Modern finance relies heavily on credit scores, a statistical number which signifies a consumer's creditworthiness. These credit scores are based on payment and credit history, accumulated via digital payment and banking methods. A credit score is necessary to be able to buy a house, finance a car, or even to be approved for shopping online. Consumers with high credit scores are deemed trustworthy and enjoy financial benefits such as: 

• Lower interest rates on loans
• Easily approved loans
• Access to the best credit cards

With only 54% of the population in developing economies holding accounts at formal financial institutions, compared to 94% in high-income economies, these regions are still highly unbanked and are therefore not granted access to the same benefits as banked populations.

The 2015 Global Findex report cited the total number of unbanked global citizens at 2 billion, with access to financial and/or mobile accounts in Sub-Saharan Africa greatly lagging. As credit scores rely heavily on data mining a consumer's credit and payment activity, or their "digital footprint", billions of cash-dependent consumers are essentially excluded from basic credit activity, such as taking out a loan, receiving credit card approval, and even making online purchases.

Account penetration

Mobile technologies and mobile money are fostering financial inclusion

The only thing closing the gap is the adoption of mobile payment technologies such as mobile money. While Sub-Saharan Africa had only 34% financial account inclusion in 2014, the gap is steadily closing, thanks to the saturation of mobile devices in this region and the high adoption rates of mobile money alternatives. Mobile phone penetration in this region is at 85% and projected to reach 100% in next few years. According to GSMA's 2016 report, 40% of adults in Sub-Saharan Africa had access to mobile money accounts towards the beginning of 2017. Over 50% of the live mobile money services originate in this region.

Mobile payments in Africa are not only fostering financial inclusion; they are generating a huge portion of the big data required for credit scores in these regions. Combined with additional socio-economic data, Africans can, for the first time, enjoy the benefits of digital footprints and credit scores.

Enter Cyber ID Data

Cyber ID (CID) utilises online and mobile activity to create digital footprints. Drawing on social media activity, mobile phone usage, and mobile money transaction frequency, a unique cyber profile is created. CIDs can be used to identify the user for authentication purposes, but by mining big data created from the above sources, it is possible to create an alternative method for credit scoring a large portion of individuals who currently do not have a sufficient financial digital footprint.

Mobile phone use is an indicator of socio-economic status, with higher socio-economic profiles found for people who use their mobile phone often. Types and frequency of social media activity are also indicators of a person's socio-economic level. This data, combined with mobile money transaction frequency and balance, can be used to create preliminary credit scores.

A New Generation of Credit Scores and Financial Services

Building off of CID, financial institutions and mobile money players can offer financial services crucial for economic advancement. From simple online payments, which save valuable time and effort in rural economies, to revolutionary micro-financing approvals, the new generation of credit scores is fostering economic growth.

And, there is no shortage of companies taking advantage of CID data.

One company leveraging unique data to penetrate a “non-data” market is the Nairobian micro-financing company Branch.

Branch

Branch uses data that mobile users opt to share with them to create credit scores. These scores are used to approve their micro-loans, and as users access and pay off loans, their credit scores improve, leading to better loan terms and approval rates.

Another prime example of a novel financial service provider available thanks to CID based credit scores is the Kenyan startup M-Kopa.

M-Kopa

M-Kopa offers its customers in Kenya, Uganda and Tanzania access to solar power in return for daily micropayments until the devices are paid off. By utilising solar power, these customers are saving money on traditional energy consumption. According to the company, as of May 2017, there were over 500,000 M-Kopa connected homes. The company projects that these customers will save a combined $375 million through 2021.  

Bridging the Divide

As global economies grow, populations in emerging markets have increasingly been left behind. Cyber IDs powered by non-traditional sources of data and profiling, combined with novel service providers, are finally offering the citizens of these nations a chance at financial inclusion and improvement.

Data-driven enterprises and leading e-commerce companies can take advantage of CID tools to ascertain trustworthiness of potential buyers and sellers. Thanks to Cyber ID data, emerging economies can take a step towards economic inclusion, all while simultaneously creating additional data for crucial CID footprints and credit scores.

Also Read: What-is-the-impact-of-big-data-on-mobile-marketing