The rising prevalence of mobile phones as proof of identity
An impenetrable layer of trust needs to be built into digital devices so that businesses and consumers can trust each other online as easily as we do face-to-face. With two-thirds of the global population owning mobile phones, it’s one of the most rapidly growing technologies, making it more important than ever for mobile and online transactions to promote privacy and financial inclusion. Verified digital identity is the key to a new world of interactions that will enable significant benefits while mitigating a myriad of risks.
For payments specifically, the ubiquitous smartphone has resulted in more options for consumers than ever before, but with this, comes higher expectations for fast and seamless transactions. Consumers demand a frictionless and convenient experience from the first enrolment to checkout and final payment. This is an ongoing challenge for payments companies due to rigor of know your customer (KYC) and anti-money laundering (AML) compliance regulations, which require them to verify every user’s identity.
Furthermore, mobile devices are already platforms for monetary transactions, particularly in emerging markets such as the Middle East and North Africa, where new mobile money services are set to skyrocket by up to 50%.
However, we are also seeing millions of consumers' personally identifiable information (PII) including dates of birth, home addresses, and social security numbers, for example, being accessed by criminals and used to create false identities and fraudulently open new accounts. In response, companies must strengthen their risk-based approach when it comes to combatting fraud by optimising their criteria and data source types to verify customers. Mobile data is now adding a much-needed new layer of trust.
Mobile — Gateway to Identity
Mobile technologies are allowing payments companies to leverage smartphones as a gateway to verify identity. Mobile network operators (MNOs) already have extensive identity information for their subscribers, due to the KYC requirements that they are required to meet. As customers can connect to their own MNOs from any other network, mobile devices and SIM cards for mobile identity can easily be used across borders.
This is a win-win situation, enabling compliance with KYC and AML regulations while ensuring an excellent user experience. Over the past few years, KYC and AML regulations have become increasingly tough, placing pressure on entities such as banks, financial institutions, and peer-to-peer payments platforms to do more to battle financial crimes.
For example, in some Northern European countries, SIM cards that enable mobile phones to connect with network providers are leveraged as direct links to the individual. Combining connectivity with compliance and fraud prevention holds the opportunity to satisfy the user experience and business demands.
The need is also seen through a variety of statistical data. In less developed countries, where financial inclusion rates are low, mobile adoption levels are becoming increasingly high. For instance, even though less than 40% of Mexican adults had a bank account in 2014, there were over 80 mobile phone subscriptions for every 100 people. In such instances, the use of mobile phones as proof of identity could become a tool of financial empowerment, which was previously not possible.
Elsewhere, the workforce is becoming more internationally mobile than ever. Nearly 250 million people live outside their country of birth, and the number of funds transferred by remittance exceeded USD 601 billion according to The Migration and Remittances Factbook 2016. Workers are going cross-border in higher numbers and the level of commerce – especially eCommerce – has risen exponentially. Cross-border shopping now makes up 25% of all eCommerce sales.
But the question on everyone’s lips is how likely and to what extent will consumers accept the use of Mobile ID? The outlook is incredibly promising – it’s already happening with two-factor authentication (2FA), which typically involves an SMS text message being sent with a verification code to the user’s mobile device. This code is then used to authenticate that the account being accessed is by the verified user.
As technology continues to advance with developments in electronic identity, security, and privacy, mobile is making its way to the center of it all, facilitating a multitude of new advanced services – all of which will be accessible from the palms of our hands.