Innovations for Identity Proofing and Transaction Monitoring: Advancing Financial Inclusion Through Data & Technology

This landscape paper details gaps in traditional approaches to identity proofing and transaction monitoring that both make it difficult for millions of consumers to access financial services and for financial institutions to detect and protect against bad actors. 

It considers three contexts in which identity proofing and transaction monitoring can play a critical role in financial access–account opening, domestic payment transactions, and cross-border payments–by summarizing legal requirements, financial institutions’ practices, potential inclusion concerns, and recent initiatives. The paper also summarizes three emerging data and technology developments–leveraging more diverse data sources, applying AI and other more sophisticated analytical techniques, and using data sharing platforms and privacy-enhancing technologies to improve the accuracy of identity verification and ongoing client, transaction, and fraud monitoring models.

As fraud and scam defense draws more attention, the paper concludes that sustained engagement by policymakers, industry, advocacy, and research stakeholders could help to ensure that new data and technology initiatives are structured in ways that also help to close existing identity gaps, build long-term digital infrastructure, and reduce the risk of substantial unintended negative impacts on consumers and smaller institutions. The paper highlights the potential value of public empirical research, initiatives to reduce cost and efficiency frictions, and addressing emerging policy questions as stakeholders continue to work toward developing broader frameworks for digital identity and data protection.

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