financial inclusion. Digital identity management solu- ble this could be a barrier to financial inclusion. In this
tions can make identity easier to manage and access context, a tiered KYC may be justified, but this is not
and therefore can play an enabling role in enhancing always an option as the risks must first be assessed
financial inclusion. Emerging technologies, biometric and compared against the likely benefit of the rela-
data, distributed ledgers, and artificial intelligence tionship to the provider. Digital identity management
are enabling new solutions for e-KYC. e-KYC lever- solutions can be combined with tiered KYC to better
ages these technologies to create new approaches address these challenges.
that are more cost-efficient and effective. Stakehold- In some countries the public sector plays a role
ers in both public and private sectors are developing to support the digital identity verification process for
innovative solutions based on these technologies to the DFS providers. In this context, usually national
discharge their due diligence responsibilities. identity authorities provide the infrastructure for dig-
In digital financial services, customer identifica- ital identity verification and are an important stake-
tion and verification are key elements of the custom- holder in the e-KYC process. Examples are India,
er due diligence process. The term KYC (know your Pakistan, Malaysia, Sierra Leone, and Singapore with
customer) refers only to the customer identification e-KYC initiatives by the public sector.
and verification elements of customer due diligence. The main objectives of this report are to under-
KYC registries are services that store customer iden- take an analysis of the technological innovations for
tity data in a single repository for use by multiple e-KYC and compare the different approaches coun-
financial service providers. tries have adopted to implement e-KYC and provide
The financial service provider must verify the cus- information about technical standards that could be
tomer's identity using reliable, independent source implemented to achieve interoperability at the level
documents or data available. In the case of unbanked of the digital identity verification process.

12 e-KYC use cases in digital financial services