About financial inclusion, online banking and digital identity with Chris Skinner

What is the significance of mobile wallets for the unbanked, and what impact do they have on society in terms of economic opportunities?

Mobile transactions are now ubiquitous across the world, including everybody in the network to trade to transact. The mobile industry is updating the mobile system, at present offering additional services, such as microloans, microsavings going forward to microbanking and this is due to the continuous development of Mobile Network Operators (MNOs) which seek to primarily serve the unbanked people. Mobile wallets are successfully developed among the unbanked.

The impact that might have on the society in terms of economic opportunities is massive. According to a McKinsey research report published a couple of years ago, by 2025 about 3.5 trillion dollars of new GDP will emerge from the economies of Africa, Asia and Latin America from the people who used to be unbanked. In other words, people who used to be excluded from the financial system will significantly contribute to the global economy.

How are fintech companies driving financial inclusion around the world, and what banks can learn from this?

One of the successful services on the market is M-PESA in Kenya. However, its success has led to an increased competition from a variety of financial solutions providers, including the banks, thus becoming a monopoly. Banks are now opening their own network operators being able to compete with M-PESA. Another fintech company coming from Kenya is Craft Silicon, which is a unicorn startup. They white label their software to MNOs to provide USSD text payments, and handled USD 5.5 billion worth of such payments in 2017. With its innovative services, the company made a giant leap forward in enabling mobile payments across Africa.

In the book, I’m focusing on a case study of Ant Financial, because they are focused on financial inclusion at a global level and their financial vision is to include 2 billion users by 2025, making over 1 mln transactions per second on average. Among other goals is to bring the benefits of API, analytics technology to any third party company in any economy that doesn’t have inclusion. Ant Financial represents the power behind Paytm in India, Ascend Money in Thailand, Mynt in the Philippines, Touch ’n Go in Malaysia, Telenor in Pakistan, working for a lot of banked and unbanked people, and this is transformational.

How do you see the future of digital identity in the emerging markets?

There is a lot of talk about digital identity in the emerging markets, more specifically, around digital identity schemes. The challenge here lies in the fact that the governments must be involved as well in the creation of digital identity schemes. In the Nordic region, though, there is a lot of innovation in this area brought by a good public/private collaboration. On the other hand, Aadhaar in India, with 1.2 billion people having biometric identities on a centralized database, was hacked and compromised so the fact that over 1 billion people may have they data leaked brings a lot of skepticism and insecurity.

There is a scheme currently being discussed by the UN to create a global digital identity service by 2030. Accenture and Microsoft are involved in this project, working on a prototype which is based on a shared ledger structure, (possibly using blockchain, but not necessarily) recording biometrics on a decentralized database. I believe there is one digital identity scheme that must take into consideration for future developments in this space: RippleNami in Sierra Leone. RippleNami provides a cloud-based blockchain data visualization platform that allows a low-cost digital identity scheme to operate for emerging and developing markets. This approach may be replicated to all African countries. That being said, biometrics identities recorded on a blockchain ledger through the mobile is the future of digital identity.

Why blockchain? For three reasons. First, it has an immutable recording. Once you record one’s identity on the blockchain, it can never be changed, so it brings a lot of trust among its users. Second, it’s decentralized, so as a result, it’s much harder to hack an identity on this type of system. Third, one can create a self-sovereign identity on a centralized system recorded on a distributed ledger and shared as a hash on an as-needed basis. When you share your identity, you actually share an encrypted version that only shares the part of your identity that needs to be accessed at that time. All of these aspects make blockchain a secure system and everybody knows how much value security can bring to one’s comfort.

For of our readers who may not know much about your new book Digital Human, could you please tell us what themes have you chosen to address and why?

The book looks at the fact that with this digital revolution, a lot of world’s structures are being rebuilt from the grounds up. It’s a revolution of humanity not just a revolution of business and technology. For the first time in the human history, people can be connected to each other in real-time. We are witnessing three movements. One is banks trying to embrace this revolution by opening up their services via API to many third-party fintechs. The second one is taking the digital revolution and build a whole new system to the grounds up and this is what mobile network operators are doing now. The third one: the digital operators building from the bottom up embracing the banks that are building from the top down. The last chapter of the book is a cases study of Ant Financial and their vision of global financial inclusion and how they plan to implement their vision.

Lastly, the book looks at what happens in the next digital revolution of humanity. In the fifth revolution of humanity, money doesn’t exist.

About Chirs Skinner

Chris Skinner is known as an independent commentator on the financial markets and fintech through his blog, the Finanser.com, as author of the bestselling books Digital Bank, ValueWeb and its new sequel Digital Human. He is Chair of the European networking forum The Financial Services Club and Nordic Finance Innovation, as well as being a Non-Executive Director of the Fintech consultancy firm 11:FS.