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G20 Digital Identity Onboarding

– World Bank

  • Report
  • Posted by Good ID team (Good ID)
  • 27 June 2019

The World Bank explores the intersection between digital ID systems and the financial sector in the developing world

Identification, both digital and analogue, is closely linked to the financial sector, and ID systems are a key concern for both users and suppliers of financial services. Produced by the World Bank Group on behalf of the G20, this report explores the potential of digital identification systems to benefit the financial sector and improve access to financial services for underserved groups.

Financial inclusion is a powerful driver of both individual poverty reduction and national economic growth. As the report authors note: “The inability to credibly prove one’s identity can be a source of economic, political and social exclusion,” observing that: “In the financial sector, it hampers access to basic services such as bank accounts and loans.” And yet, an estimated 1.7 billion adults – the vast majority of whom are from the developing world – are still excluded from the formal financial economy. Vulnerable groups such as women, poor rural farmers, refugees, and small businesses are particularly affected by lack of access to financial services.

As such, increasing financial inclusion is a key development priority, and the World Bank Group has set an ambitious target to achieve Universal Financial Access by 2020. Meeting this target will require all adults globally to have access to a transaction account, where they can store money and send payments. However, for many adults, lack of legal identification remains a common barrier to setting up an account.

Digital identification systems have the potential to dramatically broaden access to financial services by increasing the ease with which individuals can obtain ID, and by streamlining and embedding the work of the financial sector in the developing world. From a broader economic perspective, digital ID systems could also benefit developing nations by making it easier for states to collect taxes, target social programs and generate security.

Alongside the potential benefits of rolling out digital identification systems, this report acknowledges the risks inherent, including data protection, privacy, security, and system sustainability. With this in mind, the authors provide a series of recommendations for the financial sector to better incorporate digital ID, using country specific case studies, and outline key national policy considerations. It outlines the following policy recommendations to consider:

1. Ensure an integrated identity framework;

2. Consider the appropriateness of the regulatory framework to capture the challenges related to digital ID, and risks to its appropriate implementation; deliberate updates to the regulatory framework including the issuance of new regulations where necessary;

3. Establish a reliable oversight model to include stakeholders beyond the traditionally regulated financial institutions who can introduce risks to digital identity systems;

4. Build authentication and service delivery systems that protect user privacy, and provide individuals with the right to access their data and oversight over how their data is shared;

5. Establish clear and well-publicized procedures for citizen redress, including defining where the onus of responsibility lies in the event that errors emerge or that the security of a person’s identity is compromised;

6. Support and empower development of private sector led services to leverage the legal ID infrastructure for building out digital layers. In doing so, the public authorities should ensure that these services are safe, reliable and efficient; these services are interoperable; and that the market is competitive;

7. New approaches to ID are constantly emerging and public authorities should closely monitor these developments with a view to share knowledge and establish common legal frameworks at both the domestic and international level.

On both the macro and micro levels, financial inclusion is a pathway to greater prosperity, equality and independence. This report suggests that, by better integrating digital ID systems into financial services, it’s possible to improve access for the most marginalized communities.