A new report has projected that establishing financial identities for the world’s financially excluded - or ‘unbanked’ - population would add an extra $250 billion to global gross domestic product (GDP), mainly from developing nations in Asia and Latin America.

The research was authored by independent global advisory firm Oxford Economics, on behalf of financial-identity-as-a-service firm Juvo, and identified India ($7 billion GDP uplift), Indonesia ($15 billion), the Philippines ($15 billion), Pakistan ($9 billion) and Mexico ($31 billion) as the stand-out markets for this growth.

For the forecast, Oxford Economics devised a scenario to reflect a world in which mobile telecom operators have created a unique financial identity and credit score for their unbanked customers, allowing the provision of financial services to those that lack a credit history.

Mobile operators could extend low-cost, low risk offers to their customers, such as airtime loans. Based on payback behaviour, consumers gradually build up to larger transactions: and then access other financial services, via partnerships between operators, financial service providers and merchants.

The analysis found that resolving the financial identity problem worldwide would deliver an estimated $250 billion increase in global GDP, a $408 billion increase in global credit availability to households, and a $512 billion increase in global household savings.

“Establishing financial identities through mobile network operators could have profound implications for governments, financial institutions, and for the millions of unbanked and underbanked individuals around the world,” said Steve Polsky, chief executive and founder of Juvo.

“For governments, it represents a massive boost to economic development and progress, for financial institutions and the mobile telecom operators they partner with, it represents a multi-billion-dollar revenue opportunity; and for the unbanked, it opens up fair and equal access to useful financial services that wouldn’t otherwise be available to them.”

Anubhav Mohanty, lead econometrician at Oxford Economics, added: “These numbers only capture a conservative estimate of this market’s true potential, since many more people are underbanked – the sheer scale, depth and value of this opportunity is far greater than we’ve been able to quantify here.”

According to World Bank data, 3.9 billion people around the world - or 68 per cent of adults worldwide - are locked out of the formal economy due to a lack of credit history. These adults are unable to provide the necessary information that would make up their financial identity, such as a formally recognised credit history.

Matthew Blake, head of future of financial and monetary systems at the World Economic Forum, commented: “Advanced analytics now allows for meaningful insights to be drawn from transactional and behavioural data that can be applied across the economy, increasing the ability to reach financially excluded and underserved populations with customized service offerings that meet specific needs.

“Harnessing technology to increase financial access and usage can significantly improve financial health with material positive implications for economic growth and development.”

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