Financial Inclusion in the digital landscape

Unbanked adults are part of a landscape of so-called cash and banking deserts.  In developing economies, access to traditional financial services remains physically out of reach, with the nearest bank or ATM located at a great distance.  Banks have no incentive to open a branch in a rural area with a low-income population, and for the consumer, banking fees are restrictive, with individuals often not meeting the threshold to open an account. A process of identification isn’t possible without copies of passports and utility bills.

Exclusion from the economic environment has a detrimental impact to overcoming poverty.  Having a bank account gives people the tools to become financially literate, save money and manage their cashflow.  The barriers to accessing finance for loans not only impede business growth but make it impossible to build a financial credit history.

The last twelve months of 2020 has seen a rapid acceleration of digital payments across the world as people seek to minimise physical interactions with one another and handling notes and coins.  The speed and cost of tapping a payment card has become second nature for those who are already integrated into the digital world.  However, the lack of money in circulation, and options to pay has long been a reality for adults of an unbanked, underclass in developing economies.  And technological innovations are set to broaden the gap, with those in the digital system able to take advantage of open banking solutions and tailored financial offers to suit their needs.

Digital inclusion means financial inclusion, and agencies such as The World Bank and the Bill and Melinda Gates Foundation are driving the international agenda to close the financial inclusion gaps.  The Global Findex Database of 2017 estimates that whilst 1.7 billion adults remain unbanked, two thirds of them own a mobile phone that could enable them to access financial services. The World Bank further reports that in for Sub-Saharan Africa (SSA), mobile money drove financial inclusion.  It was the use of the mobile phone that revolutionised payments across the region.  Kenya’s telecommunications company, Safaricom, launched the M-PESA payment system in 2007, enabling users to send and receive money with the familiarity of sending a text.

As the future is moving towards finance, rather than banking, the simple ease of carrying an e-wallet with digital currencies continues to be the way for the unbanked to access the financial ecosystem.  The equivalent cash value is stored in a digital wallet on the phone, and not in an account, and solves the problem of scrambling around for the correct change, or the lack of coinage in circulation.  Users are also able to pay securely, with financial transactions conducted through a text message. Encrypting transactions with blockchain technology has been around for years and makes the transaction a safe mobile payment.

The banking infrastructure that exists today has not been built for the digital age or to serve society fairly.  Mobile services are the beginning of a journey into a financially inclusive landscape for those who are locked out of formal banking systems. And it will be up to innovative platforms to provide compatible wallets to expand, create and support the growth of mobile penetration in unbanked communities.  As the sector moves forward with its global reach, it is vital that everyone benefits from the opportunities of a transformational future in financial mobile services.