Digital ID and e-KYC for Financial Inclusion amidst the COVID-19 Pandemic and Beyond – Opening Remarks by Norbert Mumba, Deputy Executive Director, AFI

AFI Members, Partners, Ladies and Gentlemen,

Warm greetings to everyone and thank you for joining this joint Global Standards Proportionality Working Group (GSPWG) and Digital Financial Services Working Group (DFSWG) webinar today on the subject of the role of Digital Identity and e-KYC, both in the immediate COVID-19 policy response, and in supporting sustainable financial inclusion in the longer-term.

It is encouraging to see the interest developed for the webinar with more than 150 registrants. This speaks to the importance of the issues that we will be discussing today, with the assistance of an expert panel of AFI members and key partners.

Through AFI Member Needs Assessment and other engagements with our members we found that digital onboarding is one of the key challenges highlighted by members in times of the pandemic. The demand side therefore confirms the high relevance of the topic discussed at the webinar, and AFI will help to address these issues in the context of support of the recovery phase. I therefore encourage you to follow closely the activities of our COVID-19 Policy Response Initiative.

Most of us are aware that a critical barrier keeping vulnerable populations out of the formal financial system is the challenge of verifying their identities. Globally 1.1 billion people are estimated to lack a legally recognized form of identity, and an additional 3.4 billion have some form of ID but no digital trail.  Lack of ID has been cited as a barrier to account opening by 45% of those without an account in the Philippines, and 49% in Zimbabwe.  Furthermore, AFI research has shown that traditional Know Your Customer (KYC) norms can disproportionately exclude women from the financial system.

Digital identity solutions have the potential to address these gaps, with AFI’s Inclusive FinTech Strategy published at the Sochi GPF in 2018 emphasizing that “digital ID is the basis of a strategy for digital financial inclusion”.  Even prior to the pandemic, examples from AFI members such as Peru and Malawi highlighted the potential to implement digital ID systems and e-KYC regulations at pace and scale while ensuring quality. Digital ID solutions were also tested under controlled conditions in regulatory sandboxes in countries such as Papua New Guinea, Malaysia and Mozambique.

The shift towards digital customer verification has been further catalysed by the closure of physical premises in the context of the recent lockdowns. Countries such as India and Thailand, which have invested in digital identity programs and other digital infrastructure such as interoperable payment systems, have been able to utilize this infrastructure to deliver targeted large-scale fiscal support packages, including to informal sector workers and vulnerable populations.

This trend towards digital onboarding, if sustained beyond the pandemic, could help establish a norm whereby paper documentation for KYC starts to become obsolete. This would be a major gain for financial inclusion.

But this goal can only be achieved through collaborative partnerships to create seamless digital financial services ecosystems. As policymakers  you need to invest in digital ID infrastructure and to peer learn on best policies, best technologies and best practices in implementing e-KYC. The private sector – both established players and new RegTech start-ups – will need to bring innovative solutions to the table which address design concerns such as accessibility, privacy and security. And global Standard Setting Bodies (SSBs) will need to provide clear guidance on the compatibility of digital identity solutions with global standards for financial integrity.

In this regard, the Financial Action Task Force’s (FATF’s) recently published guidance on Digital ID, and call for such solutions to be fully leveraged in the context of COVID-19, provides helpful clarity that remote verification solutions can be equally or even more effective than physical ones to safeguard the integrity of the financial system.  I am pleased that the FATF secretariat has joined us for this webinar today to share their perspective.

This is an important topic to address, and I commend the leadership of the GSP and DFS Working Groups for working together to advance policy discussion and peer learning in this field, starting with today’s webinar.

I wish you all a fruitful discussion. Thank you!