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

by Tristan Hugo-Webb 0

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

For example in Indonesia, the world’s fourth largest country interms of population, only 20 percent of the population above theage of 15 has an account at a formal financial institution,according to the World Bank. In South Africa, one of the mostattractive payment markets following the BRIC countries, only 54percent of its population above the age of 15 has accounts at banksand other financial institutions. Even Brazil, which has rapidlybecome one of the biggest payment markets in the world, only 56percent of its population above the age of 15 maintains a bankaccount at a formal financial institution.

Although populations in developing countries have turned to otherpayment vehicles, mostly mobile payments, improving bank accountpenetration has long reaching benefits for the internationalpayments industry in generating new revenue streams. In a piece onthe BBC’s The Forum (a weekly segment that bring experts from thefields of philosophy, science, psychology or the arts to proposemeasures that would change the world for good), Oxford Universityanthropologist Catherine Dolan put forward an intriguing idea thatwould promote bank account penetration in developing countriesstarting from birth.

Dolan puts forward a concept that would see that every child givena payback savings coin worth one dollar, which includes a barcodeand a sample of the child’s DNA in order to ensure maximumownership protection of the coin. As the child grows, he or she isgiven the ability to spend the coin or save the coin as well as theinterest that has accrued over the years. However, if the childchooses to save, Dolan says, “If the child saves it until he or sheis 18 they would be able to automatically exchange it for a workingbank account, identified by the barcode. The bank account wouldhold all the interest that accrued on the child’s dollar sincebirth and the child would be the only one authorized to withdrawthe money.”

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

While Dolan’s concept is just that, it would face some difficulthurdles such as funding (according to Dolan, it could be funded byfines levied on banks for illegal operations), and privacy concernsregarding the DNA. It does raise awareness and provides aninteresting solution to the serious problem of poor bank accountpenetration in developing countries. Although consumers indeveloping economies have been quick to adopt other paymenttechnologies like mobile, improving bank account access andpenetration would lead to a more mature payment market and morerevenue opportunities in general in the future.