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Mobile operators can boost financial inclusion

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Even though SA’s unbanked population is relatively low, the country would likely see a $2 billion boost in gross domestic product (GDP) through providing the unbanked with financial identities.

This is the sentiment expressed by Josh Gosliner, director of global market strategy at Juvo, commenting on the findings of a global financial inclusion report titled: “The YES Economy: Giving the world financial identity”.

The report, compiled by independent global advisory firm Oxford Economics on behalf of Juvo, found that establishing financial identities for the financially excluded or unbanked population across Sub-Saharan Africa would add an extra $43 billion to annual regional GDP.

The research further identified Nigeria, Cote d’Ivoire and Madagascar as stand-out markets for growth in financial services for the unbanked. As a result, the potential of GDP increase in Nigeria is said to be $7 billion, while Cote d’Ivoire and Madagascar are both $3 billion.

Turning to South Africa, Gosliner says today, there are 13 million unbanked individuals in the country, and around 22% of this number is due to the lack of a financial identity.

“If we were able to reach these individuals through a Financial Identity as a Service [FiDaaS] model, the region could see around a $4 billion uplift in savings, $6 billion uplift in credit and insurance policies rising by $3 million.”

Financial identities

At the core of this financial inclusion and GDP boost is making sure the unbanked have financial identities.

Gosliner defines a financial identity as a collection of information pertaining to an individual’s relationship with money, which could be based on their buying habits, their income or their likelihood to pay back a loan.

Financial identities give banks and other third-party providers a view of an individual’s propensity to be a reliable customer and therefore allow them to grant access to financial services like loans, savings and insurance, he states.

“Connecting the unbanked across remote regions is vital, as it can have a significant effect on the region’s economy. By giving the unbanked an opportunity to join the formal economy, they’re now provided with a real chance to prove that they are trustworthy, and that they can pay back money that is loaned to them.

“Through this process, trust, and most importantly, a profile can be made on individuals that would have once been impossible.”

MNOs to the rescue

According to Gosliner, mobile network operators (MNOs) can help people open the door to building financial credit.

Mobile operators have vast swaths of data about their prepaid subscribers, who are likely to be unbanked that can help create the foundation of a financial identity.

However, what’s simple isn’t always easy, he cautions. “The data exists in high volumes, but extracting valuable insights from the dataset is challenging.”

Gosliner elaborates: “Operators need a way to make sense of this data to unlock the significant value in emerging markets. This puzzle can only be solved by learning how to connect everyday transactions of prepaid subscribers to predict their behaviour across a number of transactions, including financial services.

“Moreover, this requires a modern tech stack that is able to ingest data at high-volume from disparate sources and evaluate that data in real-time to create and make financial identities available to telcos and third parties.”

“By creating financial identities, operators are able to create products and services that better meet the needs of customers while simultaneously creating new revenue sources through partnerships with third parties,” he concludes.

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