Do We Live in a Fair World of Finance?
October 23, 2020
There is a clear disparity between those worldwide who physically cannot access financial services because their data is not held on ‘traditional’ sources, and those whose data is held online through the use of smart devices...
Creating ‘a more inclusive financial world’ has been a fashionable mantra for a few years now, but what is actually being done to make banking services more accessible and affordable to the global population?
The current financial landscape
Today, nearly every aspect of our lives has been impacted by technology and banking is no exception. Bank account holders no longer need to go into branch to carry out most transactions; even depositing a cheque can be done using a mobile phone.
However, despite all of the technological advances much of traditional banks’ customer onboarding process continues to be carried out manually and heavily relies on traditional data from credit bureaus when performing identity verification checks. High street banks are still utilising multiple forms, paper files, manual compliance checks and in-person identification checks, a process which has long been considered archaic, time-consuming and creates a poor user experience.
Relying on traditional data to verify identity doesn’t just alienate the modern digital consumer, it can also lead to huge demographics being unable to access the services that they want. Currently, there are two billion people worldwide who cannot access financial services because their data is not held on traditional sources. Reliance on traditional application processes prevent underserved or unbanked populations who may not have formal identity documents from creating accounts, applying for loans or mortgages, or gaining access to other potentially life-changing opportunities.
21% of young adults aged 20-34 in the UK live with their parents. That is 2.7 million people who are unlikely to be named on utility bills, have a credit card, pay rent or have a mortgage; 2.7 million people who may not have readily accessible bills or statements that they’re named on. Students are another key population that struggle with traditional identity verification processes; 40% of students say that they would find it inconvenient to provide a paper copy of a bank statement, whilst 28% stated that it would be impossible for them to provide a paper copy of a recent utility bill.
There are significant swathes of unbanked and underserved consumers. In order for them to gain access to financial services, the data that is relied upon in verification processes needs to expand to include more modern sources. In Colombia, for example, 75% of residents are unbanked, but 52% use smart devices such as an iPhone, showing disparity between how data is being created and the data sources that are being used to provide consumers with basic needs.
Institutional standards have to adopt a modern and digital identity verification process if they wish to effectively improve financial inclusion for everyone. With the rise of digital data, it is now possible for countries and demographics that struggle with traditional data to implement alternative ways to achieve this, provided they have the right tools.
The process is being modernised
Technology-based financial services have been leading the charge to ‘bank the unbanked’, making daily financial operations accessible and user friendly for almost everyone – especially people who had no access to banks before (financial inclusion is especially important in emerging markets, like Asia, Africa and South America). Implementing a robust digital identity verification process can positively impact the economic opportunities and welfare of those excluded from gaining financial services.
From big modern shopping centres down to small food carts on street corners, mobile payments are being more widely used as an everyday payment method, for example. Fintech innovation is lowering transaction and service costs and reaching a population that would otherwise be unable to benefit from standard financial services. No matter where you live, you can now apply for and access a bank account.
By banking the unbanked, fintech is likely to prompt traditional players in the sector to innovate, in turn, accelerating the sector’s regime change. Starting with people who have been traditionally excluded or marginalised (either through geography or socioeconomics), banks can create a more inclusive financial world.
At present, only a small minority of the population have fully switched to a digital or challenger bank as their primary bank. However according to finder, almost a quarter (23%) of British adults have opened an account with a digital-only bank, equating to 12 million people. They also found that two-thirds of banking customers say they plan to convert fully to a digital bank in the future.
In other words, the move toward digital banking is happening and on the rise. And as soon as challenger banks can offer consumers the reliability, stability, scalability and security of big banks, plus a sophisticated digital experience and a focus on financial well-being, banking will truly become more accessible and inclusive.
How can we help
Here at Acuant, we utilise digital and alternative data gathered from a range of sources such as digital footprint verification, document authentication, facial recognition matching, liveness verification, live utility data address verification and CRA identity checks. Working together, these sources can act as a catalyst for creating digital identities and improving financial inclusion. The added benefits for an organisation when using these data sources is that they provide additional insights into a consumer behaviour, likes, dislikes and background.
Using this wide range of data, we provide a unique, real-time ID scoring system which intelligently verifies identity and can be sure your customers are who they say they are. Our global ID, KYC & AML platform, Sodium ensures regulatory compliance and a smooth, automated onboarding process. Utilise a single element or multiple processes – it’s entirely up to you.
Book a demo today and see for yourself how powerful our suite of solutions are.