The Identity Challenge in Finance: From Analogue Identity to Digitized Identification to Digital KYC Utilities
44 Pages Posted: 1 Aug 2018 Last revised: 7 May 2020
Date Written: September 25, 2018
Identity is fundamental in finance. From a business standpoint, knowledge of clients’ identities is essential to protect against fraud and crime, and underpins all know-yourcustomer obligations, as well as being essential to providing quality services. From a risk management and regulatory standpoint, identity is essential to market integrity. At the same time, identification and KYC rules can be major barriers to accessing financial services, for individuals and small businesses in particular. This paper considers the various requirements for identification in the financial sector and the evolving nature of identity and its evolution from analogue to digitized to digital. We argue that technology presents an opportunity to solve this challenge through the development of digital identity infrastructure and related utilities. The establishment of such utilities for digital or electronic identification requires addressing design questions such as registration methods, data availability and crossjurisdiction recognitions. Yet, as with any reform, a balance between flow-through efficiency and cyber-security needs to be reached to ensure the objectives of financial inclusion and market integrity are not achieved at the detriment of financial stability.
Keywords: Finance, Identity, Digital Identification, eKYC Infrastructure, KYC Utilities, Market Integrity, Anti−money laundering
JEL Classification: K2, K23, K22, O16, O23, O38
Suggested Citation: Suggested Citation