Banks’ financial inclusion growth opportunities will be the greatest in markets which embrace technology-led innovation and have a clear and supportive policy framework for financial stability.
On the technology developments’ side, mobile adoption, e-payments, national digital identity (ID) systems, open access to digital data and currency digitisation are all crucial considerations for banks wanting to tap into these markets. For instance:
• As mobile devices become more affordable and network coverage expands, digital connectivity of financially excluded individuals and MSMEs improves.
These channels provide greater convenience for customers at a lower cost-to-serve for banks, and have been instrumental in helping providers overcome challenges related to infrastructure and geography.
Moreover, digital technology can streamline the lending process, enable direct origination of loans and significantly reduce decision times, while also enabling greater transaction volume.
• Government-issued biometric ID programs are being explored by an increasing number of countries.
India’s Aadhaar system, for example, provides real-time verification of identities using a fingerprint scan, iris scan or digital face print. Among others, Aadhaar enables the direct transfer of government subsidies and unemployment benefits.
Banks could leverage such biometric ID programs to verify customers at ATMs or service counters, and widen access to financial services.
• Concepts, such as digital passport — a distributed mechanism for trusted and secure customer information exchange between multiple providers — would enable easier identification and vetting, help build credit histories, and make it easier for customers to switch providers by facilitating simpler know your customer (KYC) and onboarding processes.
Digital passport concept