Financial identities for world’s unbanked would add USD $250BN to global GDP according to new study

Oxford Economics study points to India, Indonesia, the Philippines, Pakistan and Mexico as stand-out markets for growth in financial services for the unbanked

SAN FRANCISCO, December 11th 2019 – A new report published today projects that establishing financial identities for the world’s financially excluded – or “unbanked” – population would add an extra USD $250 billion to global gross domestic product (GDP), mainly from developing nations in Asia and Latin America. This is the equivalent of bringing the productive potential of a country the size of Vietnam – a country of 95 million people – into the formal global economy.

The report, “The YES Economy: Giving the world financial identity”, was authored by independent global advisory firm Oxford Economics, on behalf of Juvo, the pioneer of Financial Identity as a Service (FiDaaS) technology. FiDaaS technology analyzes alternative data using machine learning to build financial identities, allowing billions of unbanked and underbanked consumers to qualify for financial services, often for the first time.

Oxford Economics identified India (USD$7bn GDP uplift), Indonesia (USD$15bn), the Philippines (USD$15bn), Pakistan (USD$9bn) and Mexico (USD$31bn) as the stand-out markets for this growth.

More household credit, savings and insurance policies
For the forecast, Oxford Economics devised a FiDaaS enabled scenario to reflect a world in which mobile telecom operators have created a unique financial identity and credit score for their unbanked customers, allowing the provision of financial services to those that lack a credit history. This is an outcome that the report calls the “YES economy”. The name comes from financial service providers being able to say “yes” and extend their services for the first time to the globally unbanked, thanks to their new financial identity.

Mobile operators extend low-cost, low risk offers to their customers, such as airtime loans. Based on payback behaviour, consumers gradually build up to larger transactions: and then access other financial services, via partnerships between operators, financial service providers and merchants.

The analysis found that resolving the financial identity problem worldwide would deliver the following estimated results:

  • A USD $250bn increase in global GDP
  • A USD $408bn increase in global credit availability to households
  • A USD $512bn increase in global household savings
  • A six percent average increase in GDP per capita for low-income countries
  • An average increase in GDP of USD $25 per person in South and Southeast Asia: and USD $108 per person in Latin America and the Caribbean (versus a global average of USD $33 per person).

“Establishing financial identities through mobile network operators could have profound implications for governments, financial institutions, and for the millions of unbanked (and underbanked) individuals around the world,” said Steve Polsky, CEO & founder of Juvo. “For governments, it represents a massive boost to economic development and progress. For financial institutions and the mobile telecom operators they partner with, it represents a multi-billion-dollar revenue opportunity. And for the unbanked, it opens up fair and equal access to useful financial services that wouldn’t otherwise be available to them.”

Anubhav Mohanty, Lead Econometrician at Oxford Economics added, “These numbers only capture a conservative estimate of this market’s true potential, since many more people are underbanked. The sheer scale, depth and value of this opportunity is far greater than we’ve been able to quantify here.”

Lack of financial identity for the globally unbanked
According to World Bank data, 3.9 billion people around the world (68% of adults worldwide) are locked out of the formal economy due to a lack of credit history. These adults are unable to provide the necessary information that would make up their “financial identity”, such as a formally recognised credit history.

By providing unbanked people with the means to have their own financial identity using the FiDaaS model, mobile operators can help unlock overlooked sources of cash to expand the global economy’s capital base.

“There’s a huge crossover between the unbanked and the world’s mobile phone users. With a financial profile in place, unbanked mobile users can tap into consumer financial services that wouldn’t have otherwise been available to them,” explained Steve Polsky, CEO of Juvo. “Once people are more active financially, they can incrementally improve their credit profiles, and access new services as well.”

Download the report here:

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“Today, more than five billion individuals around the world own and use a mobile phone. This network of mobile phone users, covering more than two-thirds of the planet’s population, stretches far beyond the boundaries of the global financial system,” said Richard Cockle, Global Head of Identity, GSMA. “Many people who have never used financial services are using mobile phones every single day. The customer relationships held by operators have the potential to create a unique financial identity for mobile phone users. Financial Identity as a Service (FiDaaS) presents a profound opportunity for mobile operators, financial services providers, and merchants to create digital identities that unlock essential services for underbanked individuals around the world.”

“The nature of identity is changing. We are moving away from the indexed notion of identity whereby access is determined by a single, static point of reference. Bastions of identity such as utility bills and ratings agency credit scores are simply not effective ways of identifying who someone is and whether they should be given access to services, especially for the billions of people around the world who have neither,” said David Birch, Global Ambassador for Consult Hyperion and author of ‘Identity is the new money’. “‘Bottom-up’ identity based on alternative data created by social interactions, predominantly via mobile phones in emerging markets must become the cornerstone of trust across the global economy. The network of these identities will, as the report suggests, help billions of people gain access to life-changing services and help the financial industry reach a market that had until now been impossible to address.”

“There are billions of people globally who lack the ability to demonstrate their credit worthiness. Advanced analytics now allows for meaningful insights to be drawn from transactional and behavioral data that can be applied across the economy, increasing the ability to reach financially excluded and underserved populations with customized service offerings that meet specific needs,” said Matthew Blake, Head of Future of Financial and Monetary Systems, World Economic Forum. “Harnessing technology to increase financial access and usage can significantly improve fina

Source: RealWire