A finance digital ID, the cornerstone of security and inclusion

Today more than ever, banks and financial institutions have to ensure that the person who wants to obtain a financial service is indeed who they claim to be. Identity checks are vital; they help prevent criminals and terrorists from using financial products/services to store and move around money.

 

However, it is becoming increasingly challenging to conduct ID checks, as most people have moved to online banking. Meeting customer expectations for online financial services while satisfying regulations around identity fraud and money laundering is becoming extremely difficult. According to Juniper Research, the number of people using digital banking is set to grow by more than 50%, amounting to 3.6 billion users between 2020 to 2024.

 

With market growth in digital banking, it is important to equip the financial sector with a secure and convenient digital ID tool that eases the customer onboarding in a safe and secure environment. This is not limited to private sector banking institutions. Government entities―specifically central banks―need to ensure that remote ‘know your customer’ (KYC) identity checks are as robust online as they are in person. These checks contribute to a securer, more trustful and stable financial system, so that other countries approve cross-border trade and only eligible entities purchase the growing range of digital services.

 

However, building these assurances within the current systems and maintaining them at the highest level of security is a daily challenge. In recent years, multiple banks worldwide have received fines due to failures in their KYC processes. This is where IDEMIA’s identity technologies can help both governments and the private sector to create secure digital ID systems. 

Using IDEMIA’s IDway solutions, central banks can issue a financial digital ID for citizens, which can be part of a state-issued digital ID, based on national databases / ID documents. Once in place, it can be made available across the various financial services to securely verify the identity of individuals. 

 

This ‘root of trust’-backed financial digital ID can then be used to check applicants wanting to open bank accounts or apply for loans, providing near-instant verification. The financial digital ID also makes it easier to check eligibility against, for example, sanctions lists, even when―as was the case with sanctions deployed following Russia’s invasion of Ukraine―eligibility changes overnight.

Helping to improve financial inclusion is one of the digital ID’s key qualities. Once individuals have their ID, they can access financial services with ease throughout their lifetime. With the verification checks in place, digital financial services can also be provided in remote locations that do not have access to more traditional banks.

 

A great example of this is the world’s largest national digital ID project, the Aadhaar scheme in India that was launched in 2009. The vast majority of the adult population has been provided a unique 12-digit identity number that is linked to the provision of digital services across the country. A range of government services can be accessed through the ID, such as government pensions and benefits, and it is also linked to citizens’ bank accounts.

IDEMIA’s identity technology is at the heart of the Aadhaar program―the link to bank accounts was crucial during the pandemic―when traditional in-person collection of welfare payments was no longer possible. For governments to continue to distribute payments securely in such difficult circumstances is an excellent example of why digital identities are essential.

 

A digital identity is a tool and governments need to ensure that there is a clear legal framework that enables people to understand data management. Governments need to communicate transparently in order to raise awareness that a civil mobile ID wallet is coming. They need to ensure that citizens understand the specific information/data they need to provide in order to receive one. Citizens also need to understand how the identity can be used and for what.

 

As the example of the Aadhaar program has shown, a financial digital ID creates more inclusive economies. It allows people to access financial services and permits them to be economically viable nationally, even if they live remotely. Citizens are able to conduct financial transactions, receive financial aid and get paid for work with ease, and this is all because they have a foundational digital ID.