The REGTECH Book

Banking the Unbanked and Underbanked: RegTech as an Enabler for Financial Inclusion

By Soumaya Bhyer¹ and Seyoung Lee²

¹Postgraduate, Cambridge University

²Associate, Sagamore Investments

Issa comes from a village in Central Africa; he is married and has children. Like many others living in rural areas, Issa does not have a formal bank account. He works seven days a week and saves the totality of his earnings in a box under his bed. One day, Issa recounted that someone broke into the family home. That day, Issa and his family lost everything.

‘Cash is king’ is a common saying in Africa. However, is cash really king when the risk accompanying it is so high? In many cases, people do not think about the consequences of living a cash-dependent life, as they do not have access to formal financial services.

Why Is That?

Banks are rules-driven bureaucracies, and many people like Issa find themselves deprived of financial institutions’ services due to a variety of reasons including strict “Know Your Customer (KYC)” requirements of documentation, often dictated by regulators. In fact, two billion people worldwide do not have access to formal financial services. According to the Global Findex Data 2015, 69% of adults in developing economies do not have a bank account. Regions with the least financial inclusion included the Middle East and North Africa, where four out of every five adults were not banked, followed by Sub-Saharan Africa, and then South Asia.

As we can see from Figure ...