Sixty-nine percent (69%) of financial institutions say transparency issues affect underserved customers
ATLANTE, September 15, 2022 /PRNewswire/ — LexisNexis® Risk Solutions has released 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 the commitment of financial institutions to financial transparency and financial inclusion and the challenges they face in achieve these two goals.
Financial inclusion is a global issue. According to the World Bank, there are 1.4 billion unbanked people worldwide and the financial services industry faces challenges in reducing this number. There are many factors affecting financial inclusion: poverty, a poor credit history, living in a cash-based society, a history of bad debts, and/or a lack of financial education can all hinder access to financial services.
One of the ways to convert the unbanked into banked customers is to improve financial transparency. Financial institutions must be able to identify consumers and understand their risk profiles, both to maintain regulatory compliance and to support the extension of consumer financial services. The more institutions understand consumers, the easier it is to provide appropriate financial services. However, 69% of respondents agree that unbanked or underbanked people are more difficult to onboard than other types of customers and businesses due to lack of data.
The report finds that financial institutions can do more to achieve greater transparency, as indicated by the 64% of respondents who say identity verification is a challenge when onboarding people.
Main conclusions of the report:
- Financial institutions remain strongly interested in financial transparency and inclusion, with two-thirds of institutions expressing their commitment to supporting financial inclusion.
- Many financial institutions are turning away significant numbers of potential customers due to current Know Your Customer (KYC) processes. The most challenging customer onboarding barriers that institutions face are difficulties in collecting and verifying customer information.
- Interest in sharing data to support KYC processes is growing. Nearly 80% of financial institutions express interest in a global customer due diligence (CDD) service, up from just over 70% in 2019.
- The pandemic has posed a challenge to financial crime and financial institution compliance operations, with large numbers of applicants applying for government assistance loans and financial institutions unable to verify identities in person due to shutdowns. However, it has also led financial institutions to adopt more digital practices, with ninety percent (90%) of institutions reporting that the pandemic has accelerated the adoption of artificial intelligence (AI) and other next-generation technologies.
“Financial institutions have clear responsibilities to verify the identity of customers and ensure compliance with national and international regulations,” said Leslie Bailey, Vice President, Financial Crimes 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 strong data and the right technology and processes in place, institutions can help improve global financial inclusion rates 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. Celent provided an analysis around the results. The online survey was conducted in late 2021 and received 297 complete responses worldwide from management and other senior executives responsible for compliance, retail and commercial areas.
Download a copy of the 2022 Financial Transparency and Inclusion Report.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to deliver insights that help businesses and government entities reduce risk and improve decisions for the benefit of people everywhere. We provide data and technology solutions for a wide range of industries, including insurance, financial services, healthcare and government. Based in the Atlanta metro area, Georgia, we have offices around the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision-making tools for professionals and enterprises. For more information, please visit www.risk.lexisnexis.com and www.relx.com.