Catering to underbanked people could add a massive boost to the global economy, according to a new study from Oxford Economics.
The advisory firm conducted the research on behalf of financial identity company Juvo and found that providing financial identities to the underbanked people of the world would add $250bn to the global economy’s gross domestic product (GDP).
The researchers compare it to being the equivalent of bringing a country the size of Vietnam into the global economy.
Oxford Economics envisioned a world where mobile telecom operators have created a unique financial identity and credit score for their unbanked customers.
This would empower the 3.9 billion people around the world who are locked out of the formal economy due to a lack of credit history to more easily tap into financial services.
This would not only boost the global GDP, but also increase the credit available around the world by $408b, increase global household savings by $512bn and on average boost low-income countries’ GDP by 6%, according to the researchers.
Moreover, providing financial identities could also raise the average GDP per person in South and Southeast Asia by $25 and by $108 in Latin America and the Caribbean.
The biggest impact would bee seen in underbanked countries like India, Mexico and Pakistan.
“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, CEO 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.”
The news comes as regions like Latin America, Asia and Africa that have huge underbanked populations have experienced significant growth in regards to their FinTech industries.
For instance, in Latin America, FinTech companies raised $3.7bn between 2014 and the first half of 2019.
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