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KYC requirements in Nigeria, Bangladesh tough

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Over 45% of women in LIC without a national ID

Although, the country is not alone in this category, the requirements for Know Your Customer (KYC) in Nigeria employed by organisations and government institutions are said to be tough.

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According to a report titled: “Payment system design and the financial inclusion gender gap,” prepared by Caribou Digital in collaboration with DFS Lab, Caribou Data, and funded by the Bill and Melinda Gates Foundation, it noted that the gender gap in financial inclusion is stubborn.

The report said between 2011 and 2017, the world saw strong progress, which brought 1.2 billion people into the global financial system for the first time. But, the gap between the proportion of men and women, who had an account with a financial institution in low- and middle-income markets stayed stuck at nine percentage points.

The report focused on five countries, including Bangladesh, Côte d’Ivoire, Kenya, Nigeria, and South Africa. It observed that Level One Project (L1P), which shows how to build and scale a real-time digital payment platform within a country or region, to serve low-income consumers and merchants and bring them into the formal financial economy, is critical in bridging financial inclusion gaps.

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The analysis predicted that tiered KYC will have a more positive effect on women than men.

The tiered KYC requirements ensure the application of flexible account opening requirements for low-value and medium value accounts, which are subject to caps and restrictions as the amounts of transactions increase.

As such, the report said women benefited from a tiered KYC approach where they needed minimum credentials (national ID) for a SIM and mobile money account but had to produce several other credentials for a bank account (letter of reference, utility bill, collateral/evidence of salary, among others) that they might not have.

According to Caribou Digital, Nigeria and Bangladesh have the most difficult KYC requirements in the sample of countries analysed and have financial inclusion gender gaps of 24 per cent and 29 per cent, respectively, whereas Kenya (eight per cent), Côte d’Ivoire (11 per cent), and South Africa (-2%) have much lower gaps.

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It explained that with tiered KYC, low-income users with limited to no identification can self-issue basic accounts, and it allows users to increase account capabilities with their needs. It stressed that this is critical for women in low-income countries (LIC), as more than 45 per cent of them lack a national ID, compared to only 30 per cent of men.

In addition, it stressed that there are still almost 50 legal differences that have been documented between women and men when applying for an ID or passport, noting that tiered KYC supports a risk-based approach to drive usage and volume.

Further, it stressed that access to a national ID is more of a barrier for women than men, which creates significant challenges.

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“Tiered KYC, including a zero tier where no ID is required, is quite important in making sure women are able to open accounts with minimum ID barriers and would likely improve women’s access significantly. Overall, we believe tiered KYC will have significant benefits to women and contribute to closing the gender gap,” the report noted.

Dissecting the End-User Fees Principle, the report said fees to end-users (individuals, merchants, billers, government agencies, and other enterprises) should be zero or low and may vary by use case.

On the Low-Cost User Devices principle, the report said all primary functions should be accessible to users with inexpensive basic/feature phones, which are typically enabled through USSD interfaces on such devices.

It added that ensuring that primary functions are accessible on basic devices promotes user access, particularly for low-income consumers who have feature phones.

For instance, it observed that women are 20 per cent less likely than men to own smartphones in low- and middle-income countries, though notable differences between countries exist.

“Our quantitative panels showed that even smartphone users predominantly use USSD/SIM channels to make transactions, with app-based transactions comprising only 13 per cent of all activity across our five markets,” it stated.

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