LexisNexis Risk Solutions revealed the results of its 2022 Financial Transparency and Inclusion Report. The survey of banks, insurers and non-bank financial institutions in 13 countries and regions aims to better understand financial institutions’ commitment to financial transparency and financial inclusion and the challenges they face in achieving these twin goals.
Financial inclusion is a global issue. According to The World Bank, there are 1.4 billion unbanked individuals globally and the financial services industry faces challenges decreasing this number. There are many factors affecting financial inclusion: poverty, a thin credit file, living in a cash-based society, history of bad debt and/or a lack of financial education can all impede access to financial services.
One way to convert the unbanked to a banked customer is to improve financial transparency. Financial institutions need the ability to identify consumers and understand their risk profiles, both to maintain regulatory compliance and support extending financial services to consumers. The more institutions understand about consumers, the easier it is to offer appropriate financial services. However, 69 per cent of respondents agree that the unbanked or underbanked are harder to onboard than other types of customers and businesses due to lack of data.
The report reveals that financial institutions can do more to achieve greater transparency, indicated by the 64 per cent of respondents who say identity verification is a challenge when onboarding individuals.
Key findings from the report:
- Financial institutions remain strongly interested in financial transparency and inclusion, with two-thirds of institutions expressing commitment to supporting financial inclusion.
- Many financial institutions turn away significant numbers of potential customers due to current Know Your Customer (KYC) processes. The most challenging customer onboarding hurdles faced by institutions lay within difficulties collecting and verifying customer information.
- Interest in data sharing to support KYC processes is growing. Nearly 80 per cent of financial institutions express interest in a global customer due diligence (CDD) utility, compared to just over 70 per cent in 2019.
- The pandemic posed a challenge to financial crime and compliance operations at financial institutions, with large numbers of applicants seeking government assistance loans and financial institutions unable to verify identities in person due to lockdowns. However, it also led to financial institutions embracing more digital practices, with ninety percent (90 per cent) of institutions reporting that the pandemic has accelerated adoption of Artificial Intelligence (AI) and other next-generation technologies.
“Financial institutions have clear responsibilities to verify customer identities and ensure compliance with national and international regulation,” said Leslie Bailey, vice president, financial crime compliance, LexisNexis Risk Solutions. “Rejecting potential customers due to inefficient or manual processes rather than regulatory reasons can be detrimental to genuine individuals trying to access financial services. With robust data and the right technology and processes in place, institutions can help improve global rates of financial inclusion without compromising on compliance.”
2022 Financial Transparency and Inclusion Report
LexisNexis Risk Solutions and research and advisory firm Celent designed the Financial Transparency and Inclusion Survey and fielded globally in 2022. Celent provided analysis around the results. The online survey was conducted in late 2021 and received 297 completed responses from c-suite and other senior leaders with responsibility for compliance, retail and commercial areas.