Access to financial services and products is one of the most important drivers of economic development. At a time of tepid global growth where financial institutions are searching for new market opportunities, the benefits of bringing the unbanked and underbanked into the global financial system are more important than ever.
Utilizing innovative technologies was a clear trend among the banks that are successfully reaching underserved populations. While shifting their operations to take advantage of cost reductions and efficiencies in these technologies, they are opening opportunities to serve the so-called “base of the pyramid,” which in turn allows poor households to expand consumption, absorb disruptive shocks, manage risks and invest in durable goods, healthcare, and education.
Programs that serve as both an incentive for financial account use and to improve quality of life are proving very successful. Banks are starting to embed financial capability building into customer interfaces at teachable moments when customers are making financial decisions. Programs like these are key to expanding the financial ecosystem in areas where it is difficult for people to get cash or pay with a card.
Other efforts focus on building trust between banks and communities. In areas where firms employ banking agents to replace branches as a touch point, relationships are being strengthened through technology. State Bank of India has more than 61,000 agents throughout the country and is a great example of this strategy. Their program connects potential or existing customers with local, familiar agents who can enroll new customers and assist all account holders in a convenient, reliable way. Agents are responsible for helping customers fill out applications for loans, open accounts and more, all through digital channels including POS card devices, mobile phones, Internet-based kiosks, and biometric IDs with fingerprint technology. These types of programs lower costs, increase points of service and build trust.
There are still many business models that need to be improved, trust to be reinforced, and capacity for financial services to be built. Banks cannot do this alone. New partnerships with fintech firms, telcos, retailers and others will bring new products to those who are currently underbanked or unbanked. In order to succeed, banks need policymakers to develop and implement legislation that supports their efforts. By developing a regulatory framework that supports digital banking and by moving their own operations to digital, regulators will be facilitating the type of environment that supports and broadens financial inclusion efforts.