Bridging the Identity Gap: Two Practical Pathways Toward Humanitarian Financial Inclusion

Introduction: Two Missed Opportunities
Every crisis repeats the same pattern: aid agencies can register displaced families, issue program IDs, and deliver food, cash, or vouchers. But those very same individuals are turned away at the bank. And behind the scenes, agencies themselves struggle to coordinate assistance, relying on Excel spreadsheets and improvised workarounds instead of the household-level systems now common in social protection.

These are not minor inefficiencies; they are structural gaps caused by the absence of a recognized humanitarian ID.

For affected people, humanitarian credentials do not translate into the sovereign identity that banks and regulators require for compliance, locking them out of even basic KYC-light accounts.
For the humanitarian system itself, the lack of a shared foundational ID prevents effective coordination: deduplication remains partial, data systems stay fragmented, and millions in assistance are likely lost to overlap.

At the 2025 Humanitarian Payments Council in Berlin, hosted by the Algorand Foundation, MarketImpact Digital Solutions Ltd co-facilitated a discussion with Paycode and the wider council that put these two missed opportunities on the table. The conversations pointed to concrete pathways forward: normalize light accounts for crisis contexts, and establish global standards so humanitarian-issued IDs can serve as foundational credentials of last resort.

Gabe Ruhan and his team at Paycode showed that the technology barriers are already solved, offline biometric wallets, verifiable credentials, and blockchain anchoring are live and field-tested. The open question is political and institutional: will regulators and agencies recognize and adopt them?

The Council discussions pointed to a clear theory of change:

If regulators and banks agree to consistently accept KYC-light accounts in crisis contexts, then millions of displaced people could access safe, digital aid without exclusion. Even with limits, this step would normalize a compliance-friendly entry point and reduce reliance on vouchers or in-kind aid.
If global standards allow UNHCR and other UN agencies to serve as foundational ID providers of last resort, then humanitarian credentials already issued at scale could become lawful, recognized gateways to financial inclusion. Aid recipients would no longer be excluded simply because their state cannot provide documents.

Together, these two shifts would close the structural gap: moving humanitarian IDs from being functional for aid delivery but invisible to banks, into recognized credentials that unlock both financial access for people and coordination efficiency for agencies.

First Pathway: Light Accounts as a Meaningful Win
In some countries, regulators permit tiered KYC regimes that allow individuals without full documentation to open “KYC-light” or “basic” accounts. These have strict transaction limits, usually capped at a few hundred dollars a month.

The shortcomings are obvious. Families who receive repeated transfers quickly hit the ceiling. Light accounts cannot handle remittances, loans, or credit history. They risk locking people into short-term dependency rather than opening doors to long-term inclusion.

Yet, as discussed in Berlin, we should not underestimate their value. Even imperfect access is better than exclusion.

For a crisis-affected household, a light account still provides safe, digital receipt of aid.
For banks, it creates a compliance-friendly entry point to serve vulnerable populations.
For humanitarians, it enables scalable cash assistance instead of reverting to vouchers or in-kind aid.

If humanitarian partners, regulators, and financial institutions agreed on consistent, global practice around light accounts, it would be a breakthrough. Instead of ad hoc approvals in some places and outright refusals in others, light accounts could be treated as a standardized humanitarian instrument.

The first practical win, then, is simple: normalize KYC-light as a legitimate solution in crisis settings.

Second Pathway: UN Agencies as Trusted Foundational ID Providers of Last Resort
The larger breakthrough would come from global standards for identity recognition. One option, highlighted in Berlin, is to establish a framework where UN agencies can serve as foundational ID providers of last resort in contexts where no government-issued ID is available. In a refugee context, this role would naturally fall to UNHCR, which already registers and verifies refugees at scale. But in wider displacement or crisis contexts, such as internal displacement, natural disasters, or child protection, agencies like WFP, IOM, or UNICEF could fulfill this role under agreed global standards.

The principle is straightforward: where a state can provide a foundational ID, that system remains primary. But where states cannot, because of conflict, collapse, or exclusion, trusted humanitarian agencies could issue verifiable credentials that regulators and banks accept under defined risk thresholds.

This would create a lawful, consistent bridge between humanitarian identity systems and financial compliance, ensuring that people caught in crises are not excluded from the formal financial system simply because their state cannot provide them with documents.

The implications would be far-reaching:

Regulators would have a clear, lawful framework for recognizing humanitarian-issued credentials in defined crisis contexts.
Banks could extend services to displaced people without breaching compliance rules, turning legal gray zones into green lights.
Crisis-affected families would find that the IDs they already hold for aid access can also open doors to the formal financial system.

