Innovation and the digital revolution are helping bring needed services to people who have previously not had access to banks. In a report developed with Care International UK, Accenture estimates that the market for those who are un- or under-banked is estimated to be as large as $380 billion and is growing rapidly due to the economic expansion of developing nations. India’s economy, for instance, is expected to grow at a seven percent rate by 2017.
To meet the needs of this growing market of underbanked, banks like ICICI Bank of India, who won the Efma Accenture Innovation Award for Sustainable Business service, have launched new services specifically for this market. Its digital village initiative called Akodara, allows residents to open savings accounts without submitting physical documents, to transfer funds by mobile phone and to pay for goods without cash.
Digital technology is opening up this market, creating more cost-effective ways for banks and other financial service providers to work with customers. This is causing regulators and policymakers to encourage banks to address underbanked consumers.
This is wide-open territory, and banks must compete not only with banks and other financial services firms, but with tech startups and companies from other industries, such as mobile network operators like M-Pesa in Kenya and Airtel Money and Tigo Pesa in Tanzania, who provide consumers with low-cost mobile wallets.
Innovation isn’t limited to technology. NMB Tanzania combines physical and digital channels to reach that country’s large underbanked population with an entry-level savings account using an agent banking model. Agents are equipped with smartphones and point-of-service devices enabling fast account openings (in 10 minutes or less) and instant, branch-free transactions. Local agents bridge the gap for the poor who are hesitant to enter bank branches and unfamiliar with using mobile financial services. Agents also help lower overall customer traffic in bank branches.
Banks are also looking for opportunities to enable business development among small businesses that are underserved in the market place. An example of this can be seen in Turkey’s DenizBank and its Kumsal infrastructure product for small and medium enterprises, which provides these businesses with access to previously unavailable resources for knowledge and capital. The video below is an interview about Kumsal and their approach to reaching this underbanked segment.
Financial inclusion represents a major opportunity for banks. To realize this opportunity, however, banks need to do more than adapt innovative digital technologies. They have to change their customer orientation and, in some cases, their operating models to meet new customers more than halfway. This will call for a high degree of flexibility as well as innovation, but banks with these characteristics will be well-positioned to serve new customers in emerging markets.
We would like to hear your thoughts on innovations in serving the underbanked, so let us know via the comments section below what products and services you have seen that are changing this underserved market.