Oxford Economics study points to Nigeria, Cote d’Ivoire and Madagascar as stand-out markets for growth in financial services for the unbanked
SAN FRANCISCO, Wednesday December 11th 2019 – A newly published report projects that establishing financial identities for the financially excluded – or “unbanked” – population across sub-Saharan Africa would add an extra USD $43 billion to annual gross domestic product (GDP) for the region. This figure equates to an average increase in GDP of USD $41 per person: it also factors in a 17 percent rise in total household savings (USD $31 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 Nigeria (USD $7bn GDP uplift), Cote d’Ivoire and Madagascar (both USD $3bn uplift), 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 in Africa would deliver the following estimated results:
- A USD $43bn increase in regional GDP
- A USD $22bn increase in credit availability to households
- A USD $31bn increase in household savings
- A USD $41 average increase in GDP 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, “Sub-Saharan Africa is the region that would experience the strongest relative growth in both savings and GDP based on the FiDaaS model, with a 17% and 2.4% increase respectively.
“According to World Bank data, 374 million people in sub-Saharan Africa (63% of the adult population) are locked out of the formal economy” continued Mohanty. “Of this total, 101 million can’t join the formal economy because they lack a financial ID. What’s notable is that of this number, 22 million adults may have the funds to engage with financial service providers – but they need a solution like FiDaaS to do so.
“Sub-Saharan Africa’s current stage of development means it has relatively low saving and borrowing levels. But the large share of unbanked adults presents a significant opportunity for the financial services industry – if the financial identity problem can be resolved,” Mohanty concluded.
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: https://juvo.com/resources/oxford-economics-the-yes-economy/
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What is FiDaaS?
The “Financial Identity as a Service” (FiDaaS) model centres on mobile network operators as the link between unbanked consumers and financial services. The number of global mobile phone users is much larger than the number of financial service customers and, importantly, it extends into populations not known or reachable by financial service providers.
With FiDaaS technology embedded in their mobile operator’s network, unbanked mobile phone users – on both prepaid and contract agreements – can build a financial profile. This is based on their airtime credit and payment histories from their mobile operator contract and managed via a mobile application from which they can access third party financial services.
What is the YES economy?
The Oxford Economics Report analyses and forecasts the potential economic impact and associated social benefits of solving the financial identity problem for unbanked people – an outcome that it and Juvo call 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.
According to Polsky, “the YES economy uses everyday customer interactions to build trust, enabling people who have only ever heard “no” to become visible and active participants in the formal economy, creating a path to financial health, wellbeing and stability.”
Polsky continues, “the FiDaaS model that we’ve developed is a blueprint for how mobile telecom operators and the financial service providers can work together to drive a new wave of worldwide growth in and cultivate a new generation of customers in the world’s emerging economies.”
Juvo is a pioneer of financial identities for the underbanked. The company’s mission is to create the YES Economy by closing the information gap for the 3.9 billion people worldwide who are locked out of the formal economy due to a lack of credit history. In partnership with leading mobile network operators and financial institutions, Juvo leverages previously untapped data sources to build comprehensive financial identities, allowing billions of underbanked consumers to qualify for credit and other financial services, often for the first time.
Headquartered in San Francisco with regional headquarters in Miami, Singapore and São Paulo, Juvo’s footprint spans 26 countries across four continents. The company has built over 200 million financial profiles and unlocked more than a billion transactions to date.
About Oxford Economics
Oxford Economics is one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on more than 200 countries, 250 industrial sectors, and 7,000 cities and regions. The firm’s best-in-class global economic and industry models and analytical tools give it an unparalleled ability to forecast external market trends and assess their economic, social and business impact. Headquartered in Oxford, with regional centres in London, Frankfurt, New York, and Singapore, and offices around the globe, the firm employs more than 400 people including more than 250 economists and analysts. Oxford Economics is a key adviser to corporate, financial and government decision-makers. Our worldwide client base now comprises over 1,500 international organisations, including leading multinational companies and financial institutions; key government bodies and trade associations; and top universities, consultancies, and think tanks.