Why is Digital Identity verification so important for Jersey's Financial Services Industry?

Posted: 24/06/2022

Digital identity verification is fast becoming an industry standard

Edmund Hatton, Digital Jersey’s Fintech expert shares his thoughts on The Government of Jersey and the Jersey Financial Services Commission’s ‘Consultation on facilitating the adoption of Digital ID Systems’ paper and breaks down the current barriers faced by the industry.

The main issue faced today is critical mass adoption. Many firms have already started to leverage digital identity verification as part of their client onboarding process; however, numerous businesses are governed by their group’s risk appetite, resulting in strict change controls regarding compliance and their associated risks to enforcement action.

A common example currently faced by industry

“A strong desire to adopt and implement technology, supporting operational efficiency, and compete with disruptive competitors already leveraging digital identity as part of their processes.”

5 Benefits of Digital Identity Solutions

1. Faster client onboarding times

Surveys have shown that implementing a robust digital identity verification solution within the client onboarding processes can reduce onboarding times by 95%.

2. Enhanced levels of compliance and accuracy

Since the pandemic fraudulent payments and identity theft have increased by 41%, this is mainly due to the rise in fraudulent ‘physical’ documents and the utility of online payments, resulting in 5.8% of attempts being successful.

By introducing a digital identity solution, businesses can leverage a variety of multi-factor authentication techniques, truly validating the customer’s identity in real-time. Digital Identity solutions also offer a wide range of integration opportunities, such as credit reference, PEPs and sanctions screening, which will drastically remove the chance of fraudulent activity, while reducing reputational damage and or enforcement action for the business.

The risk of fraudulent identity documents has increased by 41% since 2020, this figure will only continue to rise, and of that 41% increase, 5.8% resulted in fraudulent access to a service. Digital identity verification solutions can reduce this figure, resulting in less fraud, potential reputational damage and or enforcement action.

3. Robust security assurance

A robust solution will deliver a variety of automated validation, multi-factor authentication and compliance checks, ultimately ensuring the quality and authenticity of a document in real-time, delivering comprehensive assurance to the business.

4. Lower operational costs

Identity document verification can take considerable time, resulting in wasted resources and higher costs. Compliance and Operations teams that embrace the support of automation, will have more time to focus on enhanced matters and developing policies and procedures, in-line with industry and regulatory requirements.

5. Customer experience

User experience has become an expectation across all industries and sectors. The average investor is looking for a seamless client onboarding experience. This involves a level of self-service, record keeping and assurance. By implementing digital identity as part of the process, clients can now validate and onboard themselves, resulting in less friction and a better-quality service.

3 Common Scenarios For Not Adopting Digital Identity Verification 

Jersey houses numerous innovative technology providers with deep understanding of the local regulatory framework, ultimately supporting the implementation of technology across industry.

Reliance

“We are a local, privately owned and managed regulated firm, focussing on Fund Management and Corporate Services, due to the Banks not accepting reliance through third-party digital identity verification, we are reluctant to use a digital identity solution, as we (the directors) are essentially liable to pay any enforcement action, fines and penalties, thus resulting in our firm being risk averse to the adoption of digital identity, until further clarity is provided.”

Accreditation

“We are part of a global firm, driven by group decisions, the processes work seamlessly everywhere but Jersey, we manage our client onboarding through outsourcing centres, so unlikely to adopt that technology as part of our client onboarding process. Group requires any third-party technology providers to comply with a range of accreditations standards currently unsupported by local providers.”

Clarity

“As a local firm, we are confused by the regulatory guidance, the FATF has provided clarity, assurance and recommendations on the adoption of digital identity, the local regulator has provided a series of updates related to CDD/ID&V and Onboarding practices, however, we are waiting for critical mass adoption prior to moving into automated processes.”

To conclude, industry feedback is vital, as without your input Jersey could slip behind the curve on digital adoption, resulting in a less desirable jurisdiction to onboard clients. Jersey’s financial services industry has an opportunity to influence the direction of our digital identity framework, the time is now to respond.

The Government of Jersey and Jersey Financial Services Commission requires your opinion and support to provide deeper clarity and assurance to industry. Please contribute and enhance the adoption of digital identity in Jersey by completing the following consultation questions.

The consultation paper below provides deeper insight into the problems currently faced by industry and the solutions available.

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