Financial inclusion was a hot topic at this year’s K(NO)W Identity Conference. Specifically, panelists and speakers tended to focus on the challenges posed by identity verification and financial inclusion.
One such panel was, “Creating Tiered Identity Models.” From the panel description:
Many hard to identify consumers are faced with a black and white threshold of being included or excluded because of pass/fail thresholds for identity decisioning. How can users be empowered to build identities over time and unlock new capabilities progressively? What are some best practices for implementing risk based identity profiles?
Panelists included Balázs Némethi, CEO of Taqanu; Kobina Ansah, CEO & Co-Founder of ModernLend / Credit Without Borders; and Alka Gupta, Co-Founder of global iD and Advisor at One World Identity; and the panel was moderated by Sunil Madhu, CEO of Socure.
Gupta spoke of the benefits of tiered identity. This is essential, she said, to ensure everyone has an ID. A tiered ID is different from a conventional ID in that it differentiates what the ID holders are allowed to do with it, what “permissions” they have. An example might be a state that issues an over-21 ID card to allow a person who does not or cannot drive to purchase alcohol or do other activities that require state-issued ID, as that person does not have a drivers’ license (what most people would consider the default government-issued ID card).
Némethi said that his business is focused on the customer, the end-user. His company serves recent refugees to EU countries who often lack basic identification or other documentation that allows them to participate in financial services. They essentially “create” an ID through his service, and that allows them to participate in the financial economy. According to Némethi, recent refugees may not have a particular desire to use credit or bank cards, but the economies and societies of EU countries are often card-based. Némethi also built on Gupta’s discussion of tje benefits of tiered identity, as he mentioned Mexico’s tiered identity system. Identity, he said, is a real problem when it comes to financial inclusion.
Cultural differences can complicate people’s efforts to gain ID or government attempts to create identification frameworks for its people. According to Gupta, building a personal identity can be cumbersome or costly for some populations. This could include those with traditional beliefs who do not wish to be photographed, or remote populations that require significant government expenses to reach and procure ID for.
Madhu brought up an interesting cultural distinction relating to financial inclusion – that the Hispanic population has an instinctual district of financial institutions, and because of this tends to use high rates of cash usage. A 2015 Nielsen study on this topic found that Hispanic populations do have higher cash usage rates than the rest of the U.S. population in general – 34 percent used cash most often as payment, versus 19 percent for the general population. Hispanic individuals had a lower rate of credit card usage than the general population as well, with 19 percent using it most often as payment for transactions versus 35 percent for the general population.
Madhu noted later that most of the world uses cash. Nemethi noted that in the U.S., the Hispanic population does not always have legally confirmed immigration status, and may use cash for this reason. He said, however, that refugees in Europe have a more concrete legal status and have more incentive to use traditional financial services. Nemethi also pointed out that 105 million EU citizens don’t use banking services – they are “financially excluded.” There is a key difference between those who have been “driven out” of the traditional financial ecosystem and those who choose not to participate, he said.
In other observations, Madhu noted that educating the population on financial services is important, and called for robust regulations on payday loans and prepaid cards. Ansah pointed out that accessing standardized identification paperwork and documentation is a major challenge in getting people access to an identity. Recent immigrants or refugees may not have documentation at all, and others such as overseas students may have very different forms of paperwork or ID than U.S. regulators or financial providers are used to.
Financial inclusion and the role of identity was also discussed in the conference panel, “Implementing Identity for All.” Panelists in that conference discussed some of the specific challenges in rolling out ID use to more populations. Read Consumers’ Research’s coverage of that panel here.