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Digital ID and Banking The Unbanked

By 2030, the UN Sustainable Development Goal (SDG) 16.9 is to provide legal identity for all. Digital Identification is the most likely pathway to achieving this result. Digital ID is used to identify individuals online and offline and provides individuals with access to rights, such as benefits payments, digital banking.

Interview with Tunde Fafunwa, Lead Advisor, Digital Centre for Excellence at United Nations Economic Commission for Africa

Hi Tunde, thank you for joining us today. Please could you begin with an introduction to the Digital Center and the Digital ID initiative?

Tunde Fafunwa:

"Sure, the Digital Center was put together roughly 18 months ago out of work and discussions that the ECA was doing with the African Union. While there's a lot of activity in the digital space across the continent, there was a need for an organization to help pull those activities and efforts together.

One of the initial efforts started with digital ID and the fact that over 500 million Africans don't have a foundational ID. The ECA is uniquely placed from the perspective that it convenes and works with the ID management authorities, the national statistics offices, birth registration, civil registration and vital statistics offices. One of the key initiatives was pulling together those various efforts. One example is bringing together ID management agencies and the civil registration authorities to take into account the opportunity to digitalize processes and systems and share databases for with proper data protection and governance.

Another critical initiative that the Digital Center was involved in was partnering with the African Union to create a Digital Transformation Strategy for Africa. It covers areas such as digital infrastructure and broadband, but also digital skills and enabling environments in terms of regulation, platforms and payments systems and Digital ID. The challenge and big work now comes from actually implementing the strategy on a national and regional level.

Of course, we know that broadband infrastructure across the continent is fairly limited. Less than 25% of people have access to broadband. While mobile is very available, broadband has some accessibility problems in terms of universal deployment and affordability.

There's an interest in reducing cash and face-to-face transactions, so that requires e-payments. That is one of the key areas that we're working on, which is why we've released a Pan-African Interoperability Trust framework. There are different payment systems out there, and there are a lot of innovative companies that are doing payments - almost all of them through mobile, some of them mobile operators, a lot of Fintechs. But connecting those up and connecting those to government payments and systems so that there's greater access, is one of the key areas we're working on. But key to making that work is bringing regulation, investment and innovation into alignment to meet the goal of inclusive financial access."

What are some of the challenges with online banking and epayments considering the number of people that do not have an official identity across Africa?

"Different countries are in different places, given the 55 African Union members. A few months ago, Togo launched a benefits and cash transfer payments, very quickly. I think they were the fastest and most innovative, because they already had a population database that they could use.

Sudan is in the midst of a really challenging initiative as they change their approach to subsidies. They have a fairly significant portion of the population that is identified, but there's still a very big gap. So, they may have to use other simpler, more direct registration mechanisms that don't involve a formalized ID.

To some extent, the full deployment of digital ID will have to continue in parallel, because these it takes two-four years to fully create and deploy an inclusive digital ID nationally. For the purposes of making benefits payments or other responses to the COVID-19 pandemic, there is simply not that luxury of time available."

What should companies developing online banking & epayments technologies do to be more inclusive?

"What we've seen as effective is the partnership and cooperation between government agencies, the private sector and civil society organizations. Sometimes that feels like a tough order, but it's really critical that all three of these sectors are involved because they each bring a piece that is required that nobody else can bring.

The private sector has created a many siloed solutions. However, from a scale and interoperability perspective, you need the government involved because a lot of people are going to receive their payments through the government, and governments are the ones that are going to receive major funding from donors for distribution. Without civil society organizations we don't get hear the full “voice of people” and we don’t achieve full the transparency required to achieve an inclusive system.

The financial system and the banking system as an sector are not designed to be inclusive. Banks and financial institutions are looking for financially qualified, KYC'd (Know Your Customer) individuals and entities to participate in the financial system. But a significant portion of the population cannot easily or officially identify themselves. So, by definition, they're not going to be part of the system. And the rules around knowing your customer have continued to be significantly tightened over the last few years, with many accounts being blocked or closed. The involvement of the government in finding other ways to address and mitigate the risk is necessary to get benefits to the most vulnerable.

Also, the only way to ensure full inclusion is by involving civil society organizations (CSO), because they're the ones in the areas without broadband and without access, and dealing with the vulnerable communities, the communities at risk, and the communities that are disconnected. Without CSO involvement, the design of the programs don't reach the people that they need to."

How is KYC most effectively implemented even just as a short-term solution - are there any gold standard examples?

"The answer is in context of each country. Some of them, like in Togo, have certain population registers or have election roles, and so may have a place to start.

A few countries do have some very good birth registration records, so those would be used. You've got to use whatever the biggest database is that you have, knowing that it's probably incomplete and there's a fair amount of error. And in many places it may end up being a mobile phone-based system.

In almost all countries, you've got some level of KYC and usually a fairly good one, although a lot of the records are photocopied ID documents that are maintained by the mobile operators. So that is probably one of the most widespread systems.

Countries are still finding their way through this. I guess the key thing that we think is really important is that it builds on what is there and then continues towards a foundational and digital ID system."

— Tunde Fafunwa will be speaking at Virtual Africa Tech Festival 2020. Book your free pass here.

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