LexisNexis report focuses on financial inclusion
LexisNexis Risk Solutions’ 2022 Financial Transparency and Inclusion Report showed strong interest in financial transparency and inclusion.
LexisNexis Risk Solutions and research and advisory firm Celent designed the Financial Transparency and Inclusion Survey. The online survey was conducted in late 2021 and received 297 complete responses worldwide from management and other senior executives responsible for compliance, retail and commercial areas.
The survey of banks, insurers and non-bank financial institutions in 13 countries and regions aims to better understand the commitment of financial institutions to financial transparency and financial inclusion and the challenges they face in achieve these goals.
Financial inclusion is a global issue. According to the World Bank, there are 1.4 billion unbanked people worldwide and the financial services industry faces challenges in reducing this number. Many factors affect financial inclusion; poverty, a thin credit history, living in a cash-based society, a history of bad debts and/or a lack of financial education can all impede access to financial services.
There are obvious opportunities to overcome some of these obstacles. For example, global efforts to increase inclusive access to trusted ID systems and mobile phones could be leveraged to increase account ownership for hard-to-reach populations.
Banking the uncooked population
One of the ways to convert the unbanked into banked customers is to improve financial transparency. Financial institutions must be able to identify consumers and understand their risk profiles, both to maintain regulatory compliance and to support the extension of consumer financial services. The more institutions understand consumers, the easier it is to provide appropriate financial services. However, 69% of respondents agree that unbanked or underbanked people are more difficult to onboard than other types of customers and businesses due to lack of data.
Many financial institutions are turning away significant numbers of potential customers due to current Know Your Customer (KYC) processes. The most challenging customer onboarding barriers that institutions face are difficulties in collecting and verifying customer information. However, interest in sharing data to support KYC processes is growing. Nearly 80% of financial institutions express interest in a global customer due diligence (CDD) service, up from just over 70% in 2019.
The report finds that financial institutions can do more to achieve greater transparency, as indicated by the 64% of respondents who say identity verification is a challenge when onboarding people.
Results of the COVID-19 pandemic
The pandemic has posed a challenge to financial crime and financial institution compliance operations, with large numbers of applicants applying for government assistance loans and financial institutions unable to verify identities in person due to shutdowns. However, it has also led financial institutions to adopt more digital practices, with 90% of institutions reporting that the pandemic has accelerated the adoption of artificial intelligence (AI) and other next-generation technologies.
The countries expressing the most agreement that the pandemic has accelerated the adoption of digital technologies are India, Indonesia and Mexico. In Singapore, the US and the UK, where digital adoption is already high, fewer companies see the pandemic as the driver.
According to World Bank data, in 2021, 18% of adults in developing economies paid their utility bills directly from an account. About a third of these adults did so for the first time after the onset of the COVID-19 pandemic. The share of adults making a digital merchant payment has also increased after the COVID-19 outbreak.