Page 9 - FIGI: e-KYC use cases in digital financial services

Executive Summary

Digital identity verification is rapidly growing as a (MNP) and Re-Verification (re-verification of exist-
direct result of digital transformation initiatives and ing active SIM). A verified customer SIM Card issued
has seen increasing growth due to the COVID-19 through the BVS system can be used for remote
pandemic. Account opening is moving online, and opening of Level 0 DFS accounts.
service providers demand a secure and safe meth- To ease remote account opening, Decentralized
od to verify identity and for e-KYC. The main objec- Identifiers (DID) can be adopted for the task of per-
tives of this report is to undertake an analysis of the forming online identity verification, well-designed
technological innovations for e-KYC and compare DID system can allow the user to conduct many
the different approaches countries have adopted identity-verification and authentication transactions
to implement e-KYC and provide information about over "zero-knowledge" protocols that mathematical-
technical standards that could be implemented to ly prevent information leakage and can even thwart
achieve interoperability at the level of the digital privacy-violation threats that arise from event cor-
identity verification process. Use cases in India, Paki- relation. Service Providers benefit from lower costs
stan, and Sierra Leone are considered as well as new and a much higher level of assurance in every verifi-
approach the Accountable Digital Identity Associa- cation transaction, plus auditable verification proof
tion (ADIA). that may be recorded to a distributed ledger.
In India, earlier for issuance of Mobile SIM, a Cus- One use case of the decentralized identifier using
tomer Application form along with physical copies of blockchain, is the Kiva Protocol, a network of nodes
Proof of Identity, Proof of Address and photographs supporting a public decentralized identity (DID) reg-
were required. Management of physical record and istry which has been implemented in Sierra Leone.
wastage of paper was a big challenge. The Govern- This registry provides the foundation of trust in the
ment of India through Department of Telecommu- digital credentials used to verify identity. The KIVA
nication is leveraging the e-KYC and authentication protocol enables citizens to present and authenti-
features of Aadhaar for provisioning of new mobile cate official digital identity credentials with financial
connection/issuance of SIM card. Under the new institutions. citizens can securely share authenti-
procedure, Telecom Service Providers (TSPs) are cated official identity credentials with the financial
leveraging the e-KYC feature of Aadhaar wherein sector to support KYC and customer due diligence
after getting the customer's consent using his/her compliance.
Aadhaar number along with Biometric based e-KYC, The DID Alliance seeks to fulfil the promise of the
UIDAI is sending the Digitally signed and encrypted DID systems by enabling a business interoperabili-
details of customer's Demographic details (name, ty layer as well as a technological one through the
complete address, date of birth, gender and photo- Accountable Digital Identity Association (ADIA). At
graph) along with Aadhaar number to Telecom Ser- the heart of ADIA is the Digital Address; the Digi-
vice Provider along with Date and time stamp. tal Address is a special ADIA identifier issued to an
The required demographic details of customers individual by a certified Digital Address Issuer after
are now captured in Customer Application Form Know Your Customer (KYC) processes have been fol-
(CAF) by the TSP and stored in its database. Once all lowed.
the fields as required in CAF are completed, TSPs are Distributed ledger technologies can also allow
issuing the SIM to customer. This new process is not persistent identifiers, in which the identities of their
only leveraging the e-KYC feature but also saving a holders are likely to be cryptographically verified.
lot of paper and is a big step towards green Telecom- This new type of verifiable and self-sovereign digital
munication in India. identities, where the control of them resides entirely
In Pakistan, a Biometric Verification System that in the hands of the users, regardless of any central-
allows for data flows between the telecommunica- ized registry, identity provider or certification author-
tions provider's Customer Relationship Management ity are unique, global and portable for life.
(CRMs) systems and the National Database and There is a need for a technical standard which
Registration Authority is used for Issuance of New defines a framework for decentralized identity man-
SIM, Issuance of Duplicate SIM or SIM Replacement, agement aimed at individuals for e-KYC purposes
Change of Ownership, Mobile Number Portability for remote onboarding to provide interoperable and

e-KYC use cases in digital financial services 7