Page 62 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

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

6.4 Social media data for access to banking services (Nigeria)

Sterling bank in Nigeria has partnered with lending platform Social Lender to enable consumers to apply for
loans by providing access to their social media data. For example, individuals register on the Social Lender
platform via Facebook Connect. Once access to their personal information is authorised, consumers are
assigned a credit score based on a proprietary algorithm . This score can be used to apply for loans from the
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bank.

7 Impact of digital identity on DFS and barriers to adoption

The impact of digital identity systems on DFS will depend entirely on the context within which a solution has
been deployed. How appropriate an implementation is to any given environment will depend on the demands
of local infrastructure, regulation, cultural, technical, social, and commercial requirements.

However, in analysing the potential effects of a proposed system, there are overriding impacts associated
with the concept of digital identity that should be taken into consideration. A selection of key impacts within
commercial, social, and regulatory domains are presented throughout this section.

7.1 Commercial impacts of digital identity on DFS

Large scale adoption is often necessary in order to support a viable commercial model for the provision of
DFS. Integration to, or utilisation of, a parallel digital identity service has the potential to affect the business
case through a variety of drivers.

7.1.1 Increasing the size of addressable markets

Mass adoption of digital identity services has the potential to expand the addressable market for DFS operators
by providing registration credentials for previously excluded individuals. This enables providers of DFS to lower
the adoption benchmark for critical mass within their target market. However, the balance between cost of
integration against the perceived savings made when partnering with such a service is key in establishing
whether the overall commercial impact is likely to be positive.

7.1.2 Cost of regulatory compliance

As fintech services expand, digital identity technologies and architectures are helping to bridge the gap with
partner technology groups, specifically including aspects such as regulatory monitoring tools (regtech). From
a commercial standpoint, the adoption of digital identity services, alongside monitoring tools for legislative
bodies, has the potential to alleviate some of the costs incurred through regulatory compliance.

The costs associated with the KYC due diligence processes, for example, can be significant when dealing with
paper-based documents which need to be scanned and maintained within a proprietary secure database.
These costs can be reduced by multiple DFS providers leveraging a shared resource controlled by a digital IDP
and monitored by a local supervisory/regulatory authority.

For DFS providers, the transactional fee charged by the identity service may be lower than what is otherwise
incurred by individual DFS operators, due to economy of scale benefits derived from an all-around larger pool
of transactions.

Regulators benefit from an increased understanding of the services they are supervising; greater confidence
in the compliance of the service operators; and improved, and potentially cross-industry reporting.

23 https:// pageone. ng/ 2016/ 07/ 11/ nigerias- social- lender- set- launch- south- africa/

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