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Customer due diligence for maximal financial inclusion

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Customer Identification Processes ("CIP") and Know Your Customer ("KYC") are not just a compliance game: they are indispensable for deploying financial services to the under-served.

Published in: Economy & Finance
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Customer due diligence for maximal financial inclusion

  1. 1. How To Identify & Assess Customers While Achieving Maximum Financial Inclusion
  2. 2. BANKING UP PAY DEPOSIT SAVE BORROW Start Service Context 2 Apply Online
  3. 3. BANKING UP Maximizing Financial Inclusion Accept as many deserving applicants as possible Implement Customer Identification Process (“CIP”) with maximum options Keep product prices as low as possible Contain fraud to preserve margins Reject and detect fraudsters 3
  4. 4. BANKING UP Assessment Criteria Example Identity (CIP) Legally excluded On SDN/Blocked List? Impersonator Stolen identity? Eligibility (KYC) Prior fraudster /abuser On CHEX list? Other negative list? Likely to defraud/abuse Anonymized email? Device with malware or on dark web? Commercially un-suitable Un-scoreable or low score or with senior liens on assets? (for “borrow” only) 4
  5. 5. BANKING UP Tools Lists (simple matches) Legacy • Bureaus, CHEX … • OFAC … New • Banks & networks • Telcos • Vendors Data (algorithms) Instant • Device Identity • IP address/Geo-location • Scan of ID docs • Biometrics Historical • Prior addresses/ assets • Digital footprints • References from peers 5
  6. 6. BANKING UP What’s Keeping Us Up at Night Staying ahead in the arm’s race against fraudsters • Use of new technology: fraudsters are early adopters • Shorten reaction times: fraudsters can jump quickly from one service to another Fairness and privacy concerns • New instances of discrimination against: • People with no/ few digital footprints • Protected classes which happen to have specific data patterns • Possible contribution to the proliferation of online data 6
  7. 7. BANKING UP Summary  Implementing strong CIP and KYC is economically crucial, in order to achieve low priced services for a large audience. It is not just for compliance.  Technology keeps improving. But fraudsters are always a moving target.  We are aware of potential fairness and privacy pitfalls. New policies will need to be carefully crafted to protect both consumers and service providers. 7

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