Financial inclusion starts with identity


Who is who online - a major problem for finance providers

The world of banking has as many practices for identity verification as it has offerings. But with the explosion of new online-only use cases in finance, the whole industry is facing a pressing issue - how to create and maintain new relationships online.

I am not referring to the cumbersome process of building a product and infrastructure that works online, no, I’m referring to the challenge of understanding who is who when they are no longer sitting in your local bank retail branch as a third-generation customer but online.

A digital society starts with identity

In Sweden and Norway (and with certain variations and coverage in Finland, Denmark, Estonia, Latvia, and Lithuania) there are bank-owned identification systems (“BankIDs”) that cover the bulk of the banked population.

Based on an initial physical in-branch identity proofing, consumers can use their bank authentication method (“bankID”, “SmartID” etc) to access public authorities and other service providers. Although the systems are de facto monopolies, they have become highly effective infrastructures that power a much more effective digital society. Millions of customers know how to register or sign in with a smartphone app: touchID for authentication, passcode for e-signing. A matter of seconds.

For other EU countries, the process of identity proofing customers is based on four primary inferior and highly fragmented methods today:

  • Physical presence (at bank branch, notary or e.g. post office) - by far the most common method of identification in finance today
  • Using a payment method identification system (e.g. Ideal in Holland, first transfers and similar) to also provide identification
  • Video conference combined with ID cards, which is really an extension of the physical presence meeting
  • Variants of ID documents and selfie pictures or video where a separate address check is used

A strong use case - but with monopolistic players and constraints

Use cases where secure identification and e-signatures can be performed in seconds with an app is definitely the future. The Nordic BankID systems have proven this to be the case with millions of users and billions of transactions every year. Systems and practices (video, selfie and more) relying only on ID documents (with all their present limitations) are not.

Yet, the BankID systems fail to solve two major issues:

Firstly, it is neither practical nor acceptable from a customer experience or cost perspective to require customers to physically appear at a bank branch (or any other physical location) to get an electronic identity and e-signature. The process of remote identity proofing has not been put to practice in these systems which means that they become regional by nature (covering only one country). These systems lack the fundamental capability of secure remote identity proofing.

Secondly, Nordic Banks, and Swedish BankID, in particular, have put a lot of effort into building service agreement clauses that limit the flexibility of usage. Initially designed for the banks’ own use, there is little ambition to accommodate different service provider needs. Most notably, different types of contractual limitations in switching a first registered customer to other means of identification. The result is that many service providers are forced to build customer journeys that they don’t really want. But few identification and authentication alternatives are available.

The rise of ZealiD

According to our estimates, less than 3% of the global population have an open app for identification and e-signatures. There is a need for an open, inclusive, and flexible identification solution for the masses. A solution that solves the pains of “know your customer”, strong authentication, and e-signatures without having the consumer appear with a binder at their local bank branch.

This is where financial inclusion starts.

Despite regulations such as eIDAS, we have yet to see such systems become widely available. The core missing capability is remote digital identity proofing to not the highest level but at least a substantial level of assurance.

With this capability, proven consumer behavior in the Nordic model can be transformed into a business model that works for both service providers and customers anywhere in the world. As a Trust Service Provider under eIDAS, ZealiD seeks to provide each and every EU (and global) citizen with electronic identity and an e-signature at their fingertips. That’s what fostering financial inclusions means to us.

Covering 19 languages, 25 countries, and 350 million consumers, ZealiD includes a unique and patented set of methods that pioneer the customers’ access to bank account data (or other trusted accounts) and combine it with identity document machine analyses and selfie video liveliness. The blueprints for the product are based on meeting the requirements of anti-money laundering and e-signature legislation in all EU member states.

This is the future of effective financial services. Downloading an app from an app store and instantly being able to apply for a loan, open a brokerage account, sign a contract or access the best online financial services.