The World’s Unbanked Population

Currently, there are two billion people worldwide who cannot access financial services because their data is not held on ‘traditional’ sources. There is a clear disparity between these ‘unbanked’ populations and those whose data is held online through the use of the internet and smart devices…

Recently, we explored how FinTech solutions are beginning to create more inclusive financial services, but what is the current state of play around the world?

The world’s unbanked population

Despite all of the technological advances we take for granted in our everyday lives, 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 also leads to huge demographics being unable to access the services that they want. 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. 

Our blog post on Financial Inclusion looked at how 21% of young adults aged 20-34 in the UK live with their parents. That equates to 2.7 million people who are unlikely to be named on utility bills, have a credit card, pay rent or have a mortgage. On a global scale however, the numbers of people without readily accessible bills or statements is far higher.

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 Argentina, for example, 51% of residents are unbanked, but 76% are active social media users, showing disparity between how data is being created and the data sources that are being used to provide consumers with basic needs.

Where ‘unbanked’ customers usually have some form of identification, they often lack the documentation and credit records required by financial service providers to assess creditworthiness and perform consumer due diligence. These are, as such, often referred to as ‘thin-file’ customers.

Comparatively, as of October 2020, there are 4.14 billion active social media users worldwide (more than half of the global population) with the average social media user owning an account on 8.3 different social platforms. More than 180 million people started to use social media between July and September 2020, equating to growth of almost 2 million new users every day. Roughly 4.66 billion people around the world now use the internet – nearly 60% of the world’s total population, and 91% of these use mobile devices to go online at least some of the time.

We have gathered data on the percentage of adults with a bank account from The Global Findex Database, based on information from more than 140 countries and cross referenced it against the mobile phone connections, internet users and active social media users per capita from Data Reportal, in those countries:

The Global Findex database is the world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk. According to the database, more than 20% of adults globally receive wages or government transfers in cash, and many people in developing countries pay bills in cash.

There are 5.2 billion unique mobile phone users but 7.92 mobile phone connections in the world today, according to the latest data from GSMA Intelligence. This means that for every unique user, there is an average of 1.523 connections. This demonstrates that the data being created by these users and platforms through smart devices is not being used to enable these unbanked customers financially.

In the Philippines for example, only 34.5% of the population have a bank account, but for every person, there are 1.59 mobile phones and 67% of the population are active social media users displaying a clear disparity in the way data is being generated and how it is being used. Vietnam tells a similar story where only 30.8% of the population have a bank account, but there is almost a phone for every person and, again, 67% of the population are active social media users.

Because account ownership is nearly universal in high-income economies, virtually all unbanked adults live in developing economies, though there is a relatively high percentage of access to the internet. China and India, despite having relatively high account ownership, claim large shares of the global unbanked population because of their sheer size.

But, even in Russia – the world’s 6th largest economy – more people own a smartphone than have a bank account. The same can also be said about Indonesia – the world’s 7th largest economy – where only 48.9% of the population have a bank account, but there are 1.24 phone connections for every person (81.4% of the population own a mobile phone, when divided by 1.523) and 64% of the population have access to the internet. Even more staggering, only 36.9% of Mexico have a bank account, but in a country with the world’s 11th largest economy, 69% of the population have access to the internet and are active social media users.

Alternative data sources such as these are less susceptible to fraud; social profiles for example are often built up over a number of years and are verified by their connections. They are also less costly to maintain than traditional paper-based documents, which are more likely to be lost or damaged and require storing, continuous updating and are difficult to quickly navigate. More importantly, these alternatives enable remote account opening, lowering the operational costs for banks aiming to serve isolated consumers.

How we can help

Here at Acuant, we’ve a comprehensive family of KYC and AML solutions all working together and delivered via a single API integration. Utilising all forms of data, this integrated approach helps increase pass rates in countries all over the world, which in turn increases revenue and customer acquisition with real-time onboarding, creating a better customer experience. 

Traditional checks, such as using credit history mean that many good customers are turned away. A vast number of millennials do not have CRA data so if this source is used, they are rejected. Equally in countries with thin files, where traditional data does not exist or is scarce, our product offering can be used to qualify and verify new customers.

Our global ID, KYC & AML platform, Sodium, is designed to help save you time and money, streamline your customer journey, automate your onboarding process, reduce fraud and achieve regulatory compliance. One simple integration; a flexible 360° solution which is scalable and secure.

A unique and real-time ID scoring system intelligently verifies identity through a combination of data sources, including digital footprint verification, document authentication, facial recognition matching, liveness verification, live utility data address verification and CRA identity checks.

Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you to learn more about your customers. 

Book a demo today and see for yourself how powerful our suite of solutions are.