Why Authentication is Key for Onboarding the Unbanked

Why Authentication is Key for Onboarding the Unbanked

Mobile money is the core of mobile operators’ businesses in Africa

Did you know that in 2017, over 5 billion people in the world were connected to mobile services? Better yet, by 2025, it is predicted that the number of unique mobile subscribers will reach a staggering 71% of the world population.

As the world is turning mobile-first, FinTech apps are becoming increasingly popular. For example, in Finland, over 99% of transactions are carried out online. Emerging economies are following suit, even if the majority of the population is unbanked.

Just take a look at the Philippines, Indonesia, or Africa where I recently held a presentation on IPification at the NG Telecoms Summit South Africa.

Since mobile money is the core of mobile operators’ businesses in Africa, I talked to them about different approaches to securing this technology that offers unbanked people the chance to be included in society. With nothing more than a mobile phone.

Having all these benefits in mind, it’s easy to see why Sub-Saharan Africa has more mobile money users than any other region in the world. Yet, this number is still surprisingly small – only 21% of adults in Sub-Saharan Africa have mobile money accounts.

The number of unbanked people, however, is much higher.

I’ll give you some numbers – in the Philippines, 77.4% of people don’t have bank accounts. In Indonesia, 66% are unbanked. And although various FinTech apps offer the chance for financial inclusion, these regions are struggling with onboarding these people.

What do I have to say about it? Security.

Security is the Number One Issue to Onboarding the Unbanked

Let’s look at this logically. To enable someone to handle your finances, you’d like to trust them, wouldn’t you? In a time when cyber-attacks are unfortunately thriving, the low adoption rates of the unbanked shouldn’t come as a surprise.

Check out what the unbanked in the Philippines had to say. Some of their reasons for being unwilling to access online payment systems are the presence of hackers (25%), personal security (21%), it being unsafe to access (12%) and the presence of scam (6%).

Moreover, in Kenya, 70% of people have been victims of cyber attacks or know someone who has. From there, it is easy to conclude what the biggest issue is.

However, all of that aside, it is important to note that although these numbers are crazy, the number of users has still been on a continuous rise.

Having originated in Kenya in 2007, Mobile Money is used by more than 23 million people with an acceleration of 25% in the growth of accounts over 2017 alone! As such, it’s impossible to miss the feasible potential of FinTech in unbanked regions, even beyond financial services.

A Potential Far Greater Than Simply Financial Services

Let’s start with this – Sub Saharan Africa is the only region in the world where close to 10% in GDP occurs in mobile money transactions. Over $100 billion of economic value was generated in 2017 and it supports 3.5 million jobs in the region.

It’s the main innovation channel and you can see that its potential spans wider than its original purpose. We’re talking a full-on digital economy with the ability to spur significant economic growth.

Considering that FinTech in Africa has had an annual growth rate of 24% over the last 10 years, it’s safe to say that this potential is not going unnoticed. Payments, banking and lending, InvestTech, PropTech, InsurTech, Fundraising, and Financing – all of these are segments of FinTech in Africa.

However, due to frequent security incidents, these businesses are having trouble with onboarding new users. So, what do we do?

If you ask me, it is clear that what is needed is a secure ongoing authentication process that these people could trust to handle their finances.

Effective Authentication is Key to Fostering User Trust and Increasing Adoption Rates

In today’s climate of cyberattacks, which not only cost the end-users their funds but also break the banks of FinTech companies, it is crucial that digital identity is managed properly.

We’ve been over this a bunch of times, but it is mobile network operators who are the key to effective mobile identity management. Sub Saharan Africa, whose FinTech relies heavily on mobile devices, is especially inclined towards this model.

However, while going in the right direction, the authentication solutions used in this region are not effective enough anymore. Over the last decade, we’ve seen the rise and the fall of 2FA, header enrichment, biometrics, and other authentication solutions.

SIM swapping, responsible for the demise of 2FA, is the biggest security problem this region faces. As such, it is time we swapped this method out for something more effective.

First and foremost, something secure. Increasing user trust and confidence is the only way to increase user adoption and have the digital economy truly bloom.

But, there’s a catch. 71% of people prefer an authentication option because it’s easy to use, remember? Whichever method of authentication or MFA you opt for, that’s something to keep in mind.

For example, while biometrics come with ease of use, they pose a huge risk to user privacy. You can change your number, but your fingerprint or your iris? I don’t think so.

With IPification, we’ve had both of those in mind. We decided to build it on already existing mobile network operator technology with emphasis on seamlessness.

IPification authentication generates a unique mobile identity that includes various data provided by the mobile operator while still detecting any SIM card or device changes. This whole process is completed in the background within a fraction of a second.

It is seamless, continuous, and can be part of a larger multi-factor authentication system.

We decided to think smart, not hard. That’s why our authentication solution, compared to the prospects blockchain has in the authentication space, for example, is ready to be implemented right now, and best of all, within days.

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