The Universal Postal Union (UPU) has recently established a Financial Inclusion Technical Assistance Facility (FITAF), which will receive significant support from Visa. As Stephen Kehoe, Head of Global Financial Inclusion at Visa Inc., explains, “Visa’s partnership with the UPU will make a significant contribution to financial inclusion. This systematic effort to leverage Posts’ services, size and reach will help build the comprehensive digital network needed to benefit whole societies, and especially help reach two priority groups of unbanked people: rural poor and women.” FITAF was created by the UPU to advance financial inclusion, by accelerating the digitization of postal financial services and increasing their uptake, to reach last-mile customers and businesses.

In order to increase the number of postal accounts by 250 million by 2020 and support the launch of digital financial service projects for financial inclusion from 20 Posts, FITAF will champion postal action on inclusive digital financial services, conduct research to identify key actions and provide qualifying Posts with technical assistance to improve and expand their capabilities. “This partnership is a key milestone in our efforts to position the postal network as a critical tool for delivering economic and social development to all,” emphasizes Bishar A. Hussein, UPU Director General. “Thanks to its universal coverage, to its long history as a financial actor and to the trust it holds amongst the citizens of the world, the postal sector is in a unique position to provide access to financial services to all and especially the underserved. We need to leverage that unique position.”

The situation

Over 2 billion adults worldwide were unbanked in 2014. Of those that are banked, 19% have an account at a Post, making the postal sector the second largest contributor to financial inclusion after banks. Postal networks are well positioned to meet the financial needs of some of the world’s hardest-to-reach populations. “Governments and international development stakeholders increasingly see the postal network, with its ability to deliver to everyone, everywhere and at all times, as critical infrastructure to achieving a whole range of public services and policies, including their financial inclusion objectives,” explains Siva Somasundram, UPU Director of Markets Development and Regulation.

Indeed Posts have extensive, government-backed networks that reach across countries into both urban and remote rural areas. They provide numerous services – including financial services – to customers of all income levels; they often distribute government payments, such as pensions or social support; and their public, egalitarian mission makes their services affordable and accessible to all segments of society. However, significant investment and transformation is required to improve postal capacities and services, so as to be able to deliver digital financial services and reap their many benefits.

The FITAF approach

FITAF will provide technical assistance to help Posts launch new digital financial services at a national level. Assistance will be offered according to need, based on requests from post offices, local levels of digital delivery, and the type of issue – such as product, network (e.g. back office) and systems (e.g. postal network, IT infrastructure). The criteria for selection include: commitment from the Post’s management and from government leaders; the existence of a legal and regulatory framework to enable the Post to deliver financial services; evidence of innovation; and willingness to co-fund 20% of costs. Support will also include designing mobile-based strategies for the Post, expanding Post-owned services, and capacity building.

The Facility carries out research to inform and advance Post-based financial inclusion. This includes developing case studies and best practices, identifying service and quality gaps, and creating a readiness guide to help Posts prepare to offer digital financial service. The Facility will also examine the role of Posts in supporting the financial inclusion of micro and small merchants near their branches. A crucial aspect of this work is sharing new insights and resources with UPU members and other stakeholders through regional and leadership meetings, as well as at partner events. For example, UPU organized four regional workshops for members in 2017 to explain the importance of digitization and to present effective business models and services.

Partner coordination

Visa joins the Bill & Melinda Gates Foundation and the UPU in funding the Financial Inclusion Technical Assistance Facility. Visa will provide financial support for three years through a charitable grant. The UPU has collaborated with a number of Visa’s global financial inclusion partners, including the Alliance for Financial Inclusion and Better than Cash Alliance, which the UPU joined in 2015. It has also issued joint research publications on financial inclusion with the World Bank, UN Women and the International Labor Organization, and collaborated with diverse service providers at the country level – policy makers, academics and social-welfare organizations. This inter-connectedness exemplifies the type of collaborative, coordinated approaches needed to achieve financial inclusion.

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Using 14 million postal records from 187 countries, researchers demonstrated that this network of connections can provide indicators that are closely correlated to standard indicators of socio-economic status. The new research was conducted by Univeral Postal Union, UN Global Pulse and University of Cambridge.

The study had unparalleled access to the tracking data held by the UPU on postal flows, a rich source of records of human activity with extraordinary penetration in the physical world. The records themselves are generated each time a postal dispatch occurs between countries.

Four years of daily postal data from 187 countries (2010-2014) were explored and its network properties shown to approximate critical socio-economic indicators. The data revealed that since 2010 postal activity is on the rise, which can be accounted for by the parallel growth of global e-commerce. This positions postal flows as a sustainable indicator of socioeconomic activity.

This enabled the generation of proxies for a number of socioeconomic indicators already in use by the United Nations and other international organizations to measure national wellbeing, including GDP per capita and the Human Development Index. The study identified that the indicators of life expectancy and GDP per capita were strongly correlated with the postal degree of a country.

SDGs

The use of big data for development is a burgeoning area of research that could help countries measure and monitor progress to meet the UN Sustainable Development Goals (SDGs). However, big data can have limitations in coverage, particularly in countries where digital penetration and use of social media is low. This is where the contribution of UPU data from the global physical postal network can play a critical role.

For his part, UPU Director General Bishar A. Hussein welcomed the results. “The unparalleled reach of the global postal network’s unique data footprint in the e-commerce era paves one way in which UPU member countries can make a critical contribution to helping the world achieve the SDGs,” Hussein said. 

“In the digital era, greater granularity and frequency of analysis and monitoring of SDGs can, paradoxically, be achieved though global physical networks data,” said José Ansón, Postal Economist at the UPU. “The postal network is the world’s largest physical network and its data a source of untapped potential, which, when tapped, can provide important insights into the state of nations,” he added.

“Physical networks, like the global postal, flight and migration networks, are critical variables to build robust socioeconomic proxies in combination with new digital networks, such as internet traffic and social media use,” said Miguel Luengo-Oroz, Chief Data Scientist at UN Global Pulse.

“In this work, we show how the network properties of global flow networks can approximate critical socioeconomic indicators and how network communities formed across physical and digital flow networks can reveal socioeconomic similarities possibly indicating dependencies within clusters of countries,” explained Desi Hristova, a researcher from the University of Cambridge.

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