Ethiopia Envisions Linking Digital ID with Payments

The National ID Project Program (NIDP) is collaborating with global fintech giant VISA to integrate its digital identification systems with payments, streamlining the automatic creation of bank accounts when a digital ID is issued.

Currently in the design stage, the initiative aims to establish a system where bank accounts, referred to as social accounts, are generated for customers acquiring digital IDs.

“Attaching a bank account to the rollout of Ethiopia’s digital ID can help Ethiopia significantly improve its financial inclusion,” Yared Endale, VISA Country Lead for Ethiopia, told Shega.

“We are initially working with the Cooperative Bank of Oromia but will soon collaborate with other banks. Users will have the flexibility to select their preferred bank for the account,” added Yared.

Mina Awol, Stakeholder Engagement Manager at NIDP, stated that VISA is one of the biggest supporters of Ethiopia’s national digital ID program, and the global fintech firm wants to be part of Ethiopia’s financial ecosystem. Visa and NIDP signed an MOU around seven months ago, laying the foundation for their collaboration.

“Identity is crucial in finance, and VISA wants to derisk the identity factor in Ethiopia’s financial sector,” Mina told Shega.

The duo also holds a vision to make these bank accounts accessible through the Fayda (National ID) app, set to be launched by the National ID Program. These social accounts can then be utilized for a variety of person-to-government (P2G) transactions, like tax payments, through the app.

NDIP is developing the Fayda app, intended to help individuals authenticate the validity of their digital IDs. A mini Fayda app is currently available on Ethio-Telecom’s telebirr super app. Registered users with a Fayda ID can access their ID information, including a virtual ID card, directly from the app.

“Given VISA’s expertise in card issuance, we can be involved in various aspects, including providing expertise and even financially supporting the implementation,” Yared noted.

VISA opened its offices in Ethiopia in 2020 and works with 11 banks, including the Commercial Bank of Ethiopia, the Bank of Abyssinia, and Dashen Bank.

The payment giant has issued around seven million active debit cards in Ethiopia. Apart from its card banking ventures, VISA is engaged in innovative solutions like e-commerce and inbound remittance through the VISA CyberSource payment gateway, utilized by platforms such as CashGo and MamaPays.

“VISA stands as one of our strongest supporters. We are greatly pleased to have them as our partners, offering us valuable technical support and contributing to the development of the Fayda app. We are also actively pursuing additional collaborative opportunities,” Mina added.

The Ethiopian government aims to register every Ethiopian above the age of five with a biometric digital ID by the end of 2025. Over three million individuals have already registered for the IDs so far. Concurrently, the National Bank is committed to achieving a financial inclusion rate of 70% by 2025.

In July 2023, the National Bank and the National ID Program announced they were working to establish digital IDs as the primary identification form within banks and grant them legal acceptance across all financial institutions.

Similarly, two weeks ago, it was reported that a consortium of 21 banks, led by the Ethiopian Bankers Association, is gearing up for an initiative that aims to consolidate multiple accounts under one unique digital ID.

Globally, digital identity is becoming central to payment systems. The United Nations has proposed a universal digital ID system that directly connects to people’s bank accounts and payment applications.

In India, nearly all adults are identified through Aadhaar, a biometrically secured national identification system used for various purposes, including enrolling in telecom and banking services, digital payments, and platforms like UPI.

However, challenges also exist. In May 2023, the Japanese government had to review all bank account information linked to the “My Number” national identification system due to instances where ID cards were linked to incorrect accounts.