Mercator Perspectives

Using DNA and a Coin to Improve Bank Account Penetration in Developing Countries

While many citizens in developed countries have access to bank accounts and other financial services, populations in many fast-growing developing economies have yet to migrate in large numbers to traditional banks.

For example in Indonesia, the world’s fourth largest country in terms of population, only 20 percent of the population above the age of 15 has an account at a formal financial institution, according to the World Bank. In South Africa, one of the most attractive payment markets following the BRIC countries, only 54 percent of its population above the age of 15 has accounts at banks and other financial institutions. Even Brazil, which has rapidly become one of the biggest payment markets in the world, only 56 percent of its population above the age of 15 maintains a bank account at a formal financial institution.

Although populations in developing countries have turned to other payment vehicles, mostly mobile payments, improving bank account penetration has long reaching benefits for the international payments industry in generating new revenue streams. In a piece on the BBC’s The Forum (a weekly segment that bring experts from the fields of philosophy, science, psychology or the arts to propose measures that would change the world for good), Oxford University anthropologist Catherine Dolan put forward an intriguing idea that would promote bank account penetration in developing countries starting from birth.

Dolan puts forward a concept that would see that every child given a payback savings coin worth one dollar, which includes a barcode and a sample of the child’s DNA in order to ensure maximum ownership protection of the coin. As the child grows, he or she is given the ability to spend the coin or save the coin as well as the interest that has accrued over the years. However, if the child chooses to save, Dolan says, “If the child saves it until he or she is 18 they would be able to automatically exchange it for a working bank account, identified by the barcode. The bank account would hold all the interest that accrued on the child’s dollar since birth and the child would be the only one authorized to withdraw the money.”

According to Dolan, the primary benefits of this scheme would be to teach children the benefits of saving, improving access to formal bank accounts and in turn, increasing the likelihood that the children would maintain bank accounts as they grow older and would provide the payments industry with a whole new generation of potential long-term banking customers. Additionally, it would provide women, who are often prevented from access to financial products, an important source of independent income.

While Dolan’s concept is just that, it would face some difficult hurdles such as funding (according to Dolan, it could be funded by fines levied on banks for illegal operations), and privacy concerns regarding the DNA. It does raise awareness and provides an interesting solution to the serious problem of poor bank account penetration in developing countries. Although consumers in developing economies have been quick to adopt other payment technologies like mobile, improving bank account access and penetration would lead to a more mature payment market and more revenue opportunities in general in the future.

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