Identity verification seems like a natural casualty of the times. From a friendly application to a friendly nod from the Banker, the account opening steps have been turned on its head for a generation, maybe more. People scorn at the sound of paperwork and identity proofs, and for good reasons. World Bank’s Findex suggests that paperwork and related costs are major barriers to financial inclusion. While the regulator has made it hard, the Banks have raised the bar even further and made it impossible. What started in the early twenty-first century to fight worldwide anti-money laundering and terrorist financing has turned into a monstrosity: a frustrating experience for the consumer and an expensive affair for the Service providers.
Now, unless you have been wrapped around in bear fur and living off smoked salmon – watching ice melt – you sure have come across the term “Can I see your ID”, or the more arcane sounding, KYC or “Know Your Customer”. It essentially is to prove who you are to whoever needs it – and the list is growing. You will need KYC for pretty much everything from opening a Bank account to buying a movie ticket online. Know your customer, in different dimensions, embodies the essence of the world we live in. Trust, which was established just by greeting each other has to go beyond to provide paperwork that needs to be checked, verified, filed, rechecked and refiled periodically. It is not enough just to look at the ID documents. It has to be looked behind, below, around and about. In other words, verified against multiple global data sources to be sure you are a human and not a zombie
While there is merit in paperwork and verifications, in particular, to curtail criminal or terrorist financing and money laundering, the excess hand by the Banks is driven by fear as to the price the Banks have to pay when something goes amiss – no matter what the regulatory norms. And as Raghuram Rajan, the then RBI chief says, “Banks may adopt these norms more because of a regulatory or legal liability than to safeguard against true criminal or terrorist activity”. As a result, it keeps too many away from the formal banking system and leads to harassment for those who mustered the courage to beat the paperwork to open an account in the first place.
With this backdrop is where companies like FRS Labs are beginning to make inroads toward a global digital identity solution that service providers can plug into their onboarding process. One that would be less taxing yet compliant; robust yet friendlier; digital yet transparent. More importantly, providing what consumers truly want and expect from modern service providers. And moving a step further, technologies such as Kyzo are designed to work anywhere in the world, faster, without internet connectivity and simpler than sharing paper documents, cutting across barriers for inclusion. It allows anyone with a physical document to convert it to a digital document that can then be verified against issuing authorities and further validated for true ownership through a combination of artificial intelligence and human review.
There are challenges, however. The foremost is the presence of an identity document that can be verified globally to ensure that the holder of the ID is indeed the true owner. And secondly, these technologies only work on a smartphone which is rising but still elusive for one-third of the population. Further, there is imminent fear amongst Bankers and regulators – albeit driven without facts – that digital documents could compound financial abuse and fraud in the absence of human interaction. This is really where human-machine interaction, sort of symbiosis which could well be the model on which the future is built, that can enhance both the onboarding experience and cut down fraud at places where it is impossible – even unwelcome – for machines to make a decision.
FRS Labs is currently working with the Egyptian Central Bank as part of their first sandbox cohort to trial the KYC solution built on their award-winning ATLAS platform for Egyptians to instantly open and operate a wallet account provided by any Bank in Egypt. If this proves a success, this can scale across the African continent as many of the KYC stresses will be addressed in one market before it caters to the whole of Africa. While the underlying technology is the same across India and Egypt, the localisations vary to a degree, not least the OCR that needs to work on Arabic Identity Documents.
And as Shankar, CEO, FRS Labs puts it, as we begin to understand the depth of the problem in a new market, we begin to understand the depth of its cure. Essentially, the diverse solutions we are working on are not just about the nuances of technology but, despite its complexity, it is the power of the people who use and benefit from it. If we have to pull people from dire poverty, help them manage themselves; their families; their finances; their freedoms, we have to give them simple instructions to get things done – remove barriers, not create one. And that requires many, small but significant, tools that are usable and trusted. And tools such as Kyzo are one of many toward that goal. Imagine if you walk into a Bank, scan a QR code to share and verify your identity, walk out with an Account in hand, all with a broad smile. Wouldn’t that be agreeable?