This is not about replacing or undermining state systems. Where governments can issue foundational IDs, those remain primary. The proposal is explicitly a last-resort measure for fragile and conflict-affected settings, where refugees and displaced people cannot access documents from their country of origin or host nation, and risk exclusion through no fault of their own.

The effect could be transformative. Emergency cash programs could scale in weeks rather than months. Financial access would no longer be an improvised workaround, but governed by pre-agreed global standards. And the next displacement crisis could be met not with uncertainty, but with a tested mechanism ready to protect dignity and inclusion from day one.

A Proven Technical Solution
The idea of humanitarian agencies serving as foundational ID providers of last resort is not abstract. The enabling technology is already operational and has been tested in some of the most difficult contexts. At the Berlin Humanitarian Payments Council, Paycode’s CEO Gabe Ruhan presented a working system that squarely addresses the barriers of connectivity, security, and accessibility.

Offline-first smart cards. Paycode issues biometric smart cards that store a beneficiary’s encrypted template directly on the card. This allows individuals to verify their identity and conduct transactions even in environments with no internet access, a critical feature in rural Africa, Afghanistan, or Sudan, where connectivity is often absent.

Secure credential anchoring. The system is designed to integrate with blockchain infrastructure such as Algorand. Instead of storing personal data on-chain, it anchors cryptographic proofs of credentials, ensuring tamper resistance while preserving privacy. This enables compliance checks through verifiable credentials without creating “honeypots” of sensitive biometric data.

Instant field enrollment. Using portable devices, humanitarian staff can capture biometrics, check for duplicates, and issue a live card in minutes. This avoids asking vulnerable people, particularly women, to travel long distances to banks or government offices.

Custodian-managed recovery. If a card is lost, the distributed “gossip protocol” ensures transactions are reconciled across multiple point-of-sale devices. A replacement card can then be issued with the correct balance restored, addressing one of the major risks for displaced populations.

Operational footprint. The platform is already live across several African countries and has also been deployed in fragile contexts such as Afghanistan and Sudan, offering one of the clearest practical blueprints for how identity and payments can reach the last mile.

At Berlin, the UNHCR example was cited as particularly important: when UNHCR issues a refugee credential, whether via iris scan, biometric template, or smart card, it functions as a reliable identity for aid delivery but remains invisible to the banking system. Paycode’s approach, combined with blockchain anchoring, demonstrates how that same humanitarian credential could be recognized by banks under agreed risk thresholds. In other words, a refugee’s “functional ID” could become a foundational credential for financial access, if backed by international standards.

It’s Not a Question of ‘If’, but ‘When’
The technological approach for enabling recognition is not a distant aspiration. As Gabe Ruhan of Paycode highlighted in Berlin, the tools to solve this are already live, field-tested, and working at scale. His point was not that Paycode is the only answer, but that a real solution exists today. From a technology and finance perspective, the last-mile problem is no longer theoretical.

The Paycode system, with offline-first biometric smart cards deployed across several African countries and fragile contexts like Afghanistan and Sudan, backed by a ledger system for transaction integrity, demonstrates that the toughest barriers can already be overcome:

Connectivity is solved: transactions run entirely offline, with account logic and biometric verification stored on the card chip.
Accessibility is solved: portable, in-field enrollment devices capture biometrics, de-duplicate identities, and issue credentials instantly, ensuring inclusion from day one.
Resilience is solved: custodian-managed recovery allows lost cards to be replaced without locking people out of their identity or funds.
Security and auditability are solved: a ledger system underpins all transactions, ensuring integrity and transparency even in low-connectivity environments.

Looking ahead, while the current system uses its own ledger for integrity, integration with public blockchains such as Algorand is being developed as a next step, to anchor cryptographic proofs on a public ledger while keeping all personal and biometric data strictly off-chain and under the user’s control. This would give regulators and banks an additional layer of assurance, paving the way for recognition of humanitarian credentials at scale.

The takeaway is clear: the technology is here, it works, and it is already serving hundreds of thousands. The barrier now is not feasibility but recognition, building the political and regulatory frameworks that allow these proven systems to be trusted, scaled, and adopted globally.

The Barriers: Political, Not Technical
With the technology proven, the focus shifts to the real obstacles preventing these solutions from scaling. Both pathways, normalizing light accounts and recognizing UNHCR or other UN agencies as a Foundational ID provider, face significant hurdles. As the Berlin council made clear, these are not technical problems; they are challenges of politics, incentives, and institutional will.

