13D/ Bank On It! Identity in financial services. / Tony T.

Session 13D

Bank On It! Identity in Financial Services

Session Convener: Tony Jin

Notes-taker(s): Tony Jin, <other>

Tags / links to resources / technology discussed, related to this session:

• Canada & bank consortium: https://securekey.com/
• Early Warning Systems → Zelle & Authentify

Discussion notes, key understandings, outstanding questions, observations, and, if appropriate to this discussion: action items, next steps:

• What are the main drivers for ID in financial services?
  • Option 1: it all comes down to cost → efficiencies, fraud
  • Option 2: customers have a lot of pain of repeat entry, really annoying thing for the customer
  • Option 3: might be driven by policies from government
    • Mostly conforming to open banking or to
    • Customer types: some are just baseline compliant, others take advantage of the requirement to modernize
  • Option 4: mitigating risk and non-repudiation
    • Are you you, can you rely on that from an audit perspective
    • Confirming identity of good actors and preventing the usage by a bad actor
• What is digital ID adoption in other countries
  • Singapore Singpass (covered in prior info session)
  • Sweden → BankID, hosted by the banks themselves, can be used outside of banks
    • Bank consortium runs the systems, relying parties are paying to use it
• Why do we need addresses for AML?
  • A legacy system from when we used to send physical bank statements
  • Also now regulatorily required as to not exclude certain consumers who don’t use emails / phone numbers
  • Its a broken system → now people move around so much
• Underserved groups without clear identity & history that limit access to financial services
  • Homeless, nonprofits exist to help
  • New immigrants → for instance Canada has rental housing programs for new immigrants
• Maybe regulators need to educate / add more nuance based on risk profile, different levels of assurance required
  • Challenges around regulator risk appetite → banks are fearful of overstepping and being fined, also challenges around technical implementation
  • Could be a challenge around redlining and excluding certain socio-economic groups
• Mexico example: certain levels of bank accounts with certain transaction limits can be created with limited KYC, have not seen in the US
• Simplify a lot of things if you can have a digital credential that can replace wet signatures → what’s the financial community around VCs?
  • Hypothesis: driven primarily by regulators on what banks are allowed to do
• Credit Unions & Co-Ops are good examples for early GTM
  • Technology question: what risk & ID solutions are being used to secure transactions?
  • In the US, Canada, etc. Merchant is not regulated, its up to them to determine their risk level on if they want to use solutions such as 3D **Secure (expensive)
  • For e-commerce merchants, this becomes a tradeoff of risk (chargebacks), and conversion of sales
  • In Canada, very stringent PCI regulation protects cardholder information. Merchants are very afraid so very quick to adopt these technologies to protect their consumer and their brands and avoid fines
• Open source space: banks actually want to come to the table to discuss and participate rather than just talk with vendors to have things done
• Traditional banks are important to meet needs of consumers → started to meet a specific need of consumers and then expand to broader use cases
  • E.g., China: AliPay started as an escrow system, and then became a widespread payment system. Now can transact almost entirely without cash
  • E.g., Tencent is building a payment system for the gaming ecosystem
  • In the US everyone wants to hold onto the payment rails because its lucrative, hence slower innovation & adoption of new pieces
  • Is the limited adoption for better digital payments due to identity & fraud/risk concerns or is it due to regulatory & market capture by incumbents?
  • E.g., India has UPI payment systems based on Aadhaar, being used across the entire country. Originally was driven by more efficient government disbursements
  • E.g., Costa Rica central bank has created this interchange system with settlement and low dollar value payments can be sent for free, instantly
  • Phone numbers are tied to banks accounts that create accountability / KYC

• Alipay uses progressive levels of KYC
  • Anyone can send payments using a basic phone link
  • Requires additional KYC to receive payments e.g., as a merchant