Technology has become an integral part of our everyday lives, and finance is no exception. The rise of online banking, online shopping, ride-hailing, online booking, and renting are examples of how we depend more and more on online financial services directly or indirectly. Unfortunately, around 67% of Egyptians do not have access to these services and rely mostly on cash. People lack access to financial services because they are either unbanked, do not have access to bank accounts, or underbanked, with relatively high barriers to obtaining a bank account. In either case, getting a bank account is a significant step to achieve financial inclusion. This task is not always possible given reasons like distance, mistrust, and time constraints. That’s why providing clients/people with the technology to validate their identity and documents remotely, known as digital customer onboarding, presents a solution for millions of people who lack access to financial services.
With 67% of its population without a bank account, Egypt is among the most unbanked countries in the world and is the second most unbanked country in the MENA region after Morocco, which has 71% of its people unbanked. In fact, the whole region is home to the highest percentage of the unbanked population with 66.5% of the region’s population being unbanked. Moreover, the African continent is no exception to this, with more than 60% of its population unbanked. These numbers mean that more than half of the population depend on unsafe means of lending when needed and can not invest or save through formal means. More importantly, during the Covid-19 pandemic, the unbanked could not avoid crowds and utilize any online shopping or banking services.On the macro-level, financial exclusion has costly economic consequences.
On a national level, the lack of financial inclusion promotes high cash use, leading to the informal economy’s expansion. This is in addition to limiting individual and SMEs’ access to available finance and enabling tax avoidance. Additionally, high case use weakens the investment and saving culture and facilitates money laundry, terrorist financing, drug trafficking, and other illicit practices. Hence, addressing financial inclusion through innovative solutions like customer onboarding digital verification not only serves the financially excluded but also benefits the whole economy.
The Sustainable Development Goals (SDGs) stress the importance of enhancing the quality of life, whereas financial inclusion is not mentioned in the SDGs per se; however, financial inclusion is a prerequisite for improving life quality. Therefore, many national governments have taken concrete steps towards harnessing FinTech to attain financial inclusion and socioeconomic development. In 2019, the Central Bank of Egypt (CBE) launched its first fintech regulatory sandbox to support startups and companies working on digital identity verification. The CBE is also building an enabling legal framework that fosters innovation and more financial inclusion by conducting roundtable discussions with various stakeholders. Many national and international entities complement the efforts of the CBE through numerous projects and initiatives.
These efforts to encourage using digital customer onboarding and identity verification to champion financial inclusion open the door for millions in Egypt and beyond to create bank accounts and navigate numerous financial services via their mobile devices in their homes. Likewise, digital identity verification broadens the usage of banking services beyond receiving salaries and/or deposits, but rather it allows for a wide array of other benefits.
Achieving financial inclusion is a challenging task that requires participatory solutions from different actors. At Digified, being the first Egyptian RegRech startup using digital identity verification technology, we strive to work with diverse partners to share our expertise and services to provide the financially excluded with easy and convenient access to financial services and products.