The three main barriers are:

Sovereignty Concerns: States are often hesitant to allow a humanitarian actor to provide what is seen as a core state function: foundational identity recognition. This is the most significant political challenge, as it touches on national authority and control.
Donor Incentives: The humanitarian funding model prioritizes reaching the maximum number of people at the lowest possible cost. Donors, operating in a state of "permanent triage," are judged on lives saved, not on whether beneficiaries gain long-term access to financial services. This creates a structural disincentive to invest in solutions that may have a slightly higher upfront cost, even if they deliver far greater long-term impact.
Institutional Inertia: Aid agencies themselves can be a barrier. They often remain protective of their data, fearing misuse and loss of control over their programs. A deep-seated risk aversion, combined with a reliance on outdated and non-interoperable systems like Excel spreadsheets for managing sensitive data, makes it difficult to adopt the modern, collaborative frameworks required for these solutions to work at scale.

Ultimately, these are political and governance barriers, not technical ones. The Berlin council was clear: the tools exist today. The missing ingredients are recognition, trust, and alignment between humanitarian actors, regulators, and governments.

The $230 Million Case for a Foundational ID
Recognizing a humanitarian-issued credential as a foundational ID would do more than unlock financial services; it would also solve one of the most wasteful and undignified aspects of the aid system itself: duplication.

One of the greatest inefficiencies in any large-scale humanitarian response is the lack of coordination. Without a shared way to identify households, multiple well-meaning organizations often provide overlapping assistance to the same families, while others nearby are missed entirely. The result is not just wasted resources but also a profound waste of time and energy for people in crisis. I've witnessed this firsthand

The scale of this inefficiency, and the potential for savings, is staggering. Ukraine's Cash Working Group provides a groundbreaking case study: through coordinated deduplication efforts involving 63 partners, their humanitarian response saved an estimated $230 million - $207 million in Multi-Purpose Cash and another $23 million in other sectoral cash assistance. That's enough to provide three months of assistance to an additional 1.2 million people.

Yet even this success story reveals the paradox at the heart of our system. The World Food Programme's Building Blocks, which drove these savings, still cannot solve the fundamental identity problem. As Ukraine's own assessment makes explicit: Building Blocks deduplicates assistance at the payment level, not identity at registration. The assessment calls this registration gap "urgent" - a need "widely identified and vocalized by CWG members" who must work around, rather than through, the identity challenge.

The limitations run deeper. These deduplication efforts remain almost exclusively focused on cash transfers. The same families receiving duplicate cash assistance are likely also receiving duplicate food, blankets, and hygiene kits through other clusters. Ukraine's CWG is currently evaluating seven different systems trying to solve various pieces of this puzzle, yet none address the root cause: the absence of a foundational identity that works across sectors and organizations.

This fragmentation isn't just inefficient - it's undignified. As the Ukraine assessment emphasizes, this is about "people-centered programming." Every dollar wasted on duplication is a family not reached, a gap not filled.

This is where a globally recognized, foundational ID becomes transformative. If a UNHCR-issued credential were the common standard, it would provide the shared identifier needed to unlock true, cross-sectoral deduplication. Instead of seven parallel systems and workarounds, agencies could coordinate at the household level across all types of aid, ensuring a holistic response that fills gaps instead of creating overlaps.

This is not just about cost savings. It is about dignity. Families would no longer need to queue multiple times to prove their identity to different organizations. With a single, foundational ID, aid could be delivered cohesively, respecting the time and humanity of the people we serve.

Conclusion: From Paradox to Pathway
The humanitarian identity gap is not a question of technology — as Paycode and others have shown, the tools are already live and proven. The real challenge is recognition and alignment.

The theory of change is simple:

If regulators and banks accept KYC-light accounts consistently across crisis settings, displaced people gain a safe, digital on-ramp to financial services, and aid agencies can scale cash without defaulting to vouchers or in-kind aid.
If global standards allow UN agencies to serve as foundational ID providers of last resort, then humanitarian credentials already used to deliver food and cash can also unlock lawful financial access and enable system-wide coordination.

If these conditions are met, the structural paradox begins to dissolve: the same IDs that today only work for aid distribution would also work for financial inclusion and for cross-agency deduplication. That means more families reached, fewer overlaps, and assistance that is faster, fairer, and more dignified.

The path forward is no longer about pilots. The technology works. The evidence is there. The next step is political: building the recognition frameworks that turn possibility into practice.

The council in Berlin showed the pieces are already on the table. What remains is for regulators, donors, and agencies to put them together, so the next crisis doesn’t force us back to improvisation.

Call to Action: The Council in Berlin showed that the tools exist — what’s missing is recognition and alignment.

👉 What do you think? Should light accounts and humanitarian-issued IDs be recognized as global standards? Share your thoughts in the comments — and let’s keep pushing this conversation forward.

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