The most important factor when it comes to furthering financial inclusion isn’t money. It’s proper identification. Without a valid ID, individuals will have a hard time opting for jobs, opening bank accounts, or receiving government aid.
This is the case for close to one billion people, around one-seventh of the world’s population, according to the World Bank. About 47% of that billion are children without birth certificates who, from the get-go, are already at a disadvantage to acquire any form of ID as adults.
World Bank data also suggests that 91% of the population without official documentation is found in lower-middle and low-income countries, with India (161 million), Nigeria (140 million), and Pakistan (77 million) leading the chart.
Large unregistered populations also pose a significant challenge in the age of digitization, where financial services are moving towards eKYC measures for customer identification. In turn, reducing access to these services will only slow down financial inclusion.
The Remittance Industry Observatory recently explored several barriers to accessing official documentation, ranging from lack of information to technological impediments.
Below, we offer a summary of key takeaways from the study, which shed some light on the reasoning behind these roadblocks and how we can go about removing them.
Current barriers to identification
Birth certificates: given it’s the minimum requirement, undocumented children cannot opt for official documentation anywhere in the world without proof of existence. Two common reasons for this issue include lack of education regarding civil registration among parents and non-hospital deliveries, according to the Carter Center.
Fees: for the many living in poverty, paying fees to process official documentation would mean going without food or medicine. Even in cases where documentation is processed for free, those living in rural areas will still need to pay for transportation to reach the nearest office.
Law and Society: in some countries, women need to provide more documents, such as a marriage certificate, to apply for an ID. Although within the specific society, laws are built in a way that its constituents can be accounted for, these documents don’t always travel well. Without a standard identification process, many will be landlocked. Refugees or internally displaced individuals may have fled their homes and left behind their documents. Without a system in place to replace these documents, how can these individuals be reinserted into the system?
Digitization: innovation and change don’t happen at the same pace globally, as seen in the case of automation. Digitization is taking over in rich economies, but low-income countries will find it hard to fund what the World Bank and World Health Organization have estimated to be around $3.82 billion for a basic Civil Registration and Vital Statistics (CRVS) system. Thus, as money transfer operators, we can’t move on to a completely digital format, while so many countries won’t be able to implement the same identification measures in the near future.
Interoperability: even once digitization makes its way to low-income countries, many changes will need to be made to the existing infrastructure. Data from the civil registry, the social security databases, among others, will need to be cross-referenced in order to get accurate, representative data.
Without proper identification, the individuals who need it most will not be able to break out of poverty, and financial inclusion efforts will remain stagnant. However, protocols must be in place to safeguard funds and data, which means we cannot forgo identification requirements altogether.
So, the question for the remittance industry remains: how do we continue serving customers who, often by no fault of their own, lack the proper identification needed to access purely digital remittance channels?
As a money transfer operator, we follow local government regulations rigorously, establishing an open dialogue on how to make the process of receiving money easier for these unbanked customers living in poverty.
While we can’t control or unify regulations worldwide, our promise is to continue offering traditional money transfer services to those who still rely on cash and physical locations, a number that is far higher than one might think.