Three quarters of Papua New Guinea’s population is excluded from the financial sector, but there are differing thoughts about how to include them. David James looks at some of the options being proposed for PNG and notes the mobile phone is the key to all of them.

Credit: YuTru

Late last month, the Bank of Papua New Guinea announced a ‘world first’ for Papua New Guinea: the YuTru system.

Using biometric information (a person’s unique physical characteristics, such as iris, face or voice print) to create a digital identity for banking purposes, YuTru is seen as a tool to include more people in the financial sector.

YuTru is operated by an industry-led consortium of financial services institutions. It provides users with a digital ID that then can be used to transact ‘anywhere the YuTru logo is displayed.’

The central bank has emphasized that registering with YuTru is entirely optional.

The aim is to use the ‘practical working identity’ of a person to unlock ‘the value of informal relationships in the economy by formalising referrals.’

‘The aim of the scheme is to provide PNG with an opportunity to leapfrog into the modern digital world in a way that is customised for the unique PNG environment,’ a Bank of PNG statement says.

‘If you make it easy for people to trade because of digital money and digital markets then people will trade.’

The statement says the initiative will use ‘modern smartphones and internet connectivity to register without having to travel, using smart contracts to lock identity data so that only the people you give permission to can ever access it.

‘It will be a world-first digital trust framework and give PNG the head-start it needs in preparation for greater internet connectivity to the rest of the world in 2019.’

Unbanked

Peter Williams, Chief Edge Officer for Deloitte Digital, agrees that developing a widely-used payment system is one of the ‘fundamental issues’ that PNG must solve to take advantage of the digital era.

But he believes other approaches may prove more fruitful.

‘There is a huge amount of people unbanked, and there seems to be a focus on “we have to get people digital IDs so they can have a bank account”.

‘Why don’t we look at countries like Haiti, Bangladesh, Kenya, who have mobile money systems without bank accounts?

‘The reason that (new customers) have to do a 100-point check is to abide by money laundering and terrorist financing laws—which came through the US, and were adopted by the United Nations and then globally.

‘We can run mobile money systems through mobile phones but you need trust, you need immediacy of transfer of value, you need the ability to turn it into cash.’

‘That is great for a Western country, but it is just not relevant to PNG.

Successful example

‘We can run mobile money systems through mobile phones but you need trust, you need immediacy of transfer of value, you need the ability to turn it into cash.’

Williams says an example of how this works is the mobile-based money system M-PESA, which was established in Kenya and Tanzania and is now being used in South Asia and Eastern Europe.

The service allows users to deposit money into an account stored on their cell phones, to send balances to other users, including sellers of goods and services, and to redeem deposits for regular money.

‘It has been massively successful,’ says Williams.

‘Something like 35 per cent of Kenya’s GDP runs through M-PESA.

‘It has had a transformational effect, not just on business but also the lives of farmers and people out in rural communities.

‘Because suddenly they have access to data, they have access to market information and statistics.

‘They can call through their mobile and they can get paid. It has improved the flow of money. That to me is a missing link.

Smartphones

Mark Pesce  Credit: BAI

There may be different approaches, but there is general agreement that mobile phone technology offers the best way forward.

The Centre for Excellence in Financial Inclusion (CEFI) has called for the leveraging of ‘digital platforms and mobile technologies to enable opportunities to create and monetize non-traditional assets.’

Futurist Mark Pesce says Papua New Guinea should create the space and conditions for ‘local talent’ to focus on developing mobile phone apps so as to facilitate the management of digital currencies and a digital trade economy.

‘If you make it easy for people to trade because of digital money and digital markets then people will trade.

‘They will enjoy the benefits of a very advanced money economy wherever they are in Papua New Guinea.

‘Because all of these advantages will be delivered via that universal tool—the smartphone.’