Page 210 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Table 1 – Global social network use and growth by region

Active social network users
Region Growth (YOY)
(% of population) 1
Africa 11% 25%

Americas 51% 6%
Asia-Pacific 29% 14%

Europe 47% 3%

Middle East 26% 13%
1 Smart Insights, January 2016.

validate identity and an increasing number of lenders are relying upon social data for identity verification as well
as social “cred”, graphing lending applicants by the education, employment, and credit history of their peers.
13
Multiple studies have shown that when no other traditional credit information was available, use of ACD,
such as utility and telecom payments, were found predictive of either future delinquency on traditional credit
accounts, or of future derogatory public records. 14

The benefits of leveraging ACD can be profound. Businesses previously locked out because they had no
traditional credit history may gain immediate access to lending by sharing their existing digital footprint. A
digital lending solution (application, risk assessment, identity verification, disbursement, and servicing) can
help lenders serve a wider audience as it is unconstrained by geographic boundaries and has lower costs
associated with it than brick and mortar operations, which means it can extend loans, even extremely small
loans (common and highly-valued), at lower cost.

The use of this data can be used to reduce or eliminate the need for customer-entered applications and to
verify identity. This reduces the need for documentation and manual review, saves customers time, reduces
data-entry errors, and reduces application abandonment. Some believe that the use of this data can be useful
in traditional lending as well, as traditional credit scores are increasingly seen as a lagging indicator of financial
health. 15

2 Digital financial services and the poor

A recent study by Moody’s found that increased use of digital financial services (DFSs) has positive impacts
on GDP, household consumption, and jobs, and supports a “more stable and open business environment”.
16
Governments, banks, telecoms, fintech companies, NGOs, and others are aligned in trying to grow use of DFS.
Yet, full adoption of DFS suffers in many parts of the world. In many markets, even where there is a strong base
of consumers with DFS accounts, users often cash out their digital funds as there is not ubiquitous acceptance
of them, especially amongst micro, small, and MSME.

13 “The Impact of Social Connections on Credit Scoring”, Wei, Yildrim, etc., April 2014.
14 “Predicting Financial Account Delinquencies with Utility and Telecom Payment Data”, PERC, May 2015.
15 “As Banks Start Nosing Around Facebook and Twitter, the Wrong Friends Might Just Sink Your Credit”, The Observer, December
2011, http:// observer. com/ 2011/ 12/ as- banks- start- nosing- around- facebook- and- twitter- the- wrong- friends- might- just- sink- your-
credit/
16 “Increase in electronic payments boosted GDP and jobs in 70 countries”, PaymentEye, March 2016, http:// www.
paymenteye. com/ 2016/ 03/ 10/ increase- in- electronic- payments- boosted- gdp- and- jobs- in- 70- countries/? utm_ source=
PaymentEye+Daily+Newsletter& utm_ campaign= 11ab3d277a- 10_ 03_ 2016_ NL& utm_ medium= email& utm_ term= 0_ 3bd2a3a3c5-
11ab3d277a- 14496341

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