Latest developments in financial inclusion: what you need to know

  • By Vince Kadar
  • Friday, March 01, 2019

Mobile money technology is becoming more common in making formal financial services accessible. Only 16 percent of people living on less than $2 a day have formal bank accounts, according to the Bill and Melinda Gates Foundation. For those in impoverished areas who do not have account holders, saving money becomes burdensome when their income is so low, to begin with. Financial exclusion occurs most often when the products and services offered by mainstream providers do not meet the market needs of people in poorer communities.

When alternative options such as mobile banking are offered, the cyclical nature of poverty can be broken if families are given the financial tools necessary for establishing credit and saving for unforeseen disasters. Telepin’s mobile banking solutions work because of the differentiated service offerings that deliver innovative mobile applications and promote customer retention because of loyalty promotions and rewards. Our customers can rely on stable, trusted mobile payments no matter the circumstances or location. In this piece, we’ll dive further into this topic and review the latest developments in financial inclusion.

The benefits of financial inclusion to individuals rural and poor communities

The latest developments in financial inclusion benefit those in rural areas and poorer communities who face geographic challenges such as not being able to visit brick and mortar financial institutions. The clearest benefit of mobile banking is the path it provides to get above the poverty line. It also aids in financial stability, gender equality, and stronger overall economic health. Proving identity, travel restrictions for married women and building credit are just three reasons women are more likely to face financial exclusions. Mobile transactions reduce the number of unbanked women because it is more natural to microfinance — a common economic strategy among women in developing countries — on a digital platform than it is through physical transactions.

The broader financial impact of financial inclusion

Besides the individual benefits of the latest developments in financial inclusion, digital banking could boost the annual GDP in emerging economies as well as stabilize those economies. Enabling poorer consumers with efficient and sustainable ways of saving money, in turn, raises revenue for financial providers. Providers should be prepared for long-term investments and be willing to work in ways other than what they are used to now. Once the network effects kick in, providers will see significant benefits of scale, according to McKinsey and Company, and those providers can improve profitability by increasing the number of digital transactions they make.

Opportunities for the unbanked and underbanked

Financial inclusion makes financial products and services more accessible and affordable for those who are unbanked. The ability to complete transactions, save money and send or receive payments facilitates credit building and financial planning. For those in impoverished areas, having access to mobile money technology affords them the ability to weather financial shocks, make investments and even expand the small business they might have. About 1.7 billion adults remain unbanked, according to the 2017 Global Findex Database. Compared to the five billion adults who have a subscription to a mobile device, this is a large gap that can be closed through the use of mobile banking.

The positive impact of financial technology

Many people overlook the importance of savings accounts because of the low return rate they have. Savings accounts, however, are low-risk with a small initial investment for the consumers that can go a long way in poorer communities. Financial technology can reduce the cost of performing basic transactions by up to 90 percent. Telepin’s mobile money solution incorporates convenience and security to ensure that the services provided are reliable, efficient and can meet the needs of your customers and merchants. The mobile wallet app completes transactions in real time as opposed to hours or days. Telepin is set apart from other mobile money solutions because it allows you to modify your service offerings in a way that is unique to each consumer. Core banking, loans and credit, insurance and virtual credit cards can all be added to the platform to meet the needs of your customers.

Digital transactions are more cost effective than physical transactions, which is one reason some financial providers are offered a stronger incentive to serve those under the poverty line. There is a disconnect between the idea of mobile technology in developing versus developed countries; those in developed countries expect those in developing countries to have outdated technology and hardware. Approximately 190,000 Kenyan households were lifted out of extreme poverty through the use of a mobile money system, according to a long-term study conducted by MIT’s Sloan School of Business. Leading telecommunications and companies and Telepin partners such as Airtel Rwanda and Tigo Tanzania are innovating mobile money solutions to accelerate the push for financial inclusion in developing countries. Airtel Rwanda has a mission to connect people through 2G, 3G and 4G wireless services and mobile commerce. Airtel Money and Tigo Cash is simple and secure and has given consumers financial independence. Similarly, Tigo Tanzania uses new products, services and business strategies to maintain an updated, user-friendly digital platform that fosters financial inclusion. In the fight against poverty, financial inclusion, with the help of advocacy groups and regulatory agencies, can improve the quality of digital financial services.

Better connectivity and modern technology are currently driving financial inclusion. Mobile money remains at the heart of healthier economies and more inclusive communities; however, the industry is processing an average of $150 billion per day with 690 million registered mobile money accounts worldwide. And because of the continued success of this type of financial inclusion, GSMA recommends providers and national authorities collaborate to find the balance between sustainable and responsible market growth. Successful providers work in a large payment ecosystem comprised of banks, organizations, billers, and merchants. The GSMA State of the Industry report found that by 2017, 20 percent of providers saw more than 50 percent of their consumers transacting regularly. Available in 90 countries, mobile money is now the leading payment platform for a digital economy in emerging markets, according to the 2017 State of the Industry Report on Mobile Money.

In 2015, the Bank of Ghana drew up regulatory guidelines that allowed customers to accrue interest on mobile money deposits. When cash shortages in Zimbabwe came about, mobile money kept revenue up. From December 2016 to December 2017, total transaction values grew by 21 percent and consumers were able to top up airtime and pay bills with mobile money. Telepin’s Airtime Top-Up solution allows customers to add prepaid mobile minutes wherever, whenever and however they wish. The scalable solutions help customers recharge their credit through flexible deployment, voucher management and transfer between subscribers. Maintaining and fostering the growth in customer activity rates leads to continued loyalty for providers and a more stable economy of scale.

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Because of the number of transactions made and the increasing number of consumers making those transactions, mobile money has become and will continue to be an important driver in economic growth. It is a sustainable practice, and though providers have yet to see great profitability, margins are growing steadily.

Telepin has been working in the realm of mobile banking for over 20 years and offers proactive solutions and effective platform management that can enhance your business strategies and get you ahead of the competition. For lasting results that meet the requirements you have for your business, add an extension of Telepin experts to your team. We can help you raise revenue and set up workflows that make sense for your business. Stay up-to-date on the latest mobile money solutions, and connect with us. For general information, you can email us at info@telepin.com, or call us at +1 (613) 366-1910. Our expert team is deeply knowledgeable at the market and architectural level; we offer standard training and customize workshops to suit your needs. Learn more about our digital payment solutions at telepin.com.