KYC & Financial Inclusion - Prosperity With Security

In the recent past, the COVID-19 pandemic was the biggest disrupter. It has changed the ethos of business operations, from manufacturing to marketing, and people are digitally connected now, more than ever. On the other side, those on the fringes of the global social and economic core were yet to see meaningful change in their lives through economic integration and streamlining.

The identity crisis is one of the reasons why people are left out of this wave of change. According to the World Bank’s database, over 1.1 billion people worldwide do not possess verifiable identities. Regulatory compliance and regime practices make it hard for people with non-verifiable identities to be inducted into the financial mainstream.

Financial Inclusion Week

Financial Inclusion Week is celebrated in the spirit of bringing people together financially, especially those who are under-represented across all fora. A five-day initiative calls out to industry leaders to get their opinion and plans regarding the future of financial inclusion and how to uplift those who are still denied the opportunities to employ the resources for their benefit.

This year, Financial Inclusion Week is going virtual allowing a large number of people to interact in a professional environment. The agenda for this year is Promoting Prosperity In the Era Of Uncertainty. The speakers will shed light on the current challenges that are hindering the progress of current financial inclusion efforts and how they will overcome them.

Financial Inclusion Week is aiming to take advantage of the avalanche-like progress in online services such as the rise of fintech and unicorns. This will, hopefully, allow for swift digitization of payments systems for low-cost, high-value services resulting in financial inclusion of the marginalized groups.

The Technological Gap

The technology is progressing at a lightning speed. The innovation in internet services and digital processes through Artificial Intelligence and Machine Learning has allowed people to be truly at the helm of affairs. Banks and other financial institutions have embraced the digital way for seamless operations, but there is an obvious downside to it.

A whopping number of people in the world still lack verifiable digital identities. There is no way the most heavily-regulated sector can operate in the market without carrying out KYC and AML checks of the clients. It does not stop there as Customer Due Diligence (CDD) continues for as long as two parties are under a contract.

The adoption of AI-based tools to generate and verify identities for the marginalized populace can be the equalizer to bridge the technological gap.

Roadblocks For Capital & Investments

In both digital and conventional settings, money has to leave a trail that is identifiable by regulatory bodies. This is to ensure that people who own the money are not involved in illicit activities such as money laundering, terror financing, and other kinds of financial practices that are not sanctioned by global regulatory bodies.

When a large number of people do not possess verifiable identities, they would not be able to comply with KYC and AML regimes as practised by the financial institutions. This led to two distinct developments;

• Either they are left out of the economic fold resulting in the under-utilized potential for capital, investment, and individual growth
• Or they use counterfeit documents to dodge the security roadblocks resulting in financial crimes

Since there is no way financial institutions would allow individuals to carry out transactions without KYC and AML authentication and client verification, it is a futile attempt to think of financial inclusion without verifiable digital identities. This has resulted in over 2 billion people with non-verifiable identities with no access to financial instruments and banking channels worldwide.

Lack Of Diversity & Innovation

The concentration of opportunities and wealth in specific regions of the world has led to its economic polarization. The gulf is deepening between people who have access to modern tools to better their lives and those who are still living in the past in terms of technological progress. This has manifested in terms of political and social turmoil because of the lack of opportunities and fair means.

When people from different regions of the world come closer through digital means, innovation follows. But, the road to technological integration requires verifiable identity means as the toll to let users pass by.

KYC and AML regimes are now stricter than ever because of the increasing cases of identity theft, financial fraud, and money laundering. Building a world with enhanced incorporation of people from around the world needs sophisticated tools to verify their identities and let them pass through the regulatory checks.

To further elucidate the point, this is what Diego Zuluaga of Cato Institute’s Center for Monetary & Financial Alternatives had to say about the potential of still unbanked,

“If we give the unbanked and underbanked of the world the same access to credit and investments as the people from the developed world, the next 50 years will yield more than $100 Trillion in financial assets.”

Shufti Pro — The Way Forward

A lot has changed in the last couple of years as digital banking has become just “banking” and online shopping “shopping”. What hasn’t loosened are the regulatory checks to ensure KYC and AML compliance and the need for businesses to verify credentials seamlessly for maximum client satisfaction in terms of frictionless onboarding.

Financial inclusion and diffusion of economic opportunities are impossible without due diligence on part of institutions to prevent regulatory reprimands.

Shufti Pro is a trailblazer that provides digital KYC and AML compliance tools that allow businesses to onboard new clients with minimal friction. The company offers a suite of applications that employ biometric indicators, such as facial recognition, to verify the identity of incoming clients. The synergy of Artificial and Human Intelligence results in the best user experience and regulatory compliance.

If you want to incorporate the latest KYC and AML tools into your client onboarding and monitoring system, get in touch with us for a free demo!