Unbanked, underbanked, underrepresented, and nearly uncounted are a few adjectives describing three quarters of the world's population. Many adults are in this state due to poverty, travel distance, and a plethora of paperwork. More than 50% of people living in developing countries don't have bank accounts, leaving them vulnerable to theft and exploitation. Most of this segment consists of women. Fortunately, with some low-income countries quickly adopting mobile phone use, financial services such as mobile payments and money transfers are becoming accessible for communities that would otherwise be precluded from banking privileges. Sub-Saharan Africa has the lowest number of adults using banking institutions. But according to Frost & Sullivan, mobile payments in that region could reach $1.3 billion by 2019.
According to Global Payout, a financial company that combines being a program manager for international and domestic prepaid cards with the ability to move money for customers, 90% of the people on the planet have a smartphone. This bodes well for brands looking to grow their financial inclusion initiatives.
MasterCard is expanding its mobile remittance services in Nigeria and Zimbabwe, enabling African citizens living abroad to send funds through mobile money transfers, payment cards, bank accounts, or cash outlets from their homeland. During Mobile World Congress on March 3rd, MasterCard CEO Ajay Banga delivered a keynote address emphasizing the importance of financial inclusion for citizens everywhere.
"In the future with the Internet of Things, where every device will be connected to the Internet, what kind of life will those who are financially excluded have?" said Banga during his speech.
"We'll have the Internet of Everything but not the Inclusion of Everyone."
It's worth noting that developing countries aren't the ones lacking financial inclusion in some parts. In 2013, the Federal Deposit Insurance Corporation collected data showing that 20% of U.S. households were underbanked, meaning they had a bank account, but also used alternative financial services.
Global Payout CEO, Jim Hancock, says great strides are being made in financial inclusion. "The 'non-bank' industry is starting to find ways to establish transactional history and therefore use that to assist in establishing a credit rating for users, he says. "As a result, companies like ours may become a great kick-starter to eventually getting a traditional bank account, credit card or consumer loan."
What Role do Telecommunication Operators Play?
WorldRemit, an online service that allows people to send money to people abroad, is aiming to digitize the receive-side of remittances, moving people from cash to mobile money for speed, convenience and security. Iain Mackenzie, Communications Director of WorldRemit says interoperability is helping to drive the adoption of mobile money, as many countries have several different systems and until recently most didn't work together. Prior to these partnerships, users had to constantly cash-in and cash-out when sending money to friends.
"Tanzania is a great example of the progress being made, with all four operators now cooperating," says Mackenzie. "Remittances to mobile money are also helping to extend financial inclusion. It is much faster and safer to receive an international transfer on a mobile phone than a cash pickup, and once the money is received it can be used to buy insurance, pay bills and open a savings account."
Are Apps the Answer?
Of course, apps are part and parcel of the mobile revolution and financial inclusion. WorldRemit's app allows people to send money to more than 110 countries across six continents. Users of Global Payout's free mobile payment app receive their own eWallet account, direct deposit capabilities, domestic or international money transfer abilities, automatic currency exchange, and other services. The M-Ledger app enables users to keep a journal of their M-PESA (mobile money scheme) transactions in their phones. Originally created as a mobile microfinance system for Kenyans in 2005, M-PESA evolved into a general mobile money-transfer system, which people pay into by handing cash to an agent of the mobile network operator Safaricom. Money is then credited to a user's M-PESA account. M-PESA has provided cash flow for a number of startups in Nairobi.
It's clear that not only is financial inclusion good for financial technology companies, it's good for local economies, emerging markets, and the world's prosperity on a macro level.
That being said, there's still a lot of work to be done.
"For the most part, the greatest obstacle is awareness to the alternatives to banking and the know-how to gain access to these alternatives,' says Hancock. "Another challenge is the verification process of potential account holders that are not "well documented". However, people are beginning to learn that the problem exists, thanks to the good work of the Gates Foundation, the World Bank, and others. But there seems to be more talk about the problem and less about the solutions providers. There just aren't enough reporters and bloggers covering solutions to this topic. It is a big social issue that doesn't get the kind of attention it deserves."