Financial Inclusion Week 2020

Incremental progress has been made in eradicating extreme poverty, however, the persistence of poverty remains in developing countries. Many struggle to fulfill the most basic needs, such as health, education, and access to food, water, and sanitation. These personal struggles have societal and global impacts such as discrimination, exclusion, exploitation, political instability and war.

To help advance financial inclusion, the Center for Financial Inclusion is showcasing Financial Inclusion Week from October 13 to 16; a forum for exchanging ideas, developments, perspectives and convening stakeholders of all kinds, all around the world around for this vital cause. Each day will focus on a different theme:

Financial services for mitigating and adapting to climate risk (October 13)

The global climate is rapidly changing and the economic results are real and wide-spread. However, this is just a taste of what is to come; according to McKinsey Global Institute, there will be “increases in socioeconomic impact of between roughly two and 20 times by 2050 versus today’s levels.”

Some of the geographical regions that are most at risk are already hot climates, with high populations that have limited resources. Lethal heatwaves, destruction of food supply capabilities and infrastructure are just some of the climate risk issues.

As McKinsey states it “the poorest countries could be more exposed, as they often have climates closer to dangerous physical thresholds. They also rely more on outdoor work and natural capital and have less financial means to adapt quickly.”

As we are one world, taking measures now to mitigate climate risk is imperative. Not only must we take steps to lower our carbon footprint, but we also need to create ways to finance climate resilience. According to management consulting firm Oliver Wyman “The global green financing gap is estimated to range from a minimum of $2.5 trillion, to as high as $4.8 trillion. Green finance is key to building climate-resilient organizations and societies, and for climate change adaptation and mitigation.”

Women’s financial inclusion (October 14)

Many developing countries have large populations of people without any ID or a bank account. The poorest 40 percent of women in low-income countries are 30 percent less likely to have an ID and 40 percent less likely to have a bank account than men in the same wealth quintiles, according to the Global Findex Survey 2017.

These two statistics on their own can mean a life without access to an independent, safe place to store earnings, or opportunities to build up credit. The reasons behind this lack of ID and low bank account access tell the familiar story of female poverty. Low literacy rates, early childbirth, family pressure, and lack of knowledge or the opportunity to travel all serve to keep women in developing countries from financial and social freedom.

Frequently these factors combine to leave women vulnerable to fraud, coercion and worse. Without change, the next generation will also face the same poverty trap. There is, however, a way out for women. Digital identity verification combined with a mobile account has proven to be an effective verification method in the developed world for several years. This method can be used either as a way to securely access mobile money platforms or to prove identity to receive payments such as government benefits, business microloans, money transfers and more.

Data opportunities and risks for financial inclusion (October 15)

Most of the 7.8 billion people in this world can participate in the digital economy — we have an established identity that permits us to work, play, bank, access services and shop online without difficulty. Unfortunately, 1.5 billion people lack this digital access because they are unable to prove their identity through a valid birth certificate, passport, proof of residence or some other means to fulfill traditional KYC procedures.

In 2020, numerous other data sources can provide identity information. From mobile phone accounts to social media networks, there are alternative channels that can help provide the necessary identity for financial inclusion.

But, as the Center for Financial Inclusion points out, “while these advances merit enthusiasm for their potential to break down persistent barriers in accessing financial services, they raise new questions around data security and fraud, consumer consent, discrimination or price segmentation, and opaque privacy policies. These risks are especially acute for low-income individuals who often have low digital literacy and are less likely to understand or use basic privacy protections.”

Consumer protection and the future of financial inclusion after COVID-19 (October 16)

Since the onset of COVID-19, the use of digital channels has increased dramatically. People who never used eCommerce sites are suddenly finding that often the only way to make purchases is through online or mobile accounts. Unfortunately fraudsters see that as an opportunity; since the end of February phishing attempts have risen 600%.

Individuals who are not tech or financially savvy are especially prone to various online fraudulent schemes, as the processes are new to them and they don’t know what to expect or how to protect themselves.

Improving consumer protection measures and methods to fight financial crime will assist both individuals and businesses prevent financial losses. Simplifying terms and conditions to make them more comprehensible, providing clear guidance and notifications on charges and fees and mandating certain security requirements are all measures that can be taken to better protect the consumer.

A massive business opportunity

It’s important to note that financial inclusion is not simply some type of goodwill effort, as there are significant opportunities for revenue growth. Angela Strange, a general partner at Andreessen Horowitz, calls it the greatest market opportunity in fintech: “This opportunity [to serve the underbanked] is massive. Depending on which numbers you believe there are anywhere from 2 to 3 billion people worldwide.”

If effective credit plans and other financial services are available to billions of more people, what are the global impacts? They can make more long-term financial plans, instead of going paycheck to paycheck. They can invest in education, resources, and goods and services to improve their lives and build a path toward prosperity. For example, they could start a micro-business, as the same mobile device that offers them banking is a potential conduit to developing, marketing and growing their enterprise.

The effects are not limited to individual households, as there are numerous spillover effects. They can assist their family members. Their increased wealth helps the community, as they spend more money in the local economy. As the whole local economy grows, further expansion is fueled in a virtuous circle of economic growth. According to Diego Zuluaga at Cato Institute’s Center for Monetary & Financial Alternatives, “If we were to give the unbanked and underbanked in the developing world the same kind of access to credit and investments that we have in rich countries, you could easily create an additional $100 trillion in financial assets over the next 50 years.”

It takes all of us to build a better world

At Trulioo, financial inclusion is directly tied to our mission - to make sure no one is left behind, and to uphold values of trust, privacy and inclusion.

“We’re committed to promoting digital identity as a force for positive change around the world, by increasing trust and transparency within the digital economy and ensuring all people, particularly the most vulnerable groups in society, can access the basic financial services and support they need,” said Steve Munford, CEO of Trulioo.

Effective digital identity solutions hold great promise to help people attain that first step of the financial ladder and get access to basic financial services.

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