How technology is facilitating faster ﬁnancial inclusion

Bassem Awada

GM - MENA & VP Global
- Key Partnerships

Blog | 3 min read

Worldwide, as steps are underway to boost ﬁnancial inclusion, the measures are beneﬁtting millions of underbanked people. Finally, underserved cohorts are gaining access to savings accounts, investments, loans, and other ﬁnancial products. To achieve an objective based on user convenience, technology is being used to drive ﬁnancial inclusion across all geographies, including remote regions.

Financial empowerment and inclusivity have been universally recognized as one of the pivotal pillars promoting economic growth. Although small enterprises are the drivers of developing economies, a substantial number are denied easy access to ﬁnancial services for various reasons. Since many don’t operate bank accounts, they remain unaware of the tremendous beneﬁts of ﬁnancial products and services.

Digital is democratizing ﬁnancial services

But in the past decade, technology – especially ﬁntech or ﬁnancial technology – has been instrumental in closing the ﬁscal services gap in developed and developing economies. As a result, tech tools have accelerated the democratization of ﬁnancial services among the masses. While the shift was gradual before 2020, the pandemic fast-forwarded this transition, compressing the years-long journey into mere months.

The criticality of ﬁnancial inclusion in propelling greater economic growth cannot be overstated. Access to ﬁnancial oﬀerings makes people feel more empowered and ﬁscally aware. With seamless access to savings and credit, people become more aspirational, competitive, and productive. But given the inadequacy of the telecom infrastructure in many regions, millions of people remain unserved and underbanked.

Goals such as economic emancipation and poverty alleviation require equitable distribution and mobilization of resources and capital. As mobile and broadband penetration rises globally, it oﬀers great hope that ﬁnancial inclusion initiatives via digital technology will beneﬁt the marginalized masses. Digital technologies help in minimizing the operating costs of banks, NBFCs, and ﬁntech ﬁrms in providing banking and allied ﬁnancial services, particularly in rural and unbanked areas.

Be it artiﬁcial intelligence, machine learning, blockchain, or big data analytics, a variety of new-age technologies are amplifying the opportunities and driving greater penetration of ﬁscal services by creating a digitally-enabled ﬁnancial ecosystem. Consider blockchain, which is now being used beyond cryptocurrencies. As an inviolable record of data and transactions, it is facilitating greater ﬁnancial inclusion and freedom via multiple applications. While Coinbase uses it to promote Person-to-Person payments, it is used by Bitland in Honduras and Ghana to verify properties.

What’s more, these tech solutions are even empowering unbanked people in the developed nations, such as the US, by providing attractive and seamless customer experiences. Through elegant and simple services, users can seamlessly access ﬁnancial systems without complications. For instance, ‘saving circles’ in the US (termed ARAC) are an attractive option for those without checking account access, permitting them to receive and lend funds to persons they trust, wherein each circle member contributes a sum of money every month and a speciﬁc member receives the overall amount each month. These circles are now being digitized to boost accessibility.

Competitive, cost-eﬀicient oﬀerings Digital

By augmenting access to banking infrastructure and improving ﬁnancial health, tech-powered services are assisting consumers to better manage their savings. Through better credit scores, small-scale entrepreneurs can avail of loans from legacy lenders or ﬁntech ﬁrms at more competitive interest rates.

Thanks to non-traditional digital sources that gauge the creditworthiness of prospective borrowers, ﬁnancial inclusion is receiving a boost through ﬁntech ﬁrms and other new-age lenders. Additionally, the application of big data analytics is enabling these entities to provide customers with bespoke packages of ﬁnancial products and services.

TerraPay’s technology platform is designed to oﬀer ease and accessibility, enabling our partners to join our global payments highway. Our commercial design lies very much on a lump sum fee per transaction and a very competitive rate given to partners. This will allow those partners to re-design their pricing structure and make it more competitive and aﬀordable to their consumers, who were always wary of using them because they were considered to be a rip-oﬀ. Imagine, a transaction that used to be sent to India from the Gulf priced at 35 Dhs each, is now sold to the same customers for as low as 10 Dhs per transaction and sometimes promoted with the fee waived and in a much more eﬀicient scheme. Financial inclusion is enabled in the above example by our commercial proposition which has enabled customer-facing companies to get more competitive, allowing them to reach a new segment of customers who never considered them as an option due to their high fees per transaction or a lack of conﬁdence that their money is secure, hence using illegal systems to transfer money. On the other hand, as 2/3 of the earning population remains underserved, our commercial design and our technology allowed banks, FIs, and telcos to become more accessible and this creates the ﬁrst step for the unbanked or underserved to receive some attention in being oﬀered ﬁnancial services that they may not have dreamt of before.

I have witnessed the importance of the remittance cycle for breadwinners and their families. I must say that our solutions not only bring conﬁdence to the eﬀiciencies we present to our partners and their customers on both sides, but they add a lot of value to the evolving customer behavior and their need to be oﬀered a uniﬁed, multi-channel platform whereby they beneﬁt from speed, accuracy, transparency, and of course aﬀordability.

To build long-term relationships and foster greater consumer loyalty, lenders are engaging customers via SMS. This simple mobile service for mass communications is empowering both lenders and their customers to establish personal relationships at scale, most eﬀiciently and cost-eﬀectively. Without mobile technology, this would not be possible.

Likewise, MFIs (microﬁnance institutions) in Africa are deploying digital tools to promote faster ﬁnancial inclusion through a three-pronged approach. First is the use of mobile devices for digitizing ﬁnancial services and processes. Mobile phones, tablets, and point-of-sale terminals oﬀer existing services (loan applications, customer registration, etc.) at lower costs and with greater eﬀiciency. MFIs can also provide paperless services (such as savings collection) via mobile devices instead of brick-and-mortar branches.

The second is by teaming up with digital ﬁnance service providers to digitalize current operations, products, and services. This could be possible by leveraging the MFI’s capital, branch network, and rural outreach to act as the service provider’s agent, thereby oﬀering mobile-money transactions for the needy. This could include Person-to-Person payments customer registration, bill payments, electronic top-ups, etc.

Third, establishing an agent network for digitizing existing products and services. In this way, MFIs can control delivery channels since they would identify, hire, train, and manage these agents through which clients could deposit, withdraw or transfer funds, pay bills, and repay loans. Besides helping MFIs expand their customer base, agency banking boosts the overall access to ﬁnancial services.

To be sure, all the above tech-enabled initiatives and innovations could just be the tip of the proverbial iceberg. Undoubtedly, exciting tech innovations have a critical role to play in pushing the expansion of ﬁnancial inclusion throughout the world – sooner rather than later.