How do you stop a frog from leaping?
It sounds like a riddle or the set-up to a bad joke, but it’s actually a question about the fundamental requirements to become a digital leapfrog society. A frog can’t jump with broken legs.
In theory, digital is the great equaliser, as everyone with a phone has greater access to information and often life-changing opportunities. Your nearest school may be falling apart, your local library non-existent and your nearest ATM kilometres away, but that doesn’t stop you from enrolling in a MOOC or sending a payment online.
Practically speaking, it’s not quite so cut and dry. Societies, no matter how digital, still require you to ‘check in’ using certain demographic information. What’s your name? No, not that one, the one the government calls you. When and where were you born? Where do you live now?
They’re seemingly simple questions, but ones that can be impossible to answer if you’re one of the many without access to formal ID, birth records or a fixed address. In South Africa, even getting your hands on a digital device that connects to the internet – the very key that’s meant to open up the possibilities of a digital future, needs an extensive list of information. Good luck getting RICA-certified without an ID book or proof of residence.
An estimated 1.1-billion people lack any form of identification, preventing them from accessing so-called basic services like healthcare, education and banking. All the digital services in the world don’t mean anything if the people that need them the most are shut out. Try leapfrogging without an ID and see how far you get.
So how do we overcome this and give our leapfrogs their mobility back? The answer, as it does in so many things, lies in data and how we use it.
Finding an alternative
We all know about the importance of reliable access to finance as a means of socioeconomic development. And yet, according to the World Bank, around 2-billion of the world’s adult population don’t have even a basic bank account. In the Sustainable Economic Development Assessment, South Africa scores relatively poorly when it comes to financial inclusion.
For the heavily regulated financial services and credit industries, finding ways to service this large unbanked and underbanked population has required some creative solutions. Alternative data has been one of the big ones, allowing banks to service what are known as ‘thin file’ clients – those without much formal banking history.
What this means is that they’ve sought out new data streams from which to create their customers’ digital identities. Because even those who’ve never had a bank account have still participated in the informal economy and have a transactional and behavioural history from which to draw. And the insights gained from these more unusual data sources – social media footprints, for example – can build a much more accurate profile of who a customer is and what their needs are than formal data sets.
In Kenya, where student loans are hard to come by and many young people find themselves unable to go to university, one start-up has developed an innovative workaround. It uses information like academic performance, attendance record and mobile money payment history to fund students’ higher education. It’s just one of many FinTechs that are exploring alternative data models to overcome infrastructural challenges. And with the WEF launching a framework of new financial inclusion metrics, alternative data is set to lose its flannel shirt and combat boots and become mainstream.
New ways of looking at data
While alternative finance models themselves aren’t too new, the beauty of them is that they open the floodgates to a number of uses for unstructured data outside of credit risk assessment. And when you start to add in new digital technologies like machine learning, the possibilities to create better societies become galactic.
Let’s look at the challenges faced by displaced persons, for example. Already, organisations like the UNHCR and the Red Cross use biometric information to find refugees’ citizenship records, help them receive aid from NGOs, and link them to their families. App Taqanu uses refugees’ digital footprints to create reputation networks to authenticate their identities and allow them access to bank accounts.
Then there’s the problem of those who lack formal addresses, estimated to be 4-billion. That’s where start-ups like what3words come in, with a radically different way of conceptualising how we map our world. It throws out the very concept of addresses in favour of dividing the world into grids and giving each their own unique set of three-word combinations.
It’s not difficult to see how such a framework for conceptualising GPS data can change the game. The reach of everything from drone drop-offs to emergency response to government service delivery can be bolstered in ways that were impossible before. Nigeria and Mongolia, both notorious for a lack of street addresses, have already started using the what3words system, as has Mercedes Benz.
Initiatives such as these are a testament to the power of shedding our limited preconceptions of what is valuable data and what is ‘alternative’. One man’s junk can be another’s life-changing treasure, as long as it’s purpose-driven and shaped around a specific set of objectives. And as we recover from the last few years of institutional disillusionment, the onus is on business and government to explore how to understand every person in society.
Do you agree we’re entering a new age for social and financial inclusion? What societal problems do you foresee alternative data models solving?