It is easy to take the ease with which we prove our identity for granted. Even the most basic tasks, from booking a flight to registering with a doctor, require some form of identification. And as the digital world continues to dominate much of our lives, digital footprints are providing an additional layer of verifiable identity, with use of mobile data and analytics becoming mainstream.
But when it comes to opening a bank account, stringent regulatory requirements require a wider variety of proofs than some people have.
Strict requirements to stop fraudsters
To comply with various government regulations, financial institutions need to be able to verify the identity of account holders, and thus a lack of sufficient documentation or proof of identity can be a serious bar to opening a bank account. And ID verification is becoming more codified in the wake of new regulations.
The Second Payments Service Directive (PSD2) in Europe, for instance, states that the identity of an account holder must be verified through two of the following three criteria: something known by, owned by, or inherent to the individual. Ownership is often proved through possession of essential documents such as passports or birth certificates. But in places where these are not widely available, this can be a barrier to financial inclusion.
The Great Unbanked – do my files look thin in this?
Many people don't have a passport or driving licence. Some do not have a credit history because they haven't taken out a loan or used a credit card. Others cannot locate any official statement to serve as proof of address – an increasing problem following the rise of paper-less billing systems and the reduced use of the postal service. These 'thin-file' customers, without enough identity data to meet Know Your Customer (KYC) requirements, make up a large proportion of the unbanked population.
Even in a country like Britain, with highly-established administrative and financial structures, 1.5 million people still have no access to a bank account – half of whom would prefer to have one. Of the global population, around 2 billion are still 'unbanked', with no direct access to financial services. For these individuals it is much harder to securely keep and save money, and almost impossible to gather interest or take out formal loans.
A New Option
However, what many people do have is mobile phones. In fact, 6 billion people around the world have access to a mobile phone, which includes at least half a billion of the world's unbanked population. And new technology is beginning to link up need with opportunity.
By connecting mobile network operators in a country, ID verification services will soon be able to access a comprehensive registry of mobile users, and develop systems through which these individuals can verify their identity through possession of the phone. Users can be sent a unique code after entering a password, combining knowledge of the password and possession of the phone, and this can be corroborated with traditional KYC-compliant data sources, such as government and credit. With little or no credit history, millennials and young adults are some of the most likely to be thin-file customers – so your son or daughter's smartphone addiction might not be such a bad thing.
This has highly valuable implications for day-to-day account security, making it much harder for fraudsters to impersonate account holders and steal money. It also adds another layer of security for the on-boarding process, allowing financial institutions to access an additional form of identification to comply with anti-money-laundering (AML) and KYC rules to stop money launderers setting up fake accounts.
And, it also has significant potential impact for unbanked individuals. Once mobile devices can be linked with identity verification technology, the unbanked will have a more auspicious way to prove their identity to access financial services so that they may save, borrow, and manage risks, and hopefully lift themselves out of poverty.
ID verification is also a vital capability in disaster relief situations. When people are forced to evacuate their homes, or have their homes destroyed, it is often very difficult to corroborate who is who for the provision of financial aid. Of course this shouldn't have to be a problem but, unfortunately, amidst tragedy there are often opportunists attempting to take advantage of charitable donations.
Following the fire season in British Columbia in 2016, the Red Cross faced allegations that fraudsters had been trying to claim money set aside for evacuees. It was reported that people had been using the addresses of those affected to access funds that weren't intended for them.
But when record-breaking fires struck last year, we were able to quickly assist the Red Cross to efficiently verify the identities of 50,000 wildfire victims in need of aid. Prior to integrating with Trulioo's services, the Red Cross had to manually verify the identities of recipients, which was time-consuming, tedious and at times, problematic.
The advent of mobile ID verification will likely make this capability much more accessible and useful. In disaster situations throughout the world, identifying who people are is a massive challenge.
Phones to root out the phonies
Mobile donations have been in use for many years, providing a fast and easy way for people to donate to relief efforts. Soon, mobile ID technology will be available to help NGOs identify evacuees quickly and efficiently, to trace family members, prevent disaster fraud and provide aid.
In situations of mass displacement, one of the few items of value many people are able to keep hold of is their mobile phones. Many mobile operators are able to pinpoint where people are gathering in a disaster situation, and are using this information to help charities reach people in need more efficiently.
With card machines popping up in even the smallest independent stores, and mobile banking allowing us to view our balance, transfer money and even apply for loans at the swipe of a finger, it is easy to take our access to financial services for granted. But for the unbanked or individuals struck by disaster, proving one's identity can be much easier said than done. With the prevalence of mobile phone use throughout the world, many people could be provided with a vital lifeline.
Stephen Ufford, CEO of Trulioo