How digital identity is the catalyst for increasing financial inclusion among women
Madhvi Mavadiya
Head of Content , Finextra
Women make up 55% of the world’s unbanked population. Ahead of International Women’s Day, Finextra interviewed several experts in the financial services community about how women can be granted the autonomy to take control of their own financial decisions and the barriers that need to be removed, namely the lack of a formal ID.
The digital divide
Despite being highlighted as part of the Davos 2021 Agenda, very little has since been done to offer these one billion women protections over their money. While it is evident that understanding the needs of end users is key to the success of technology initiatives related to financial inclusion, women living in poor and marginalised communities are on the wrong side of the digital divide.
200,000,000 more men than women have access to the internet and women are 21% less likely to own a mobile phone that helps them transfer money, run a business or connect with their community.
Sustainable Development Goal 16.9 states everyone should have a legal identity by 2030. Using a digital ID can help build credit profiles, support entrepreneurship, provide a safety net with automated insurance and enable privacy and security of funds owned.
Digital identity and other policy options
A recent G20 report revealed that one in five women say a lack of ID is one of the reasons they do not have an account. “Countries should work toward removing barriers to women’s access to official ID and eliminate policies that impose extraneous conditions on adult women using ID to access financial services, such as requirements to provide identity documentation for a related male (husband or guardian) as well as their own,” the report read.
Other policy options also included:
facilitate women’s universal ownership of mobile phones,
promote government digital payments protocols that are competitive and interoperable with private sector payment systems,
support mechanisms for enabling government payments to women to be directly deposited,
leverage technology and behavioural insights to strengthen women’s digital skills,
reform discriminatory laws to promote women’s full economic participation,
provide incentives that increase representation of women working in finance,
support financial inclusion strategies that address women’s and men’s needs,
support work towards financial institutions providing anonymised sex-disaggregated data as part of reporting requirements.
For example, as stated in a Bill and Melinda Gates Foundation report, G7 members have a long track record of advancing financial inclusion in Africa and Agence Française de Développement (AFD) has long supported African governments, central banks, and financial institutions in their efforts to build more inclusive, sustainable, and responsible financial systems.
“The task now is to harness emerging payment and identity technologies to accelerate these efforts. The G7 Partnership for Women’s Digital Financial Inclusion in Africa aims to achieve this by making the critical infrastructure, regulatory, and planning investments that will ensure that women are not left behind by this digital revolution.”
A change in culture
Dr. Ruth Wandhöfer, global fintech influencer and partner at leading fintech VC firm Gauss Ventures, highlights that ensuring that women have autonomy over their financial decisions is “really a question for governments. It requires government willingness to drive a change in culture and as a result the day-to-day ability for women to be more in control over their finances.”
Dr Wandhöfer adds: “What we need is the availability of affordable financial products, combined with the ability to access these with affordable tools such as mobile phones (this also requires network coverage) and the issuance of digital identity as well as the use of biometrics.”
Jane Loginova, co-founder and co-CEO of Radar Payments agrees: “I foresee three key elements to women’s financial autonomy: education, reach and tools. An account is a right and a means for more independence however this is not obvious nor understood by populations in certain countries, cities, or villages.
She continues to say that while there are strong cultural barriers, which can only be overcome through education, knowledge is ultimately power and women can own this power to grow themselves, their businesses and their families.
Loginova also says that “women will not come to banks, so banks need to come to them. In order to reach out to women, financial institutions need to be present where they are, build a network of ambassadors who can open up communication lines with women in places they visit and trust. Targeting high women footfall locations to enable proximity onboarding and banking becomes essential.”
Female migrants and the gender pay gap
Another aspect to mention is that women make up approximately 50% of all migrant workers globally, according to the World Bank. However, the gender pay gap means that their wages are commonly lower than men’s - problematic when research suggests that female migrant workers typically send home a higher proportion of their earnings more frequently and this is driven by the need to sustain their family group.
While migrants can exert individual and collective influence by leveraging remittances, both as recipients and senders, regardless of the gender of the sender, remittances are usually directed to mothers, daughters or to women looking after the children of migrants.
According to the UN, remittance sending behaviour of migrant women often involves a higher financial cost as they tend to send smaller amounts of their income more frequently and are subjected to paying more in transactions fees.
Online remittance providers have driven down the cost of sending money abroad. While offline agents continue to add fees, fintech firms have provided customers with significantly lower cost options and these savings have a real-world impact on the lives of migrants and their families, which is particularly of benefit to women.
The fintech approach
To this, Dora Ziambra, COO of Azimo, says: “While women make up half of the sending population of remittances, they also make up half of the recipients as well. Because of that, lower transaction costs for senders and access to digital transactions for the recipients are paramount for increasing financial inclusion among women.
