Dan Salazar and Carlos Monteverde :
Unprecedented technological advancements and corresponding innovations in business models have helped financial inclusion evolve beyond merely connecting people to a bank account. It is, for instance, helping level the playing field for small farmers by providing access to buyers, more efficient pricing, and speedier payments. It is replacing unwieldy paper voucher systems used amid humanitarian crises with prepaid cards for food and supplies. And it is helping small and micro-merchants expand their businesses by leveraging purchase data to enable credit scoring.
As the Digital Revolution continues to progress, digital financial services are making financial access ever more feasible. In high-income economies, the proportion of people with financial access has reached 94 percent. In low- or middle-income countries, financial access is a reality for a respectable 63 percent. Since 2011, more than 1.2 billion adults worldwide have gained access to a bank account, including 515 million since 2014.
Mobile networks are widespread as well, accessible to nearly 90 percent of the population in developing countries today. Mobile money accounts, in particular, are prevalent in a number of markets: in Kenya, 73 percent of adults have one, while in Uganda and Zimbabwe, about 50 percent do. Similarly, more than a billion users have mobile accounts in China.
Fulfilling the promise of financial inclusion for boosting prosperity (a $3.7 trillion boost in GDP in developing economies by 2025) and for improving financial resilience and financial health requires engaged usage of digital financial services. After all, access is inconsequential if people do not use the services available to them.
According to our latest research, The Next Frontier in Financial Inclusion: Moving Beyond Access to Usage, based on lessons from programs that have connected more than 348 million financially excluded consumers to the formal financial system, three key components are needed to move the newly included from access to usage:
Focus human-centered design on customer needs and cultural considerations. Our market research in 16 focus markets across five regions shows, for example, that urban residents are more commercially engaged, are more familiar with the use of payment products and trust these products.
Rural residents, in contrast, rely more on cash and are more risk-averse. Two-thirds, for example, feared losing control of their money or savings if they did not have physical control of them. These insights can help product design teams tailor financial instruments for different user groups.
To overcome this, Mastercard partnered with a mobile messaging service devoted to building mutually beneficial relationships between financial service providers and their customers, and one of the region’s leading telecommunications providers, to create a text messaging option to open a dialogue with users and answer key questions about finances and financial pain points. Increased knowledge and trust led to an increase in monthly transactions.
This payment interoperability was critical to boosting the overall level of acceptance. By addressing consumer and merchant needs collaboratively, the service providers were able to reach a far larger population more quickly and efficiently.
In this regard, opportunities exist for actors interested in spreading digitization and enabling usage, even beyond the financial industry, to partner and help drive the growth of payments. Stakeholders across different industries, especially those serving the base of the pyramid – from agriculture to telecommunications to consumer goods – all have important roles to play in extending digital payments to the underserved.
By engaging with a broad and diverse group of strategic partners, we can make significant progress in helping hundreds of millions of people attain financial health and promote inclusive growth.
Unprecedented technological advancements and corresponding innovations in business models have helped financial inclusion evolve beyond merely connecting people to a bank account. It is, for instance, helping level the playing field for small farmers by providing access to buyers, more efficient pricing, and speedier payments. It is replacing unwieldy paper voucher systems used amid humanitarian crises with prepaid cards for food and supplies. And it is helping small and micro-merchants expand their businesses by leveraging purchase data to enable credit scoring.
As the Digital Revolution continues to progress, digital financial services are making financial access ever more feasible. In high-income economies, the proportion of people with financial access has reached 94 percent. In low- or middle-income countries, financial access is a reality for a respectable 63 percent. Since 2011, more than 1.2 billion adults worldwide have gained access to a bank account, including 515 million since 2014.
Mobile networks are widespread as well, accessible to nearly 90 percent of the population in developing countries today. Mobile money accounts, in particular, are prevalent in a number of markets: in Kenya, 73 percent of adults have one, while in Uganda and Zimbabwe, about 50 percent do. Similarly, more than a billion users have mobile accounts in China.
Fulfilling the promise of financial inclusion for boosting prosperity (a $3.7 trillion boost in GDP in developing economies by 2025) and for improving financial resilience and financial health requires engaged usage of digital financial services. After all, access is inconsequential if people do not use the services available to them.
According to our latest research, The Next Frontier in Financial Inclusion: Moving Beyond Access to Usage, based on lessons from programs that have connected more than 348 million financially excluded consumers to the formal financial system, three key components are needed to move the newly included from access to usage:
Focus human-centered design on customer needs and cultural considerations. Our market research in 16 focus markets across five regions shows, for example, that urban residents are more commercially engaged, are more familiar with the use of payment products and trust these products.
Rural residents, in contrast, rely more on cash and are more risk-averse. Two-thirds, for example, feared losing control of their money or savings if they did not have physical control of them. These insights can help product design teams tailor financial instruments for different user groups.
To overcome this, Mastercard partnered with a mobile messaging service devoted to building mutually beneficial relationships between financial service providers and their customers, and one of the region’s leading telecommunications providers, to create a text messaging option to open a dialogue with users and answer key questions about finances and financial pain points. Increased knowledge and trust led to an increase in monthly transactions.
This payment interoperability was critical to boosting the overall level of acceptance. By addressing consumer and merchant needs collaboratively, the service providers were able to reach a far larger population more quickly and efficiently.
In this regard, opportunities exist for actors interested in spreading digitization and enabling usage, even beyond the financial industry, to partner and help drive the growth of payments. Stakeholders across different industries, especially those serving the base of the pyramid – from agriculture to telecommunications to consumer goods – all have important roles to play in extending digital payments to the underserved.
By engaging with a broad and diverse group of strategic partners, we can make significant progress in helping hundreds of millions of people attain financial health and promote inclusive growth.
(Dan Salazar is a Director at Mastercard. His efforts focus on building commercially viable approaches to financial inclusion. Carlos Monteverde is a Product Manager at Mastercard).
