The need for financial inclusion: Driving new technologies and innovations Two billion adults worldwide are unbanked7 and some of the lowest rates of financial penetration are in emerging markets (see Figure 2). Traditionally, banks have been the primary means of accessing financial services.
But given the problems of reaching branches in geographically remote communities, the question is how to deliver affordable and accessible financial services. Although literacy rates and urbanisation are on the rise, digital awareness and access to basic financial services still pose a major challenge in these economies.
To meet the need for financial inclusion, there has been a rapid expansion of new technologies and innovations, which are helping to make it more economically viable for banks to reach the ‘unbanked or ‘underbanked’ populations.
Technology has leapfrogged from branch banking to e-banking and now mobile money, which has helped to create pockets of strength even amongst the less financially inclusive countries. Around a fifth of the adults in Vietnam and Thailand have savings at a financial institution, while around two-thirds of the adult population in Kenya make or receive payments using their mobile phones8 .
With the cost of serving customers considerably lower for automated teller machines (ATMs), interactive voice response (IVR), mobile and online banking (see Figure 3), these alternative banking channels have seen a massive increase in adoption both at the retailer and customer end.
Several governments are also making financial inclusion an integral part of their national plans. The Indian government, for example, launched the ‘Aadhaar’ card programme. Aadhaar is a 12 digit individual identification number issued by the Unique Identification Authority of India on behalf of the Government and enables online and cost effective identification for every resident Indian. Innovations leveraging the ‘Aadhaar’ card are expected to assist the financially excluded segments with the explicit aim of removing financial untouchability. In Mexico, concerns about the high cost of credit and lack of competition in the banking sector have led to major financial reforms aimed at strengthening regulation, increasing competition and lowering the cost of borrowing.