Identity is the key to accessing the formal financial system. But efforts to expand the use of digital ID must overcome a significant hurdle: complying with regulations that are designed to prevent money laundering and terrorism financing. While necessary, these regulations can also be a systemic barrier for the unbanked. A robust digital ID system can enable remote and low-risk onboarding while strengthening due diligence of bank customers.
Digital connectivity has laid the groundwork for systemic inclusion, but there are two other key steps before capital flows can be unlocked. This is where Protocol comes in.
Know Your Customer (KYC) regulations prohibit financial service providers from onboarding new customers without valid identity credentials. These regulations aim to counter money laundering and terrorism financing, yet unnecessarily excludes hundreds of millions of people from the formal financial sector because they are unable to prove who they are.
Unbanked borrowers have robust economic activity , but cannot reliably provide it to financial institutions. Verifiable data unlocks this activity from the informal financial sector.