Page 43 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

These inputs are then used as inputs to an analysis of the use of digital identities in the DFS sector, considering
first the ‘traditional’ approach with a customer who has a foundational identity document set. The paper
cautions against relying entirely on the foundation identity for DFS transaction authentication, highlighting
the consequent performance issues, and suggests the use of derived transactional digital identities for this
purpose. With regard to customers without the necessary identity documentation, a way forward based on
the use of dynamic digital identities is suggested, with the type of service that can be delivered linked directly
to the LoA that can be achieved over time. It is recognized that further work is needed in this regard.

A number of examples of the use of digital identities with DFS services are explored, including a general
example of the use of a foundational digital identity with the Groupe Speciale Mobile Association’s (GSMA)
mobile connect framework, and specific examples from Pakistan, South Africa, India, and Nigeria. The impact
of digital identity on DFS in general, and on the barriers to adoption, are explored from the perspectives of
the commercial models (increasing the potential customer base, reducing the cost of regulatory compliance,
and creating a framework for the development of additional revenue streams), social and cultural issues
(specifically including privacy concerns, balanced by the potential to enhance financial inclusion), and the
regulatory impact (including the potential for increasing support for the FATF Risk-Based Approach, and the
need for developments in the area of liability).

Finally, a number of recommendations are made:

Recommendation 1 At the time of registration, a DFS operator should create a digital identity for its
customers, for use in both DFS transactions and (where relevant) in identity asser-
tion with external service providers.
Recommendation 2 Where a customer is unable to provide a foundational document of digital identity,
consider the issuance of a dynamic, self-asserted digital identity, which may be
‘stepped up’ over time and as required.

Recommendation 3 Regulators should standardize digital identity registration, and ensure interopera-
bility between DFS operators and service providers relying on the digital identity.
Recommendation 4 DFS operators should build in customer privacy measures, compliant with national
legislation either current or anticipated.

These recommendations are expanded on in the body of the document.

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