Casey Merolla and Stephen Kiene explore why expanding access to digital payments is key to financial inclusion and reaching the unbanked.
Of the two billion adults (not to mention millions of small businesses) who remain unbanked globally, two-thirds of them own a mobile phone, according to the World Bank.1
That’s good news for payments providers with broad goals to advance financial inclusion around the globe.
Financial inclusion—having access to savings accounts, money transfers, loans and related services—is key to boosting economies by empowering individuals to improve their financial well-being. Payment providers will also consider the lure of a $380 billion annual revenue2 opportunity for banks and other providers that find ways to meaningfully support the needs of the un/underbanked, based on our analysis. Digital payment services—mobile apps, mobile wallets, virtual cards and others yet to come—are turning out to be gateways to more financial inclusion, especially in less developed areas around the world. They are convenient, fast, simple and low risk in enabling new forms of financial access and new value propositions at greater efficiencies.
Companies currently taking advantage of this trend range from small start-ups to the world’s largest technology companies. Regalii, for example, uses blockchain and SMS technology in its mobile payments platform to make it easy for immigrants to pay their family’s bills in their home countries.3 According to CNBC, Amazon is working with central bank Banco de México on a new payment system that will allow customers to make payments online and in person through smartphones free of charge using QR codes4. Accenture is teaming with Mastercard, Amazon Web Services, Mercy Corps and Everledger to develop a circular supply chain capability that uses digital identity, payments and blockchain to enable transparency, promote financial inclusion and directly reward sustainable practices of small-scale growers and suppliers.5 In its new report on expanding payments to low-income populations, Mastercard describes several use cases for digital financial inclusion, including how digital solutions enable farmers to receive secure electronic funds directly from buyers—linking them more closely to the supply chain so that they become more visible suppliers on record with large institutional buyers.6
To expand further into unbanked markets and take full advantage of these growth opportunities, payments providers should focus on four key areas:
- Get connected. Create cross-sector ecosystems focused on win-all-around benefits from a wider reach of financial services. This includes partnerships with national governments, development institutions and NGOs, microfinance institutions, non-bank financial services providers (like retailers, telecoms service provider, mobile network operators (MNOs) and fintechs) to share insights, collaborate and invest jointly.
- Know the customers. Use insights and data from partner organizations to better understand the needs and behaviors of unbanked customers, segment them granularly into logical persona groups and tailor business models, products, services and operations accordingly.
- Keep innovating. Invest to enable fully digital and highly secure versions of consistent, replicable payment flows of everyday life to support broader payments ecosystem development as the foundation for financial inclusion. Additionally, digital identity verification and other digital security can limit fraud by streamlining payments authentication and authorization for low-income or undocumented customer segments.
- Interoperate. Foster standardization, integration and interoperability between mobile money platforms by working on cross-bank initiatives to develop agent networks, payment systems and other technology infrastructure, particularly in countries where MNO services and networks are already dominant.
The world’s road to universal financial access is paved with digital payments. We can get there if payments providers and country stakeholders continue to make digital payments a priority in expanding access and shaping financial inclusion for the better.
1 The World Bank, “Financial Inclusion on the Rise, But Gaps Remain, Global Findex Database Shows” 4/19/2018
2Accenture and Care International, “Within Reach: How Banks in Emerging Economies Can Grow Profitably By Being More Inclusive” 2015
4Reuters, “Mexican central bank in talks with Amazon about new mobile payments” 3/5/2019
5Accenture, “Accenture Collaborates with Mastercard, Amazon Web Services, Everledger, and Mercy Corps to Increase the Sustainability and Fairness of Global Supply Chains” 2/25/2019
6Mastercard, “Role for Last Mile Partners in BOP Payments” 1/22/2019