A newly published report projects that establishing financial identities for the financially excluded – or “unbanked” – population across the Asia Pacific (APAC) region would add an extra USD $75 billion to annual gross domestic product (GDP) for the region. This figure equates to an average increase in GDP of USD $19 per person: it also factors in a rise in total credit available to households of USD $132 billion: and a rise in total household savings of USD $223 billion.
The global 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 the Philippines, Indonesia (both USD $15bn GDP uplift), China (USD $13bn), Pakistan (USD $9bn) and India (USD $7bn), 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 across Asia-Pacific would deliver the following estimated results:
|Asia Pacific region||China||India|
|Annual GDP increase||USD $75bn||USD $13bn||USD $7bn|
|Increase in available credit to households||USD $132bn||USD $35bn||$18bn|
|Increase in annual household savings||USD $223bn||USD $47bn||USD $30bn|
|Average increase in GDP per person||USD $19||USD $9||USD $5|
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.