For most of us, access to financial services is as simple as opening an app on our phone. But this basic necessity remains elusive for millions of displaced people without government-recognized identification. Often caught on the margins of societies, they face multiple barriers to participating in the formal financial system, which perpetuates cycles of poverty and exclusion.

The global refugee population more than doubled in the past decade, reaching 37.9 million in 2024, according to the United Nations High Commissioner for Refugees. Many refugees live in host countries without legal recognition or proper documentation due to various factors, including the rapid onset of conflict and the complexity of asylum procedures.

The financial exclusion faced by refugees is shaped by multiple factors. In many countries, banks and financial service providers are held responsible if their customers engage in criminal activity. As a result, they must comply with strict "know your customer" regulations that often require government-issued identification. Where local laws or practices limit ID access to citizens or residents, refugees are often left without viable options for opening even a basic bank account. Even when refugees are permitted to stay legally, the lack of recognized identification, credit history, or collateral further limits their access to financial tools like loans or savings products. In some cases, these barriers are explicitly codified in law. In others, they are the result of unintentional or unexamined regulatory structures. Mistrust of formal institutions—often due to experiences of exclusion or discrimination—can also discourage engagement with financial systems . 

“Identification requirements by the anti-money laundering laws are weaponised to deny access to basic banking services demanding formal documents that most undocumented individuals simply do not have…systematically excluding undocumented migrants from basic financial services, pushing them into informal and exploitative pathways and denying them even the most basic dignity and rights,” says Eunice de Asis, activist, community organiser and filmmaker.

Finding alternative means of identification

One potential solution is the development of community-based identification systems. These systems use community vouching, shared reputation, and risk-sharing mechanisms to provide a trusted form of identity. Rather than relying solely on government-issued documents, they draw on the knowledge and trust embedded in local networks. Such models can offer secure, inclusive on-ramps to digital financial services for individuals who lack access to traditional forms of identification.

Governments and institutions can also take steps to expand what is considered acceptable for onboarding. For example, the Dutch fintech company Bunq adapted its onboarding process to allow Ukrainian refugees to open bank accounts using only their national IDs, a move that bypassed typical residency requirements. Fintechs can use their faster development cycles and willingness to experiment to expand financial access in crisis situations.

"The ‘hacker mentality’ of leveraging creative workarounds and partnerships to create alternative pathways within the constraints of formal systems is crucial for driving real change for undocumented individuals and refugees,” says Savannah Koolen, Founder and co-director of Here to Support.

Bunq's actions also put pressure on policymakers and regulators to re-evaluate their ID requirements and other rules that may inadvertently exclude refugees and other marginalised groups from the formal financial system. This type of innovative, user-centric approach by fintechs can help drive broader policy changes to foster more inclusive digital financial services.

Centering Displaced People in Inclusive Financial Policy

The United Nations Internet Governance Forum's Dynamic Coalition on Digital Financial Inclusion is leading a global effort to address these challenges. Comprising a diverse group of experts, the Dynamic Coalition has been working to define ‘digital financial inclusion’, which they believe goes beyond access to encompass financial empowerment, privacy, and the social dimensions of money.

In its work, the Dynamic Coalition highlights that solutions must be grounded in the lived experiences of those most excluded. It recognizes the Global South as a hub for bottom-up innovation, and stresses that top-down frameworks often fail to serve displaced populations.

“Achieving digital financial inclusion would support nine of the UN’s Sustainable Development Goals. We do not want the work of the Dynamic Coalition to just consist of a report on a shelf that is not read and not acted upon. We are hopeful that addressing this challenge can result in material change across the different elements of society, and that we can have impact as a working group,” Ayden Férdeline, a public interest technologist who has worked directly with governments, industry, and civil society organizations.

Importantly, the Dynamic Coalition emphasizes the need for inclusive policymaking by national governments and regulatory bodies, with active engagement from civil society and community organizations. This ensures that solutions address real needs—not just institutional priorities. Limited interest in serving more diverse communities and in lowering fees are barriers beyond identification challenges.

Jeremiah Lee, a former Interledger ambassador grant recipient, outlined several key policy levers:

• To ensure all people participating in an economy have access to the necessary financial services, regulators should permit alternate forms of identification with tiered risk assessments and introduce digital, decentralized identification documents based on open standards for improved portability across borders.
• To increase market competition between financial service providers and incentivize providing service to more people, regulators should introduce regulatory sandboxes with tiered licensing of financial service capabilities to support the introduction of new providers while protecting consumer safety.
• To decrease the cost of sending money, central banks should operate instant payment clearing and settlement as public infrastructure with no transaction-based fee structure. All financial service providers should be required to participate and not apply per-transaction fees to customers.

Open, borderless payment rails

The Interledger community, with its focus on building an open, global payment network, can be a powerful ally in the fight for digital financial inclusion. By promoting a free and open source payment standard that enables sending and receiving institutions to dynamically select the most efficient settlement method, the cost of cross-border payments is expected to decrease—a critical need for refugee and migrant communities. Moreover, the community's technical expertise and user-centric design approach can inform the development of digital financial tools that meet people where they are.

As de Asis sums up: "Financial services are not just about transactions or economics; they are about survival and integration." It is time to make this vision a reality, empowering undocumented individuals and refugees to participate in the digital economy with dignity, autonomy, and the promise of a more equitable future.

Watch these talks from the Summit 2024 to learn more: