Government introduced the Financial Intelligence Centre Act (Fica) almost two decades ago to help prevent financial crime.

While measures to curb illegal financial activity should be welcomed, quite often such steps result in red tape for law-abiding citizens. This is particularly true where financial institutions have wide-ranging interpretations of the documents they may accept to verify the identity and proof of residential address of potential clients. Some institutions require certified copies of all documents — including an identity document and narrowly defined proof of residential address — while others are not that strict.

The initial idea was that customers should present institutions with a bill they received through the post at their residential address as proof that they actually live there when they open an account. But nowadays most bills — even the rates and taxes bill sent by the municipality — are e-mailed. The question is whether the verification process is evolving fast enough.

The good news is that the proliferation of digital financial service providers may see a more streamlined Fica process in future. However, it may also give rise to other challenges such as privacy concerns.

South Africa’s first digital bank, TymeBank, allows customers to open a Fica-compliant bank account at any of its kiosks at Pick n Pay and Boxer stores without submitting any documents. Clients verify their identity by having their fingerprints scanned and answering a few questions on the kiosk screen. The information is then cross-referenced against the home affairs database.

“This process happens in real time and customers don’t need to bring any documents like their ID books or a utility bill with them; it is all automated and takes just a few seconds,” TymeBank’s head of sales and service, Cheslyn Jacobs previously explained.

Once clients are issued with their debit card they can transact immediately.

Triangulates

But how does the bank verify someone’s residential address without them submitting a document as proof?

TymeBank CEO Sandile Shabalala says the bank triangulates various credible databases — including municipal and property rental databases where legal contracts are in place — to validate customer addresses.

“There are various databases that are available that make the process quite seamless from a customer point of view — you don’t actually have to have a physical document to submit as proof of residence.”

But what about customers in the unbanked market or others whose details may not show up in any of these databases?

Shabalala says one innovation they are working on is geolocation. This will allow the bank to determine the physical location of a client using digital information.

Due to privacy concerns, customers will have to give their consent, but someone who has given permission for their mobile phone’s location coordinates to be used could be checked at night a couple of times each month for the bank to be reasonably comfortable of their address — as this is arguably where they sleep most often, Shabalala says.

This could be particularly helpful in enabling financial inclusion of those who live in informal settlements. “That is where the technology becomes incredible in terms of the things that you can do going forward.”

TymeBank has been working on this concept “quite a bit”, but Shabalala admits that it will require more time before it can be implemented.