Democratising finance: Technology improves access for the masses

There are two popular perceptions of Nigeria. To many, it is the beating heart of Africa’s growth story, with GDP expanding by about 7 per cent a year. To others, it is a country in turmoil, with a fragile democratic government desperate to shrug off the mounting atrocities of Boko Haram terrorists.

The rollout of a national ID scheme by President Goodluck Jonathan captures this ambiguity. Electronic chips on the new ID cards store details of the holder’s iris and fingerprints, boosting security. But with the backing of MasterCard, these are also payment cards — and a potential harbinger of access to finance for the masses.

“This is digitalisation, democratisation and financial inclusion all rolled into one,” says Ann Cairns, who heads international operations for MasterCard.

Once it is fully implemented, the project will allow 100m Nigerians to access financial services. It is just one of countless initiatives around the world being touted as proof that digitalising finance can empower people.

Over the next week, the Financial Times in its series “Democratising Finance” will examine the initiatives that are bringing new sources of finance, new forms of currency and new methods of payment to new customers — and ask the question: is the world genuinely being “democratised”, as many of those behind such innovations insist?

Nigeria’s ID scheme is a case in point. To its fans, the project is a slick way to modernise the country, leapfrogging some of the west’s traditional ways of doing things in the process. But it has been criticised by human rights and protest groups. Privacy International, the data protection charity, has raised concerns about the potential abuse of biometric data. And local protest groups have complained about the involvement of a western financial company, the MasterCard branding on the back of the ID card was akin to the branding of people in the 19th century slave trade, they said.

Finance companies, from MasterCard to the biggest banks, dispute suggestions of exploitation. But there is no denying that access to digital technology is helping financiers tap lucrative new markets.

“Making access to finance more democratic is not only about social responsibility, it’s a business model,” says Carlos Lopez-Moctezuma, the Mexico-based head of financial inclusion at BBVA.

The Spanish bank operates in Mexico through a network of 30,000 agents — local shops, pharmacies and post offices. Now in an effort to reach a broader spread of customers improve efficiency and reduce risk, the bank is trying to shift agents away from traditional cash transactions by encouraging them to turn their smartphones into point of sale devices.

In another initiative, 2.5m customers now have an integrated mobile phone number and bank account number. “It is about using technology to reach more people but also making life easier by understanding what they want,” says Mr Lopez-Moctezuma.


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