Bridging the digital divide: how improved device financing could make life better for the world’s most vulnerable populations
What is the digital divide?
Despite the central role that internet-enabled devices have come to play in modern life, 2.7 billion people (one third of the world’s population) continue to live without internet access. The fundamental gap between those with and those without is known as the digital divide.
Who is affected?
Whilst the digital divide can affect anyone, it’s impact is strongest among the world’s most vulnerable populations. For instance, despite being the second most populous region on the planet with 4.3 billion inhabitants, Asia Pacific (APAC) only has an online population of 67%. Likewise, of the 1.3 billion living in Africa, only 43.2% are connected to the internet. This stands in stark contrast to the 93.4% that are connected in North America and the 89.2% that are connected in Europe.
However, with 3G and 4G networks now accessible from almost anywhere on the planet, fully offline communities are no longer the crux of the problem. Rather, access to quality devices and a reliable connection is. More than 500 million of the two billion subscribers in the APAC region are still relying on 2G networks– despite the rollout of 4G and 5G. Similarly, 70% of African people are limited to 2G and 3G access, despite modern internet-speed developments.
What causes the divide?
Limited funds with which to pay for subscriptions, software and devices are largely responsible, although a lack of appropriate skills – often fuelled by gender discrimination in education – can also make matters worse.
In addition to being defined by poverty, the digital divide is also informed by gender bias, with 52% of the world’s female population affected. Indeed, 200 million more men than women have access to the internet. Inequality in education is often behind this, with the world’s poorest families choosing to send their sons to school whilst their daughters assist with the housework. These girls then find themselves lacking the skills they need to leverage new technologies, in addition to lacking the funds required to access such tech in the first place. In fact, it’s often more difficult for females to finance devices like mobile phones, given that they don’t have jobs or a registered bank account like many of their male counterparts.
The challenges of an unbanked population
According to the World Bank, there are still 1.4 billion people without a bank account around the world. Unsurprisingly, they tend to live in poorer, remote areas, where access to education is limited – perhaps explaining why more women than men are affected. In fact, 56% of the world’s unbanked population is female.
Once again, there are regional disparities to these statistics, with the world’s lowest-earning populations most affected. For example, many people across APAC and Africa are either unbanked or underbanked. Furthermore, research conducted by TransUnion CIBIL has revealed that, in India – one of the largest APAC countries – roughly 480 million adults up to the age of 65 are classed as ‘credit undeserved’. Meanwhile, in China – the most populous country on the map – 287 million people are unbanked, with a further 57% of the entire African population (approximately 95 million people) living without a traditional bank account.
Without a bank account, however, it becomes impossible for people to subscribe to regular internet packages, rendering widespread satellite access moot in many areas. A 2017 Global Findex survey revealed that, whilst distance, distrust and a lack of documentation can contribute, the main reason people didn’t have a bank account was simply because they don’t have enough money. Indeed, 30% of the adults surveyed felt they didn’t need a bank account, whilst 26% felt that opening account would be too expensive. A further 26% responded that having their own account wasn’t necessary because another member of their family already had one.
Something has to give if we are to tackle this disparity. Co-chair of the Gates Foundation, Melinda Gates, explains:
“Financial tools for savings, insurance, payments, and credit are a vital need for poor people, especially women, and can help families and whole communities lift themselves out of poverty […].”
The problem is that, without internet access, these communities are trapped in a vicious cycle. Even in developed countries like the UK, a lack of access to the right technologies is considered a major obstacle to financial improvement, as it’s more difficult for candidates to study and apply for jobs. In fact, an independent poll conducted by the Big Issue in association with 02 revealed that 91% of Brits believe digital access is essential for finding employment. Nevertheless, 300,000 UK families found themselves disconnected from the internet between 2020 and 2021 because they were in arrears.
Extend this problem to countries where bank account access is limited and finding a well-paid job capable of transforming people’s way of living becomes even more impossible. Indeed, when money is stashed in non-traditional places, like under the mattress, people struggle to build up reserves, making it even less likely that they will eventually be able to access credit in the future. Without this credit, they cannot apply for device financing, leaving them struggling to survive without the latest technology, which may, in turn, limit their chances of securing employment.
Mobile transfers and non-traditional banking via an app rather than via a brick-and-mortar bank would, of course, present a solution to this – if they could access credit to be able to leverage these devices in the first place.
What telecoms companies can do to help
Dedicated to creating equal opportunities for all, the US Close the Gap foundation emphasises the need to address the prevailing digital imbalance in order to ensure that everyone can access essential services like online banking, in addition to having access to equal learning and career opportunities. Indeed, the goal is to extend ‘meaningful connectivity’, which the ITU defines as “a level of connectivity that allows users to have a safe, satisfying, enriching and productive online experience at an affordable cost.”
However, with such large swathes of the world’s population either unbanked or underbanked, many financers are reluctant to lend users the money they need to purchase a 4G or 5G smartphone. This is because doing so could increase levels of delinquency or bad debt among borrowers, should they find themselves unable to pay back what they owe. Indeed, financing customers with poor or inexistent credit histories carries considerable risk for lenders and operators alike.
Nevertheless, if telecoms companies were able to extend their offers at a lower risk, they would be able to improve life for the vast majority of the world’s underbanked population. As we have seen, access to the latest mobile technologies could improve the uptake of bank account subscriptions in underprivileged areas, whilst providing those impacted with greater opportunities for education and employment, which will only serve to improve their standard of living further.
Mobile lifecycle management tools from companies like Trustonic present an ideal solution to this dilemma, allowing operators to protect their revenue whilst doing their bit for society.
The Trustonic telecoms platform is designed to help operators extend smartphone offers to customers who may not traditionally be considered for financing – without taking on too much risk when it comes to repayment. This is achieved using a series of automated messages, which nudge the customer into taking action when it’s time to pay their bill. If the customer is responsive, they will continue to enjoy 5G coverage as agreed in their contract. Conversely, failure to make a payment after several reminders will result in their handset being automatically locked. Locking is only used as a final resort – akin to a financial safety net for the operator – with friendly and encouraging messaging that can be tailored to each customer taking precedence. In fact, this seemingly simple solution has been proven to reduce delinquency rates by as much as 70%.
Of course, the more payments operators are able to successfully recoup, the more new customers they are able to onboard, further reducing the digital divide. For instance, in Latin America, Trustonic successfully took an operator’s bad debt from 35% to almost zero, not only serving to increase their share of a growing mobile market but also helping a greater segment of the region’s populations to access the latest technologies. In addition, the Telecoms Platform also improved customer repayment rates by 89% within 30 days, 97% within 60 days and 99% within 90 days.
Indeed, the more accessible these devices become, the easier it will be for previously underserved groups to improve their quality of life through digital services like banking, education and health-advice apps, thus fuelling a more positive cycle for change rather than perpetuating inequitable opportunity based on a customer’s ability to finance.
What better way to enhance corporate social responsibility? Learn more about the Trustonic device locking platform and how it can help to reduce bad debt when lending to underfunded portions of the world’s population.