Going Beyond Financial Inclusion

About one-third of adults, or about 1.7 billion people, still don’t have a bank account. Without a bank your money is vulnerable, you can’t get paid by direct debit, you can’t use savings accounts to build emergency funds, no access to online discounts and you have no hope of getting credit. Unbanked people are more likely to be exploited and become a victim of modern slavery and most of these people are women and living in poor countries.

Financial inclusion strives to remove the barriers that exclude people from banking and using these services to improve their lives.

Historically, the biggest barriers to financial inclusion have been infrastructure and access to technology.  But over recent decades, technological innovation has made it possible to deliver the infrastructure needed to support delivery of financial services to more of the world’s population at a lower cost and advancements in fintech, such as digital transactions, are making financial inclusion easier to achieve.

In remote areas traditionally lacking in access to banking, technological innovation is delivering increased access to electricity and the web through use of maturing renewable energy technologies.

For example, solar technology has been around since the 1970s, but its capacity has grown significantly in recent years, driven by falling costs, continued government support, and technological innovation. Off-grid solar systems provide rural and off-grid communities with access to electricity and the demand for off-grid solar systems has grown exponentially.

Off-grid power and access to the internet means that financial services can be accessed remotely giving people and businesses access to financial tools for savings, insurance, payments, and credit.

Historically, the cost of running banking products has resulted in exclusion of unprofitable customers – typically those with low balances or those in sparsely populated areas. When pushed by the governments to provide products to a wider range of customers – ‘banking lite’ were created to deliver the minimum of functionality and keep costs down for the bank.  Whilst technology has made it possible to deliver digital banking services to everyone, for banks built on legacy technologies their ability to provide the very best services to all their customers is still hampered.

So, while more people have access to banking products, they often have limited features such as just being a simple transaction account or savings account, however if everyone had access to a quality banking product we could achieve so much more.

It is great to see things moving in the right direction with financial inclusion increasing across the world but with financial technology enabling more cost-effective implementation of first class banking products for all, shouldn’t that be our goal? 

By harnessing cloud based core banking together with fintech that enables quick and easy configuration of complex products, banks can offer all customers the tools to help them to manage their finances – large or small – more effectively.  For example, just simply offering wallets within an account makes it easier to budget, to keep money for bills separate from discretionary spend etc.  By allowing everyone access to the very best banking services, the ability to plan, budget and save is available to everyone – no matter their circumstances. In a small remote village in Africa financial inclusivity might be the ability to join a farming co-op and receive payments electronically for crops throughout the year – thus removing the inherent risk of holding annual cash payments in their home.  In the UK it might be enabling struggling low income families to more easily manage their money to ensure they do not end up paying a premium through pre-pay meters.

So, while progress towards financial inclusion through basic banking products is a step in the right direction, there is the danger of ghettoizing people in a second class product. There has never been a better opportunity to offer a first class banking products to the financially excluded – we call this Financial Inclusivity.

In our next article we’ll dig deeper into how banking technology and financial inclusivity are vital for achieving the Sustainable Development Goals identified by the United Nations.