Identity is fundamental in finance: to protect against fraud and crime, to fulfil know-your-customer obligations, and to ensure market integrity. At the same time, identification and know-your-customer rules can be major barriers to accessing financial services. This paper considers the various requirements for identification in the financial sector and the evolving nature of identity. We argue that technology presents an opportunity to solve this challenge through the development of digital identity infrastructure and related utilities. The establishment of such utilities requires addressing design questions such as registration methods, data availability, and cross-jurisdiction recognitions. Yet, as with any reform, a balance between flow through efficiency and cyber-security needs to be reached to ensure that the objectives of financial inclusion and market integrity are not achieved to the detriment of financial stability.
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The authors are grateful for comments from Iris Chiu, Emilios Avgouleas, Pierre Schammo, Jean-Louis Schiltz, Anton Didenko, Tsany Ratna Dewi as well as participants of the Alliance for Financial Inclusion Global Policy Forum (AFI GPF) in Sochi (September 2018), and for the research assistance of Rohan Balani, Jessica Chapman and Evan Gibson. All responsibility is the authors. The authors gratefully acknowledge the financial support of: the Luxembourg National Research Fund, project ‘A new law for Fintechs—SMART Regulation’, INTER/MOBILITY/16/11406511; the Australian Research Council, project ‘Regulating a Revolution: A New Regulatory Model for Digital Finance’; and the Hong Kong Research Grants Council Theme-based Research Scheme.
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Arner, D.W., Zetzsche, D.A., Buckley, R.P. et al. The Identity Challenge in Finance: From Analogue Identity to Digitized Identification to Digital KYC Utilities. Eur Bus Org Law Rev 20, 55–80 (2019). https://doi.org/10.1007/s40804-019-00135-1
- Digital identification
- eKYC infrastructure
- KYC utilities
- Market integrity
- Anti-money laundering
- Financial inclusion