Enhancing Financial Inclusion through Digital ID

July 8, 2021

Many countries in the developing world are grappling with financial inclusion challenges, including weak regulatory environments, lack of digital payment infrastructure (e.g., ID systems, credit information, internet, and mobile access), financial illiteracy, consumer protection, and security and integrity of digital financial services. This topic cannot be addressed without recognizing the increasing great power competition and China’s growing influence, given its digital Belt and Road Initiative vision is fraught with human rights, security, and sustainability concerns. The U.S. government has an opportunity to engage and lead in the digital financial and ID infrastructure space to help countries unlock their full economic potential while simultaneously achieving their own national security priorities and creating new markets for U.S. goods and services. Investing in digital payment and ID infrastructure has potential benefits that would appeal to U.S. policymakers on both sides of the aisle. The objective of this project is to map out opportunities where the United States can lead and policy actions that can harmonize the priorities of the defense, development, and diplomacy communities (the three “D”s of security) and shape a bipartisan, whole-of-government response that not only addresses the rapidly unfolding digital technology revolution in the developing world but also leads the global community in its investment and development efforts. In this new report, CSIS analyzes how the United States can engage and lead in the development of digital finance and digital ID infrastructure in low- and middle-income countries.