February 03, 2017
The pace of change and disruptive innovation happening around us is exhilarating.
We are not only rethinking and reimagining how people shop, bank, dine, and travel, we have an incredible potential to address a very real societal problem: the growing number of unbanked and underbanked individuals.
At last count, McKinsey & Company estimated that 2.5 billion of the world’s adults are currently unbanked, with just short of 2.2 billion of these in Africa, Asia, Latin America and the Middle East. And in the U.S., one government study showed that 20% of US households are underbanked.
Financial inclusion is about much more than just having a bank account. At its root level, it is a key element of social and economic inclusion. It is about helping people participate in today's connected economy. Reaching the unbanked and underbanked population is a win for both sides – it can provide new customers for banks, while connecting people to financial services that can help them manage their money, save and obtain access to a wider range of welfare benefits.
Many large technology and banking providers are already looking at how we can address this problem, alongside governments who are introducing new policies to support this. The challenge is to create meaningful opportunities to bring banking services to underserved communities.
The problem of financial inclusion is global, and it is not just a third world problem. It is true that in developing economies, only 59% of adults have a traditional bank account. In India, more than 233 million people have never been to a bank. But highly developed economies have challenges too. A World Bank study showed that 11% of adults in high-income economies do not have traditional bank accounts.
And another recent study estimated that 93 million people in Western Europe are financially underserved. While solutions like online payments, mobile banking, and prepaid cards have made important strides in promoting financial inclusion, these sobering numbers make it clear that there is still a great deal of work to do.
There are many ways that technology can help open the vaults of banking to the unbanked and the underbanked. Among these are:
These kinds of innovations are already in existence, and ready to roll out. However, if countries are to better support financial inclusion through technology, there are several steps they must take. First, they must have a clear national strategy, such as the goal set by India to ensure every household in the country has a bank account by 2018. This is where the government needs to play a pivotal role in encouraging financial inclusion.
Second, public-private partnerships are essential to ensure that new technologies reach underserved populations that need them. Governments and technology providers need to work together to ensure that the latest technology is embraced and capable of reaching a wider audience.
Third, more support is needed to extend the rollout of fast, reliable broadband technology, as this will underpin almost all of the technologies that are essential to financial inclusion. Without it, other technology solutions will not succeed.
Perhaps most importantly, countries must take an omni-channel approach to financial inclusion. While tools such as digital banking are immensely powerful, not everyone will have access to every solution, or will want digital channels. Likewise, physical channels themselves are not always the answer.
To open more doors to financial inclusion, we must not get locked into existing technologies – the pace of innovation is too fast for that. Government rules must be flexible and technology-neutral to allow the best technologies that drive financial inclusion to flourish, and technology providers need to ensure they are embracing the latest technology innovations in their products to be able to reach an ever-larger banking population.
The NCR Corporation is an American computer hardware, software and electronics company that makes self-service kiosks, point-of-sale terminals, automated teller machines, check processing systems, barcode scanners, and business consumables.