With close to two billion of the world’s population currently classed as unbanked, financial inclusion is increasingly being brought to the forefront of the global agenda. Access to financial services has been improved by the convergence of mobile and digital technology into daily lives, the strides in mobile banking and the pace of progress within financial technology. Although the key parameters for financial inclusion are likely to be different for different countries (and consumer segments), the consensus is clear: universal access to financial services may be some way off, but financial technology and its role in aiding the movement towards financial inclusion has never been so relevant.
Before we kick off KAE’s Financial Inclusion blog series, here are the three factors we consider most important to set the scene:
1. What is financial inclusion?
According to the World Bank, “financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way”.
The notion of financial inclusion defines a common goal that involves accessibility and affordability, and in meeting consumers’ needs, will inherently involve usability too. There are however still a number of factors, including the socio-economic idiosyncrasies of each country that will ultimately shape the path towards financial inclusion.
2. Who is being financially included?
When we talk about financial inclusion, we immediately think of those currently underserved financially, but with the potential to be affected by inclusive finance in the future. The most obvious group are households with low or no income as well as those in rural, remote and hard-to-reach areas. Moreover, we should not forget about women and children, as well as small & micro businesses that tend to be under-represented when it comes to financial services.
|No-income and low-income households||Rural, remote and hard-to-reach households||Small and micro-businesses||Children||Women|
There is an opportunity to provide affordable access to financial services across these groups; for instance, for those in remote areas, needs may involve receiving remittances from family members. For low-income women in particular, digital savings accounts could help bridge the gaps by providing greater financial security and increased accessibility.
These are just a couple of examples – in our upcoming blog series we will get to grips with the needs within and across these groups in finer detail. We will also explore some of the greatest challenges and opportunities across regions in creating greater financial inclusion.
3. How do we get there?
The road to financial inclusion is not without its obstacles, but government initiatives and new solutions, combined with technological advancements can help pave the way forward.
If the existing technological infrastructure in place is more advanced, it will be a speedier journey towards inclusive finance as it will underpin and extend faster service roll-outs, be it through access to the Internet and/or mobile services.
On the other hand, consumer appetite and the need to be financially included are prerequisites to greater financial inclusion. If customers are transitioning from informal to formal means (for instance instead of asking family members to hold cash, using a savings account that is also supported by a mobile service) and are encouraged to do so through financial education, this will help to smooth out some of the bumps in the road.
There are different types of institutions driving the movement towards financial inclusion, including national governments, policymakers, banks and FinTechs. In envisaging greater financial inclusion for underserved segments, it is important to consider the collective and the role that each of these play in enabling change.
So where do FinTechs fit in?
In today’s world, with a payment a click (or text) away and banks operating without branches, the opportunities for financial technology to bridge the gaps and bring down the boundaries are plentiful. What’s more, we are expecting to see the spotlight intensify upon FinTech and firms that are set up with a social impact in mind; BanQuApp is just one example of this, by helping those without economic / financial identity (e.g. refugees) to become financially included.
The role of FinTech in further re-imagining inclusive finance and access to affordable financial services is something we’re very keen to explore. In fact, it may even help to redefine what it means to be financially included in today’s society (or for that matter, underbanked).
To help build a complete picture of the journey to financial inclusion, our upcoming posts will be focused on unearthing developments across the savings, payments, borrowing spaces – both for consumers and SMEs. Our posts in the upcoming weeks will help to predict the impact of FinTech upon the wider global agenda of financial inclusion.