Sumsub says digital ID can speed up onboarding in emerging markets
The use of digital ID technologies, alongside government databases, can substantially speed up the identity verification process in emerging countries.
This claim comes from London-based identity solution provider Sumsub, which recently published a guide focusing on identity verification and its challenges in five emerging markets: Argentina, Brazil, India, Indonesia and Nigeria.
The report mentions how Argentina has experienced growth in fintech solutions over the last few years, spurred partly by the Covid pandemic’s effects.
“Crypto and decentralized finance have also taken a special place in Argentina due to the depreciation of the country’s peso and difficulties with foreign currency exchange,” reads the report.
Further, the country’s national digital ID program (in the making since 2019) has issued around 47 million IDs at the time of writing.
“The digital ID from the Mi Argentina mobile app is now considered fully equivalent to traditional identity documents and can be used to authenticate identities for online services,” Sumsub writes.
In terms of know-your-customer (KYC) challenges in the country, the Sumsub report mentions the rippling effects of the 2021 hack of the national digital ID infrastructure, alongside identity verification failures connected with the use of low-quality photos and screenshots during the ID verification process.
As for Brazil, Sumsub says digitalization is having a clear impact on identity verification in the country, mainly thanks to the new form of identity cards introduced by the government that supports QR codes.
“Brazil has [also] been continuously working to minimize money laundering and comply with international standards set by the Financial Action Task Force (FATF),” reads the report.
Still, Sumsub says that online identity fraud remains a problem in the country due to the fact that more than half of documents forged in Brazil do not contain MRZs (machine-readable zones), making them easier to fabricate.
Additionally, access to various digital IDs is performed through different apps, with this lack of standardization and centralization leading to further fraud attempts.
“[We] found that 88 percent of IDs in Brazil forged are printouts. However, CPF numbers will soon be adopted as the only general registration number (RG) in Brazil, which may help solve this problem.”
According to Sumsub, Nigeria has become a significant fintech player over the past few years. However, the country is still not a FATF member due to deficiencies in its anti-money laundering (AML) system.
For instance, the firm says that in 2022, 55.8 percent of all fraud detected worldwide was attributed to five countries, with Nigeria among them (5.4 percent).
Further, like Brazil, Nigeria does not have a consolidated and centralized identity management system. Instead, Nigerian citizens’ data is stored in databases across different government bodies.
“However, [the country] is constantly working on improving the situation,” reads the Sumsub report. “The latest Mutual Evaluation report taken in 2021 revealed that Nigeria is compliant with seven and largely compliant with 14 of the FATF’s 40 Recommendations.”
Additionally, Sumsub highlights how roughly 90 million Nigerians have already registered for a National Identity Number (NIN), allowing firms to verify people without dealing with potentially forged documents.
India is experiencing a rapid increase in digitalization, mainly driven by its biometrics-based ID system Aadhaar.
Sumsub highlights how the country has been a FATF member since 2010, but various issues, particularly related to money laundering, remain in the country.
“According to the FATF’s evaluation, India is fully compliant with four of the FATF’s recommendations, and either partially compliant or non-compliant with five out of six core recommendations,” reads the Sumsub report.
Another main KYC challenge in the country, according to Sumsub, is the lack of digital experience that leads to human operators from financial institutions being present during the identification process, thus slowing down the overall flow of operations.
The Aadhaar KYC system is also widely not considered full KYC, Sumsub explains.
“Therefore, customers can only use this type of verification for one year. After that, full KYC verification should be performed. This is because the Aadhaar is updated in the system, and the process takes at least 90 days.”
Last but not least, Sumsub writes that Indonesia is the largest and fastest-growing digital economy in Southeast Asia.
“More than 95 percent of the Indonesian population has e-KTP cards linked to a government database of citizen identities and biometrics.”
Indonesia is also a FATF ‘observer’ with expectations to become a full member in 2023, according to Sumsub.
The main KYC challenges in the country include poor quality of cameras or photos during user authentication and high fraud rates, mainly related to the Indonesian ID card.
Exploring document-free verification
The Sumsub report highlights that as the countries above are embracing key digitalization trends, this is leading to paper documents being used less as large-scale digital ID initiatives are launched.
The company writes that while it works well with local documents, in some regions, verification can be streamlined further with the Sumsub 1сlick solution.
“With 1click user verification, Sumsub has become the first KYC provider empowering companies to verify over 2 billion people from Brazil, Argentina, Nigeria, India and Indonesia without scanning their documents,” comments Sumsub CEO Andrew Sever.
“This way, Sumsub is realizing its mission of becoming a multilocal KYC provider—helping businesses onboard local users the way they’re used to, while empowering companies to enter new markets at the same time.”