At the turn of this decade, the “GDP of the internet” began rising precipitously; online merchants, particularly micro-merchants, began opening online storefronts in increasing numbers. Yet the technology powering the flow of money online was simply not keeping pace. It was this set of unique circumstances that necessitated the creation of a new generation of payment solutions. With their elegantly simple code and their vast network of relationships with credit card issuers, banks and financial services, these payment solutions open the doors to a truly borderless marketplace where online merchants and buyers could transact freely.
A layer of trust
There was, however, another problem that stood in the way: If these payment solutions wanted to enter new markets, particularly unchartered and unfamiliar ones, they needed to first build a layer of trust between themselves and their new customers – the online merchants.
This layer of trust needs to be built on:
- Customer due diligence (CDD): Ensuring a level of CDD that is commensurate with the risks involved in transacting with new customers in these regions. For payment companies, banks, and financial services providers, this includes meeting regulatory requirements such as Know Your Customer (KYC), Anti-Money Laundering (AML).
- Fraud prevention: While the digital economy has created unprecedented opportunities for both established and upstart merchants around the world, it is also prone to fraud. Indeed, prevention is the operative word here, because very often fraud is only detected after the fact.
As it happens, the success of both CDD and fraud prevention hinge on a critical process: Identity verification. When it comes to highly competitive and fast-growing companies, it becomes imperative to move quickly and capture as much market share as possible. For these companies, it becomes essential to have an identity verification process that can scale quickly, efficiently, and cost-effectively. In order to do that, these companies need access to a variety of trusted and reliable data sources; but, as it happens, the data that is being sought to verify the identity of merchants in these markets is often available exclusively with local data vendors.
Consider a growing payments company; let’s say it is foraying into the Peruvian market. It will likely struggle to forge relationships with local data partners there; it would have to sign multiple contracts with multiple data partners in order to gain access to a sufficiently large swathe of identity data. This process requires a great deal of time, resources and familiarity with the local ecosystem; identifying, procuring, and vetting data sources, and then manually undertaking security and compliance checks. Even from a technology standpoint, the time and investment required to build an API for every data source that the company intends to tap into, become critical roadblocks to their expansion plans. Given these constraints, it would take anywhere between six months to a year for these companies to integrate each data source onto their systems. Now, consider the total time it would take to integrate with multiple data sources across multiple countries; that’s when the project begins to look unfeasible.
The solution: a single API to access identity data across the world
Trulioo has, to a large extent, mitigated this problem; as one of the world’s preeminent identity verification solutions, we have access to hundreds of data sources. Through a single API, GlobalGateway --Trulioo’s flagship solution --provides secure access to over 400 data sources across the world. With GlobalGateway, our clients no longer need to sign multiple contracts with multiple parties; instead, a single contract with Trulioo provisions it with access to data from multiple data partners. In fact, one of the world’s leading cross-border payroll solutions uses GlobalGateway to verify the identity of payees in 52 countries across different continents, including Chile, Jordan and Egypt.
Instant access to a plethora of data sources also goes a long way in mitigating risk; for instance, companies tend to put off their CDD process till such time as a merchant starts transacting beyond a certain dollar threshold — this is mainly because traditional processes of identity verification were manual, slow and required much human effort. The instantaneity of identity verification, which Trulioo enables, allows companies to place identity verification at the very beginning of merchant onboarding; the same instantaneity makes it easy for many of our clients to verify (rather, reverify) the identities of their existing merchants. As a result, our clients are able to understand their entire consumer base quickly and take timely cognizance of any risks that their merchants might pose.
MobileID verification: a boost for financial inclusion and an antidote to fraud prevention
From very early on, we, at Trulioo, saw identity verification as a catalyst for financial inclusion; to that end, we realised that we needed to cover hard-to-reach areas, which lacked traditional sources of identity data. As of October, Trulioo can verify the identity of up to five billion people, or two-thirds of the world’s population, along with 250 million businesses, including micro-merchants. In developing areas of the world, where a large part of the population is “unbanked”, and traditional sources of identity data have limited coverage, mobile network operators (MNOs) can play a game-changing role. In developing markets, the mobile user base outstrips that of financial services: for instance, over the last four years, over a billion mobile accounts were opened around the world, compared to 500 million bank accounts. Indeed, the data in possession of MNOs can go a long way in verifying the identity of otherwise “thin-file” merchants.
To that end, we began partnering with MNOs around the world. Currently, we have access to identity data provided by dozens of MNOs, which cover 1.8 billion mobile users. When the traditional KYC-compliant sources of data are combined with MNO data, one is able to obtain more insight into the identity that one is trying to verify. No less important is the added value that MNOs bring to fraud prevention; for example, when verifying a merchant’s mobile number against MNO data, GlobalGateway can flag numbers that are VoIP numbers, which are often prone to misuse by fraudsters.
We are one breakthrough away from financial inclusion
If we look back at the evolution of online commerce, we realise that at different points, there have been different technological breakthroughs that have catalysed the sector in different ways. The revolution in online payments was one such breakthrough; identity verification is on the cusp of being the next breakthrough. Today, merchants from around the world can transact online as free agents of the online economy; our dream is to see a world where they are able to transact not just as free agents but equals of a financially inclusive ecosystem.
This article first appeared on ThePaypers.