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Expert opinion

What opportunities does Mobile ID bring to the unbanked

Thursday 14 March 2019 | 08:23 AM CET

Daniil Gussev of B.est Solutions Estonia looks at the unprecedented potential of national mobile identity and legally binding m-signatures for financial inclusion

Why financial inclusion matters

It’s the provision of affordable, accessible and relevant financial products that had previously not been available. According to the 2017 World Bank Global Findex study, 1.7 billion adults lack access and are excluded from a formal financial system. Changing this is a priority. By doing so, it will improve the lives of millions of families and communities globally. It’s a way to increase resistance to economic shocks, boost job creation and productivity of trade while eradicating extreme poverty, which is a United Nations Sustainable Development Goal. Research shows that we can increase GDP by 14% in large developing economies such as India, and up to 30% in frontier markets such as Kenya, while increasing banking revenues by USD 200 billion in 60 countries.

The common reasons for exclusion are the lack of valid identification, expensive products, geographical obstacles, low financial and technological literacy. Practically all the unbanked live in the developing world. Additionally, individuals that are not active in the labour force are more likely to be unbanked and the same issue is observed among the less educated living in the rural areas.

Map 1. 75% of financially excluded reside within 25 countries

[click-to-enlarge]

Source: The World Bank Group

How can Mobile ID help

It's a key enabler for governance as we can't hold someone's wealth in an account without knowing who they are, neither we can't conduct financial transactions without being sure of the counterparties. Thus, identity is the cornerstone of all legal interaction between people, businesses and the state. Simultaneously, as people embrace technology, we built a mobile and connected environment. According to the 2017 Gallup World Poll data, 79% of adults in developing economies have mobile phones, giving rise to new financial electronic services. This adoption presents the banks greater opportunity, as the low cost of serving them is overcoming prior obstacles. The focus is shifting towards digital financial inclusion - as payments make their way through mobile channels making our economies flow, we need to digitally identify all players. In doing so, we must face some challenges. As we move towards a fully digital economy, the challenges will increase. For this reason, mobile ID can be seen as the key unlocking its potential. If not, cybercrime will explode, with damages going beyond dollars, as the negative effect on banks reputations can create major setbacks in the long run.

What’s mobile ID and how does it work

Mobile ID is a digital identity and e-signature solution used to authenticate into e-services such as banking (being equivalent to a face-to-face meeting), and gives e-signatures confirming transactions. Just as with a passport, governments will be the sole issuers for its citizens. It works equally well on mobile phones and smartphones, thus can be deployed in rural areas with limited connectivity. Secure robust technology is used to provide the highest level of assurance. The identity is embedded on a SIM and the highest level of security is achieved with elliptical curve cryptography and PKI (public key infrastructure) – a high-grade set of hardware, software and standards used to issue, store and revoke credentials. When accessing an e-service, the person inputs a 4-digit PIN code on the mobile phone to authenticate. When confirming a transaction such as a bank transfer, a 5-digit code is entered. The simplicity makes it attractive to the user, while strong PKI governmental-level back-end security, including KYC (know your customer) procedures, ensures total reliability and control. PIN codes are not stored in remote databases nor do they ever go through Internet channels.

As most of the unbanked reside in rural areas, there is little use for a smart card with a chip. Mobile ID is the first choice, as mobile phones are widespread. It requires no additional hardware or software, no computer or card reader.

What are the pre-requirements and how fast can it be done

A nationwide rollout can be done within 6 months. The most important is the political will of the government to ensure implementation, boosting the economy by taking advantage of digital innovation, opening the door to secure financial e-services that are fast, easy and convenient. Similarly to any digital transformation, clear supportive policy frameworks, regulations and laws to safeguard the users are required while educating the unbanked with responsible financial literacy programs. In order to reach full potential, a continuous public-private-partnership is crucial in building the digital infrastructure together as stakeholders.

Digital financial inclusion provides economic prosperity, transparency, and equal treatment of citizens while reducing corruption. Mobile identity inclusion is the first step towards it.

About Daniil Gussev

Daniil as the CSO of B.est Solutions Estonia is an accomplished professional in the field of mobile digital identification having hands on experience in advising and consulting banks on their digital transformation projects. He is determined in his efforts to turn the challenges we are facing regarding financial inclusion into opportunities and to share his belief that spreading mobile identification, and global interconnectedness in general, have great potential to accelerate human progress and bridge the digital financial divide.

About B.est Solutions

B.est Solutions is a large-scale e-and mGovernment solutions provider for well-developed regions with advanced infrastructure, as well to rural areas with limited internet access, low financial and computer literacy. Managing body of the world’s fastest growing state recognized digital identity based on mobile-eID, branded Asan Imza in Azerbaijan with more than 90 million transactions made and connected to +650 e-services including banking, whilst recognized as an example innovation by the United Nations and OECD’s Observatory of Public Sector Innovation.

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