Every aspect of access to financial services rests upon the identification of the customer, which is one of the main bedrocks of the new FinTech ecosystem, and, as such, identity has posed a great challenge to the industry. Without a verifiable identity of some kind, it is impossible to access a regulated financial system, open a bank account, make payments, or use credit for personal or business development. Hence, an estimated 1.5 billion (more than 20%) people globally do not have an official, government-issued, and legally recognized document as proof of their identity. Thus, alternate forms of identity, such as digital ones, would allow individuals to access at least some of the services without government-authenticated legal identity, increasing the social and financial inclusion of such excluded persons.
Moreover, fully harmonized processes and requirements regarding identification and verification are needed, since divergences in these processes across jurisdictions provide the single most important example of fragmentation, which harms the provision of services across borders using FinTech..
However, more than 20 years of AML/KYC regulation of remote identification in European Union suggests that so far, there is no tradition of adaptation to technical progress. Liberalization of remote identification means, introduced from 2014-2018, and subsequent initiatives could be considered the first significant attempt to adapt to technical progress after decades of regulatory stagnation. The question remains, however, is that enough to ensure the access and possession of undistorted digital identity and to increase sustainable access to financial services?
This chapter therefore addresses the following objectives: — Overview the natural person’s identity and financial inclusion dimensions, with a specific focus on the digital context. — Analyze the historical evolution and current state of electronic identification regulation in European Union financial services. — Provide perspective on the future and challenges of electronic identification, thus concluding with remarks and recommendations for related legal regulation principles.
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