Over the past decade, the push for financial inclusion has
united governments, companies, technology entrepreneurs, and nonprofit
organizations in dozens of countries on every continent — and with remarkable
success. In 2011, only 51 percent of the world’s adults had a formal bank
account. By 2017, as the World Bank recently reported in its new Global
Findex data, we’ve reached 69 percent — that is 1.2 billion more people who
are now connected to the modern economy.
As more people in emerging markets gain access to the formal
financial system — fueled by the increased penetration of the mobile phone and
associated digital financial services — the pace of financial inclusion is
accelerating. At this rate, we're on track to reach universal financial access
by 2020, a goal set by the World Bank, which is an important success
milestone. Access to basic financial services, such as a bank account,
credit, and insurance, is a crucial step in improving people's social and
economic outlook.
As we move forward, however, we must concentrate on what comes
next: Shifting our focus from creating access to improving financial outcomes
for the hundreds of millions who have been excluded until now; making sure that
people can use financial instruments to better weather economic shocks and
invest in health, education, or in a business.
Even in the developed world, where access is nearly
universal, a large cohort of people are not well served by the existing
financial system. Many people who have transaction accounts but whose incomes
are low or irregular, rely on expensive solutions, such as payday lending,
check-cashing services, or informal moneylenders, to lead their financial
lives.
Globally, account inactivity remains stubbornly high. About
one in five accounts around the world are sitting idle. The reality is that
access alone does not truly solve people’s financial struggles and set them up
for long-term success.
There is a difference between financial access and financial
health. The Global Findex has provided a valuable metric and a goal for us to
strive toward: Ensuring everyone has access to financial mechanisms that many
of us take for granted. But using these services must be affordable, and most
importantly, fit people’s financial contexts.
Promoting financial health means designing products and
services that are relevant and address the real challenges that people face.
Across ages, genders, income levels, and backgrounds, consumers have very
different attitudes toward technology, levels of financial literacy, and
appetites for risk. What works for a single mother in India, may not work for a
cocoa farmer in Brazil or a micro-entrepreneur in Nigeria.
The obstacles are real. Increasing adoption among
underserved consumers demands new approaches. Companies will need to employ
cutting-edge human-centered design, the latest insights in behavioral science,
and culturally-specific distribution — while pioneering new business models.
While no easy feat, several entrepreneurs around the world
are already showing promising results leveraging these new approaches. The rise
of neobanks is a good example. The digital-only, mobile-first
banking experiences give consumers more personalization and smarter tools,
often at dramatically lower costs. Neobanks can overcome many of the legacy and
infrastructure costs of brick-and-mortar banking. They can take advantage of
digital channels for distribution and marketing, while riding on the rails of
smartphone proliferation and digital payments. They also offer the opportunity
to “re-skin” a traditional bank for new languages, cultural contexts, and
market segments.
As companies bring these and other new models to market,
their success will depend on a policy environment that fosters innovation as
well as consumer protection. Success will also rest on listening to consumers
to understand their unique financial needs, values, and behaviors.
The world has made incredible progress by uniting across
public and private sectors toward universal financial access — a feat we will
achieve sooner than could have been imagined just a decade ago. Let’s pursue
the next challenge — widespread financial health — with the same unity of
purpose, consumer-centric innovation, and focus.
*Contributed by Tilman Ehrbeck, Partner at Omidyar
Network
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