Financial Inclusion On The Continent Continues To Rise Despite The The Data Trust Gaps; Says Edouard Docteur
Financial inclusion on the continent continues to rise but there is still a long way to go. Figures place financial inclusion levels at only 48% of Africa’s population with over 400 million people still excluded.
In an interview Edouard Docteur the Chief Service Delivery Officer at Global Voice Group (GVG) sheds light on the critical barrier of data mistrust and its impact on the adoption of digital financial services in Africa.
The data trust gap refers to the belief and conviction that individuals and businesses have in digital systems, particularly those involving financial transactions and data privacy. Bridging this gap is crucial in boosting the adoption and success of digital transactions thus enhancing access to financial services, reducing the unbanked population, and supporting socio-economic development across the continent.
- What are the consequences of this gap?
The consequences of this gap all feed into each other as they include reduced adoption of digital financial services, and thus slower progression towards financial inclusion which all result in decreased economic growth.
Data mistrust leads to reluctance among potential users to engage with digital financial services as if individuals fear that their personal and financial information might be compromised, they are less likely to use digital platforms for their financial needs.
This is particularly significant in a context where digital financial services are seen as key to expanding financial inclusion.
Regarding financial inclusion, digital financial services offer a potent solution to reaching underserved and remote populations. However, data mistrust hinders these services’ potential reach and effectiveness, keeping substantial segments of the population in financial exclusion.
That is evidenced by financial inclusion on the continent still being relatively low, at 48%, despite the significant strides made in the adoption of services like mobile money.
Financial Inclusion On The Continent Continues To Rise Despite The The Data Trust Gaps; Says Edouard Docteur
Africa is recognized as a global leader in mobile money, with services like Kenya’s M-Pesa and Nigeria’s OPay having expanded beyond their initial markets and are now used across various African countries, reflecting a broader trend of mobile payment solutions providing vital financial services to regions underserved by traditional banks.
Numerous obstacles hinder the implementation of Know Your Customer (KYC) strategies in Africa, including limited or legacy national identity systems, Silo databases, difficulties in address verification, and the need for standardized regulatory frameworks across countries.
Addressing these challenges requires tailoring KYC processes to the African context by leveraging mobile technology and fostering collaboration between regulators and private companies. Establishing a robust identification framework is essential before adopting financial services.
We cannot efficiently advance the implementation of these services without a solid foundation in digital development, and citizen identification is unequivocally one of the first steps. Despite the willingness of governments and banking providers to offer solutions to the entire population, the challenge of identification presents a significant barrier to access.
Financial inclusion and economic growth are inextricably linked, so the result has been the continent experiencing economic growth at a slower rate than desired. As highlighted in the African Development Bank’s (AfDB) macroeconomic performance and outlook report, eleven of the world’s 20 fastest-growing economies in 2024 are projected to be in Africa.
Among these, Niger, Senegal, Libya, Rwanda, and Côte d’Ivoire are identified as leading the charge with substantial GDP growth rates expected. However, data mistrust, by limiting the adoption of digital financial services, may therefore impede broader economic growth and development.
Mr. Edouard Docteur points out the potential strategies to address the issue
There are several key focuses that have significant potential in correcting the data trust gap. First is digital literacy.
- The lack of digital literacy contributes significantly to the data trust gap as many users do not fully understand how their data is being used, stored, or protected.
This uncertainty can lead to mistrust in digital platforms. Enhancing digital literacy can help bridge this gap by empowering users with the knowledge to make informed decisions about the use of digital financial services.
The need to enhance data infrastructure is also fundamental. Without strong infrastructural support that combines material and human resources and supports data access and processing, it will be challenging to achieve the continent’s financial inclusion goals.
- Addressing data security and privacy issues also becomes central to the strategy of bridging the data mistrust.
Users are often wary about the safety of their financial and personal information due to the risk of data breaches and fraud. These concerns are heightened by reports of increasing cyberattacks and insufficient data protection measures by institutions managing sensitive data. Implementing robust cybersecurity measures and complying with international data protection standards can help secure user data.
The data trust gap can be overcome through authentication and data verification technologies, always combined with comprehensive policy frameworks. This is because even if the data trust gap is bridged, well-established policies need to be properly implemented to achieve social trust.
Inadequate or unclear regulatory frameworks regarding data protection risk aggravating the data trust gap. Effective regulation that ensures the protection of user data and penalizes breaches is therefore essential for building trust. Users need to feel confident that there are stringent measures in place to protect their interests.
In Kenya, for example, there has been recent significant discourse around a new revenue generating proposal by the government, in the most recent finance bill, concerning a section that would allow the revenue authority access to citizen’s bank and mobile money statements. The premise is that this will allow them to weed out tax cheats and increase Kenya’s tax-to-GPD ratio from 14% to 16% in one year, and 22% by 2027.
With clear guidelines on how this information will be accessed and used, trust in data would increase and lead individuals to enhance digital-based transactions. Hence the importance of establishing and enforcing strict data protection guidelines and regulations to close the trust gap.
