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Enabling Financial Inclusion with Employment and Income Data

Enabling Financial Inclusion with Employment and Income Data

Why Financial Inclusion Matters

Financial inclusion is critical to ensuring that everyone has access to the financial tools and resources they need to improve their lives. When people are financially included, they can build savings, access credit, and make investments that can help them escape poverty and build a better future for themselves and their families. They can provide education for their children, save for retirement, and have the means to achieve their dreams and aspirations. It also helps people better manage risk and prepare for uncertainties: making them more resilient in times of crisis.

Financial inclusion can also help stimulate economic growth and development. It creates an environment for increased consumer demand, and provides incentives for businesses to start and expand. It enables transparency, reduces graft and corruption, and reduces poverty. It helps grow economies by creating business efficiency and improved resiliency. It improves the quality of life for everyone.

Bridging the Financial Inclusion Gap

Financial inclusion has been hard to achieve in the past for a number of reasons. One of the biggest challenges has been the fact that financial services have been costly to bring and offer to the lowest economic segments of society or what have been typically called the "unbanked" or "underbanked." This population is typically rural, low-income, and/or young. They often lack identification documents, which makes it difficult to open a bank account. They may live in remote areas where there are no brick-and-mortar banks or ATMs. They may also lack the financial literacy needed to understand and use financial products and services. Additionally, they may not have enough money to meet minimum balance requirements or fees associated with financial products and services. This problem is apparent in emerging markets like the Philippines, where nearly 7 out of 10 of the population are still excluded from the formal financial system.

However, with technology, this is quickly changing. Technologies such as mobile devices, cloud computing, robotic process automation, and artificial intelligence have transformed how these services are being conceived, managed, and delivered. The glue that links these technologies together are something called “APIs” or “Application Programming Interfaces.” APIs provide a set of tools that allow for easy connectivity between systems, exchange of data, and automation of processes and workflows.

One example of how APIs are changing the world of finance is with the rise of something called “Open Banking.” With APIs, banks and traditional financial institutions have started opening up their data as well to third-parties. Open Banking is changing the landscape of financial services because it gives customers the power to control their banking data and how they want to interact with banks.

While Open Banking is great, Open Finance takes this one step further. With Open Finance, any type of financial data and not just bank accounts, can be opened up to trusted third parties. This can include for example your assets, insurance, or credit. Basically any relevant information to create a clearer picture of your financial status and activities. With Open Finance, improved financial health driven by market innovation and competition can be realized. driving greater financial inclusion for everyone.

It is with this vision in mind that we have started Smile. At Smile, our mission is simple: we want to enable people to easily share their employment and income data to trusted third parties so they can get access to financial services much more quickly and easily.

To share an example of what problem we are solving: take the case of lending again in emerging markets like the Philippines. To get access to credit, borrowers are required to provide identification and proof-of-income, such as a payslip, to a bank when applying for a loan. This is because majority of the population is not covered by the local credit bureau and have no credit history at all. This process can not only be inconvenient and time-consuming for the borrower, but also costly and inefficient for the lender to process. If lenders have user-authorized, API-enabled, direct access to data from a borrower's employer, they can quickly verify a person's identity, employment and income. Mainly because, in places like the Philippines, people can live without a bank account but not a job. By giving lenders direct access to a borrower's employment data (with of course his or her consent), he or she is given greater access to financial services and in turn also lowers the cost of those services.

To date, Smile has already doing this for tens of thousands of Filipinos, with the potential to help millions more. As of today we are able to assist more than 90% of the Philippine adult population get access to financial services by simply sharing their employment and income data. But this is just the beginning...

We have plans to do the same in many other countries across Asia. Through our use of technologies like APIs, we are able to help our customers achieve improved efficiency and reduced cost, and also create new innovative business models and user experiences. But more importantly, we want to help millions of people across Asia have happier, healthier, more empowered and fulfilled lives. If you want to join us in this mission, or just follow along in our journey, do reach out and contact us! We would be happy to hear from you!



Jan Pabellon is the CPO of Smile API.

Smile API is a part of our Batch 4 Global Innovation Alliance (GIA) Manila Program.

To find out more about our GIA Manila Program, click here.


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