The underdeveloped world is home to over two billion unbanked people, many of which lack basic formal identification and cannot acquire finance through legitimate, ethical methods. This often causes a snowball effect, resulting in financial turmoil that's impossible to manage, greatly decreasing the victim's quality of life.
Tackling Financial Exclusion
Financial exclusion is a complex issue and people often look to government and financial services for solutions. Sometimes it works: India tried tackling the problem by allowing undocumented people to acquire tiered documentation in order to open small “stepping stone” accounts; while the United States now offer alternatives to the FICO scoring system. However, in the majority of circumstances the developing world simply isn't equipped to implement such measures.
But perhaps we've been looking in the wrong direction all along; perhaps it's the tech sector that has the answer... With the right platform, biometric identification has the potential to fill the missing voids and establish a role as a formidable force within the financial services industry.
The concept and practice is nothing new. Retina and finger print scanning has been around for decades, but the systems were expensive and rarely encountered by everyday citizens. However, in today's digital age, with smart phones dominating the telecoms sector – and affordable for citizens of developing countries – biometric identification technology has found its way into the hands of everyday people. And now that we've seen it work, we trust it. This has given developers a reason to push the boundaries and use the technology for worthy causes.
Solving Financial Literacy
One of the biggest issues that unbanked people face is financial literacy. Sometimes those who could be included don't have the literacy skills to navigate the complex documentation required, or understand how the system as a whole will work. In fact, many of those that could acquire formal identification and finance simply don't know how.
New tech startup, Humaniq, which is powered by blockchain technology, is hoping to solve this problem by providing an easy-to-use interface that can be understood by anyone, regardless of language or educational background. The developers are using the smartphone revolution to help the developing world move a step closer to full-scale financial inclusion. Through facial recognition software, the application offers an alternative form of identification, allowing users to work, borrow, lend, save and pay across the internet.
Humaniq creates win-win opportunities for both partners and the world's poorest, using a system built upon humanitarian capitalism – profit with a purpose – that could empower lives and offer a high ROI for investors. It achieves this by opening up the workers pool for employers looking to engage global markets and provide the poor with employment opportunities via the web. However, at the heart of it, it's about giving everyone – regardless of credit rating, location or educational background – equal banking opportunities.
Blockchain technology has been causing a great deal of hype in the tech and finance sectors in recent months. The World Economic Forum even predict that 10 percent of the world's GDP could be stored using it by 2025. If just a fraction of the market could be replaced with peer-to-peer transactions and cryptocurrencies there could be huge potential benefits: smart power grids, devices connected to the Internet of Things that automatically pay off bills, no more human error, and most importantly, new opportunities for the developing world.
In order to create a prosperous global society we must eliminate financial exclusion. Fortunately, through the widespread use of biometrics, blockchain technology and applications such as Humaniq, this could be possible in the very near future.