FSD UgandaDissemination of the Electronic Know Your Customer evaluation report
The surge of digital financial services necessitated Electronic Know Your Customer (e-KYC), a digital process that allows financial institutions to verify a customer’s identity remotely. In the journey toward financial inclusion, e-KYC serves as an initial step in enabling access to financial services like bank accounts and mobile wallets, often marking the beginning of financial inclusion for many individuals.
On October 8th, FSD Uganda in partnership with the Uganda Bankers’ Association (UBA) conducted a workshop to share findings from the e-KYC project evaluation report. Initiated in 2020, in collaboration with Bank of Uganda, the project aimed to enhance identity verification for supervised financial institutions (SFIs) in Uganda. The first implementation phase of this project was completed in 2021 involving 31 supervised financial institutions integrated into the e- KYC system.
Key successes
Some of the key successes noted in this project include 1) e-KYC has enabled SFIs to verify customer identities in real time using the National Identification Number (NIN). 2) The onboarding turnaround time has decreased from over an hour to approximately five minutes. 3) The system has lowered the risk of fraudulent onboarding, enhancing security across institutions.
The challenges
Despite these successes, financial institutions continue to face challenges which include 1) Lack of the image verification functionality which is critical for curbing identity theft. For example, banks are not able to verify the face of the person who opens an account against what is in the National Identification Registration Authority (NIRA) database. In this case, the NIN might be legitimate but not the photo. Further information on the report can be accessed here.
A diverse group of nearly 60 stakeholders, representing various sectors attended the event and shared valuable feedback including the following key discussion points;
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- Tier IV interest: The Uganda Microfinance Regulatory Authority (UMRA) expressed a strong interest in integrating its institutions with the E-KYC platform to streamline compliance.
- Data protection and privacy: There was a strong emphasis on protecting the NIN and ensuring data privacy not only from the perspective of Financial Service Providers (FSPs) but also from the perspective of customers (data subjects).
- Secure financial inclusion: Attendees encouraged institutions to uphold a secure financial inclusion journey, safeguarding customer data and minimizing fraud.
- Staff security awareness: Financial service providers (FSPs) were urged to enhance cybersecurity awareness among staff who conduct verification processes, as they can be potential weak links in securing customer information.
- Legal considerations for foreign IDs: Before incorporating foreign passports or other international ID forms into the E-KYC platform, NIRA advised that Ugandans study the relevant laws and regulations governing foreign identification.
- Lessons from other countries: Participants suggested looking into best practices from countries like Kenya, where integration with National ID infrastructure has been successful. Kenya’s use of e-Consent infrastructure without widespread biometrics could provide insights.
- Customer grievance mechanisms: Stakeholders recommended that FSPs establish a clear grievance handling mechanism to assist customers who face ID-related security issues.
- Continuous identity verification: Participants called for the development of a mechanism for ongoing verification to address issues arising from number reassignments and changes.
- KYC verification standards: It was suggested that standard guidelines for KYC verification be established to provide consistency across institutions, particularly regarding API protocols and security requirements.
- Concerns with mobile number reassignment: There are concerns regarding the Uganda Communications Commission’s (UCC) practice of reassigning mobile numbers without notifying SFIs, leading to potential security issues when phone numbers are linked to previous users.
Conclusion
The workshop highlighted both achievements and ongoing challenges of the e-KYC system. The e-KYC evaluation report revealed the extent to which financial services were utilising the e-KYC platform and how it has been integrated into their operations. Looking ahead, collaboration among stakeholders will be essential to address infrastructure gaps, strengthen data protection, and establish clear standards for KYC verification.
FSD Uganda, as a market facilitator, is committed to working with partners to expand the e-KYC access to the underserved populations. This is with an objective of reinforcing Uganda’s financial ecosystem and advancing secure digital identity verification.
e-KYC is no longer about a compliance ticking the box exercise. It is now an integral part of our regulatory framework, helping to reduce fraud and is part of organisations’ internal policies.