“At Azimo, our cost per transaction is a fraction of that of traditional money transfer companies, which is useful for small value transfers. In addition, we offer various payout methods, including mobile wallets and home delivery, reaching recipients (usually women) in rural areas.”
Elena Novokreshchenova, executive vice president, international for Remitly also provides the fintech perspective, reiterating that “part of the challenge is that immigrant women often become the primary earner for their families back home.
“We know that of our female customers, 40% are mothers who had to leave their children behind. So whether it's for bills, food, or school fees, they send money when and as soon as they have to, which leaves them vulnerable to exploitative costs.
Novokreshchenova also believes that the main ways fintech can help is by continuing to drive down the cost of transferring money and by designing products that address not only white collar, high earning early adopter customers, but also unprivileged segments of the population that are unbanked and overlooked.
“The average cost of sending money globally at the end of 2020 was 6.51%, but for Sub-Saharan Africa it was 8.19%. Every percentage this amount drops means more money sent by these women makes it to loved ones,” she says.
As mentioned, fintech firms have provided customers with significantly lower cost options and these savings have a real-world impact on the lives of migrants and their families, which is particularly of benefit to women.
An abundance of options?
Says Lottie Wells, community manager and head of the Women in Crypto initiative at Wirex: “Technological advancements have allowed for a huge range of options that make consumers’ lives easier and cheaper.”
Wells goes on to say: “When it comes to financial marketing, the rhetoric directed at women is usually around saving and budgeting, while crypto is often considered more of a male-dominated sphere. In reality, public opinions are beginning to shift showing that crypto really can be for everybody.
Referencing a recent Wirex survey carried out with The Stellar Development Foundation about their audience and attitudes towards crypto, it emerged that 26.1% of women aged 55-64 invested in crypto compared to only 14.3% of men in the same age bracket. Further, 65.7% of female respondents that did own digital assets were over 45.
“Women will be more likely to use tech when products are built that add value to their lives, and for older people, simple products that help them manage their finances and save money, including that of crypto, are important.”
Digital fluency and financial literacy
While these issues persist in developed economies, what has been done to remedy issues with digital fluency and financial literacy, how can the fintech industry help with this, is this more of a societal, stereotypical problem or an issue that surrounds identity?
Liz Frazier Peck, executive director of financial literacy, and advisory board member of teen financial literacy digital bank Copper Banking states that there continues to be a large gap between men and women in the world of finance. “Financial literacy and financial independence are directly connected. Without financial independence women lack the experience and confidence to become financially literate. Without an understanding of finance, women cannot reach financial independence.”
Peck explains that women who do not manage their finances aren’t getting the valuable experience and knowledge to ensure they can be financially independent. Alongside this, men continue to be the primary investor and financial manager in the family and while it’s important for men and women both to be financially literate and independent, women face challenges that add to the need for this.
“They live longer, make less money than their male counterparts and are more likely to leave the workplace early to care for children or elderly parents. Financial literacy is the foundation for financial security and independence. So much of this comes directly from the workplace, and the opportunities available to women.
“Women are empowered today, with more women CEOs, entrepreneurs, women in office and pursuing graduate degrees than ever before. However there still remains a gap. There is not one single program that fintech companies (or companies in any industry) can do to remedy this issue. The changes need to come from an organisational and systematic effort to support women and the unique challenges they face.”
Peck says that companies can make sure women are represented at the leadership table, giving them more opportunities to reach these positions along their career, starting at a young age, although women are more likely to leave the workplace mid-career to be a caretaker for a family member.
It must be possible for them to continue their career growth during and after this break and their employers must offer flexible working environments, telecommuting and encouraging paternity leave to share the family caretaking responsibilities, and equal pay.
“Women need to be paid the same as men, and it’s taking too long to get there. Specific to financial literacy, corporations can provide financial education and support to their employees. This can be through 401k training, mentors and providing access to financial advisors. This should be available to everyone, but is especially important for women.”
A different approach in emerging markets
Loginova believes a different way is needed to tackle the issue in emerging markets: “A digital first approach to solve financial literacy challenges is unrealistic. The solution requires strong cultural empathy. We can speak from our own experience as we ventured into the creation of a startup marketplace for farmers in India with a strong focus on female inclusion and financial access.
“Face to face interaction is essential and women to women interaction is a must. Overcoming logistical and social barriers by engaging with husbands is also a common step, while creating a network of ambassadors/relay is important.
“There are many educational steps that need to be achieved before we can begin to empower women with financial knowledge. Gaining their trust and openness to learn is key and involves the collaboration of many players alongside fintech providers, such as governments NGOs, and microfinance institutions.”