Page 98 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

While programs in India, Nigeria, and Pakistan authenticate financial transactions on site using biometric
information, in general, cost considerations may prevent other ID programs from doing the same. Portable
fingerprint scanners can be less cost effective than traditional means of verification (e.g. presenting a physical
ID), especially if they are distributed at the scale required for use in national programs (Gelb & Clark, 2013).
In many cases within our review we find that the initial biometric registration of citizens is carried out by
international companies who are contracted specifically for the task. These companies bring scanners and
other equipment to register citizen biometric information during the registration process, but the equipment
is not typically given over to governments for use after registration is completed. Thus, while governments may
have a central registry of citizen biometric information they do not necessarily possess the equipment to verify
citizens on site for financial/social transfers, elections, or other functions unless they have separately funded
the acquisition of such infrastructure. Even with sufficient equipment, technical problems can sometimes
interfere. In India, reports emerged that portable biometric scanners were unable to read the fingerprints
of rural residents whose hands were calloused or worn from labor. As a result, beneficiaries of the Rural
Employment Guarantee Act were unable to withdraw wages (Jishnu & Sood, 2012). Cost and technical capacity
may partially explain why we find many ID programs that incorporate biometric features, but few functions
that require biometric authentication on-site.

Mobile Money

In Congo, national identification cards are used to sign-up for and access mobile money accounts (Intermedia,
2013). In Kenya and Egypt, however, mobile money and IDs are more intricately linked. In a deal similar to
Nigeria’s digital banking partnership, MasterCard recently partnered with Egypt to integrate the Citizens’
National ID with the country’s national mobile money platform. “The system will allow the government to
issue digital ID cards which can be used to pay for a number of services including government fees, mobile
bills, merchant purchases and domestic remittances” (Security Document World, 2015).

In Kenya, customers of M-Shwari who have national IDs are entitled to higher maximum savings balances and
access to credit. Cook & McKay (2015) explain that first-level identity verification for M-Shwari occurs “using
the existing KYC details from the customer registration of the phone number (SIM) and M-PESA account,
which requires physical presentation of an ID.” However, a second-level verification can occur if these initial
KYC details can be matched against the identification information contained in Kenya’s Integrated Population
Registration System (which contains all citizens with national IDs). A successful match means a customer is
entitled to accounts that can hold KES 250,000 (instead of the usual KES 100,000). They are also qualified
to borrow from the Central Bank of Africa, because they have gone through a stronger verification process
(Cook & McKay, 2015). This remote verification method allows the central bank to accurately confirm identity:
the biometric database and central registry lend additional confidence that a unique identification has been
made. With this confidence, the bank can offer more and higher-quality services, mitigating the perverse cycle
whereby identification challenges increase costs for banks and lead to reduced financial service packages for
customers (Dahan & Gelb, 2015).

Figure 9 – Social Transfer Connections to ID Programs

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