Financial institutions center identity verification in inclusion and expansion drive

Across the world there is a drive to expand financial inclusion so that more people can have access to banking and financial services. In Africa and Asia this is especially the trend but even as more people use some kind of digital monetary service, whether digital wallets or banking apps, there is a commensurate need to guard against fraud, online crime, and identity theft.

In Thailand there’s been a recent upgrade to rules pertaining to “Technological Crime” as the Deputy Governor, Rung Mallikamas, for the Bank of Thailand has set new standards for the banking sector. Overall, it should improve customer support with greater responsibility being shifted toward financial institutions, payment service providers, telcos, social media service providers, among others.

From the beginning of May, the Bank of Thailand will issue a notice that for opening (bank, payment, e-money) accounts, operators will need a thorough Know Your Customer (KYC) process. In addition, there will need to be an identity verification process for mobile banking that utilizes face biometrics and biometric counterfeiting detection that applies to transactions above a certain value. The fuller list contained in the notice can be found here.

This comes as Mallikamas outlined the Bank of Thailand’s “3 Opens” framework as it champions greater financial inclusion across ASEAN, The Nation reports. This would focus on open competition, open infrastructure and open data to unlock digital finance opportunities for the bloc’s underserved groups. The proposal came as Mallikamas addressed the huge potential of ASEAN’s digital economy, which is expected to exceed $360 billion this year, but acknowledged that financial exclusion remains a challenge.

“A significant portion of our population remains unbanked or underbanked,” she said, in a keynote presentation. “For instance, studies indicate that over 60 percent of adults in some ASEAN nations lack access to formal financial services.”

The latter comment could refer to countries such as Laos, the Philippines, Indonesia, Myanmar and Cambodia. Pointing to Thailand’s experience with the successful implementation of PromptPay, the national real-time payment system, Mallikamas made the argument that fintech companies, that are more agile and take a data-centric approach, can step in for the underserved where traditional banks have been unable to.

Over in Hong Kong, Ant Bank (Hong Kong) has received a $100 million capital increase from its parent company Ant Global as it expands cooperation and seeks to promote financial development. Ant Bank is the only digital bank in Hong Kong that is entwined with the Special Administrative Region’s e-wallets, such as AlipayHK, the e-wallet of the parent company. Ant Bank has introduced anti-deepfake technology for customer authentication and has an “intelligent risk control system” to monitor transaction risks in real time.

Wing Sze Lee, general manager of Ant International’s Greater China Business, commented: “Ant International is optimistic about Hong Kong’s future, and this capital increase reflects our confidence and long-term investment in the local market, and further promotes the deep integration of financial services with the real economy.”

“Ant Global looks forward to working with all sectors of the community to promote the development of Hong Kong’s smart city and consolidate Hong Kong’s leading position in the global fintech field.”

Over in Nigeria, the Shared Agent Network Expansion Facilities Limited (SANEF), which is an initiative of the Central Bank of Nigeria, has called for the adoption of AI to help deepen financial inclusion and to meet the needs of the country’s unbanked and underbanked populations. This is an estimated 36 million Nigerians, especially in the northern regions, who are not included in the formal financial system.

To speed up inclusion, SANEF CEO Uche Uzoebo emphasized the use of AI. “It is at work right now all over the world, powering mobile banking apps, automating customer service, detecting fraud, and enabling instant lending decisions,” she said, as reported by Punch. SANEF was established with the intent of accelerating financial inclusion in Nigeria.

Uzoebo pointed to the use of face biometrics, used by some Nigerian digital banks, as practical examples of how AI is being implemented and how artificial intelligence can streamline KYC processes and detect fraudulent activities in real-time. The executive also emphasized responsible AI deployment and compliance with regulatory frameworks to that end.

While identity verification is burgeoning across all these places and more, the actual method used can be a battleground, as a report from South Korea shows. The Korea Times reports that an increasing number of credit card companies are terminating card-based identity verification services since it’s not being used very much.

A major reason could be because the country’s three major telecommunications companies dominate authentication methods, while private verification systems are expanding. KB Kookmin Card will end its card-based identity verification service starting June 30, and Lotte Card will do the same on July 31. BC Card already discontinued offering the service in October 2023. The card industry had hoped the service would become new sources of revenue.

South Korea’s three major telecoms companies – SK Telecom, KT and LG Uplus – receive a reported fee of around 30 won ($0.02) per transaction for identity verification services from their partners, which generate annual earnings of around 20 to 30 billion won ($13.9 million to $20.9 million), according to the Korea Times.

Consumers have generally found mobile phone-based authentication quick and convenient in confirming their identity, but card-based identity verification in South Korea requires users to input information card details such as expiration date and security code. Meanwhile, all four of the country’s major commercial banks – KB Kookmin, Shinhan, Hana and Woori – issue private certificates, with NH NongHyup Bank and Industrial Bank of Korea joining as officially designated identity verification institutions this year.

Digital banks such as Toss and KakaoBank, and tech companies like Naver and Kakao, have also begun to issue private certificates, representing additional competition to the beleaguered card-based identity verification services. The revenues for the credit card companies have now been deemed unfeasible relative to the costs of maintaining the services.

Article Topics

Africa  |  ASEAN  |  Asia  |  biometrics  |  digital identity  |  face biometrics  |  financial inclusion  |  financial services  |  identity verification  |  KYC