Research

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


Market Context Report

Report Summary


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.

Acknowledgments


Many of the insights in this report were derived from interviews with stakeholders in the financial services, technology, and civil society sectors, as well as a convening that FinRegLab held jointly with the Aspen Institute’s Financial Security Program (FSP) in October 2024. FinRegLab would like to thank stakeholders who participated in interviews and discussions, Aspen FSP, and Visa for providing support for the convening.

We would also like to thank individuals who provided valuable feedback on this report. They include:

Susana Barragán

UnidosUS

Laura MacCleery

UnidosUS

Nick Bourke

Consultant

Linda Jeng

Digital Self Labs LLC

Ivo Jeník

Consultative Group to Assist the Poor (CGAP)

Amit Sharma

FinClusive

Lastly, we would like to acknowledge the FinRegLab team for their work in writing this report: 

David Ehrich

Consultant

Gillous Harris

Research Analyst
FinRegLab

Abdulla Tarabishy

FinRegLab

Kelly Thompson Cochran

Deputy Director and Chief Program Officer
FinRegLab

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