The Business of Financial Inclusion
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While start-ups and disruptive innovators often attract the financial inclusion spotlight, traditional banks remain the key drivers of financial inclusion globally. Thanks to the Global Findex, we know that over 720 million adults accessed formal financial services for the first time between 2011 and 2014. A simple analysis of this data reveals that 90 percent of these new accounts were opened at formal financial institutions. Of the 720 million total new accounts, only 54 million used mobile money as their primary account.
In The Business of Financial Inclusion: Insights from Banks in Emerging Markets, produced in partnership with the Institute of International Finance (IIF), we explore how banks are innovating to include new customers. Through in-depth interviews with leaders from 24 national, regional, and global banks, we assessed the opportunities and challenges they face while reaching the unbanked and underbanked. Each bank has its own particular story. In the aggregate, their stories give insight into how banks are evolving to meet people
where they are and serve population segments that have been traditionally excluded. Below are the primary opportunities and challenges highlighted in these interviews. For more information on these challenges, and for specific examples and profiles from the interviewed banks, check out the full report here.
Banks’ Top Opportunities in Financial Inclusion
1. Build on digital payments, including:
a. G2P - procurement, payroll, social transfers, pensions, etc.
b. Private sector - retailers, consumer goods companies, payroll, etc.
2. Start with the underbanked and use data to understand their needs.
3. Cross-sell the full range of products.
4. Address the usage gap by building financial capability.
5. Develop the ecosystem through bank-led partnerships, increasing customer convenience while sharing costs and risk.
6. Enable remote account opening using digital IDs, supported by proportional, tiered KYC requirements.
7. Align all systems to digital banking, benefiting banked, underbanked an unbanked customers.
Financial Inclusion Week
Banks’ Top Barriers to Financial Inclusion
1. Lack of trust - in banks, in digital, in agents - leading to lack of uptake.
2. Lack of financial capability and digital literacy - leading to lack of usage.
3. Agent networks - building them, equipping them, ensuring their quality.
4. Data - privacy, security, cost, lack of capacity to analyze the data, lack of willingness for parties to share data, and regulations around these issues.
5. Regulatory issues, especially pricing, capacity, and KYC requirements.
6. Lack of coordination among government bodies.
7. Lack of connectivity/infrastructure