PRB

Blog: It’s Time to Expand the Definition of Financial Inclusion

September 14, 2020  |  NORBERT KNIEVEL

Financial inclusion aims to offer greater access to financial services, and it’s a common theme across nearly every region in the world, but the underlying issues vary widely. “Unbanked households” may be the first thing that comes to mind, but true financial inclusion involves many more segments of the population: people with disabilities, those with limited knowledge of or access to digital financial services, people in rural areas where branches have never existed, micro-SMBs and women- and minority-owned SMBs. Efforts to drive financial inclusion can take many forms.

Inclusion challenges and opportunities look very different from one region to another. 
In developed countries throughout Europe and North America, even rural communities have historically had the benefit of a local bank—but over the past decade, local branches have been closed; and because of the expected economic uncertainty caused by COVID-19, that trend is likely to continue. The closure of a local branch disrupts the community, leaving many areas suddenly underbanked or even unbanked all together. 

In contrast, underserved communities in developing countries such as India never had a branch to begin with, and often lack the infrastructure to offer accessible banking. Government initiatives have been successful in raising the number of accounts across the country, however, the number of transactions in these accounts, unfortunately, remains low. Countries such as Zimbabwe and Colombia are seeing some success by leapfrogging traditional financial channels, going straight from cash-based economies to relying on mobile technology to access finances—so enabling omnichannel consumer journeys is a must. 

On the other hand, an emerging focus in developed countries such as the UK is on how to ensure that vulnerable groups—like the elderly, disabled individuals, etc.—are not left behind in the move toward digital technology. 

The common theme among the many challenges is this: as people progress to “actively banked” they experience positive changes that impact not only the individual and their immediate family, but their villages, communities and society as a whole. Financial inclusion sends ripples far beyond its immediate beneficiaries. How can your organization help drive this kind of positive change? Here are five ways to take action: 

1. Address access and inclusion for differently-abled populations.
According to the World Health Organization (WHO), around 15% of the global population has some form of disability. From your mobile app to your ATM network, every channel in your network offers opportunities to expand access and availability above and beyond regional compliance or accessibility requirements (e.g. ADA, CRPD). For example, look out for physical accessibility and appropriate UI – starting with font sizes and color contrast up to BYOD (bring your own device) capability to ensure blind or visually-impaired individuals a more seamless, intuitive experience. Self-service devices enabled with text-to-speech software and braille labels on physical touchpoints also allow for the visually impaired to use a device they never thought possible.

2. Strengthen your mix of physical and digital channels.
The WHO also notes that worldwide, the portion of the population over 60 will double by the year 2050, from 12% to 22%. Many of these individuals are not “digital natives,” and don’t feel comfortable using exclusively digital channels to conduct their everyday banking. Interestingly, even the younger population still views physical channels as critical to their banking experience. Recent research found that 72% of Gen Z consumers stop by their bank’s branch at least once a month, a higher percentage than Gen X and Baby Boomers! Digital education and smooth transitions in both directions are key: your ATM channel can act as an integrator for elderly and vulnerable groups and help Gen Z consumers stay constantly connected.

3. Educate consumers through outreach and access. 
It should go without saying that education is a primary pillar of financial inclusion—yet the reality is that millions of individuals around the world are financially illiterate. And simply reaching them isn’t always the answer: It’s not only about having an account; it’s about being financially active, supported by financial education and a close connection to banking services and institutions. Once the knowledge about financial services and their opportunities (in general) is acquired, consumers need education on how to access and use the services. This applies to all your digital channels, including self-service and ATMs. Guiding these new clients and showing them how to conduct transactions or connect to a video teller for personal assistance will not only help give them confidence in using your channels, but also deepen the relationship and trust with your institution.

4. Ensure financial access in underbanked areas.
New and intriguing partnerships are popping up around the globe to help bring financial services to rural areas, as well as those affected by branch closures: Think of partnerships with other FIs for common branches, shared ATM networks or white label branches. Or go beyond banking and partner with Post Offices, retailers or mobile communications providers offering financial access in underbanked areas more efficiently. Multi-function ATMs can provide not only cash services, but 90% of the transaction capabilities of a branch combined with personal connections and advisory services using video teller capabilities. And since the unbanked and underbanked population mainly conducts transactions in cash, the ATM is a great solution to serve as their branch and the connection point with your brand.

5. Think differently about SMBs, micro-SMBs, and women- and minority-owned SMBs.
SMBs account for more than 90% of global businesses and more than half of all employment worldwide. Functioning, profitable SMBs can have a profound effect on the areas around them: According to the International Monetary Fund (IMF), improving financial inclusion for SMBs in the Middle East and Central Asia could boost economic growth by up to 1% and lead to 16 million new jobs by 2025. Yet in many parts of the world, SMBs struggle to secure loans that could pull them out of poverty or enable them to expand. First and foremost, attitudes around loans and lending may need to be adjusted; equally important is that banks must serve this customer segment’s unique needs, which are typically intense and require more frequent interactions, combined with the need for more cash-heavy services. In this context, automated deposit functionality and recycling capabilities at the ATM can offer benefits to the SMB segment and FIs at the same time.

Financial inclusion consists of many different facets and priorities that vary by geography, but it starts with financial education and securing access to financial services. Staying connected to target individuals is critical to assisting them in progressing from unbanked or underbanked to actively banked. Financial technology solutions offer innovative ways to help bridging the gap between the unbanked and economic opportunity.

Download our Sustainable Banking Guide and learn more how to drive positive social and environmental impacts through financial inclusion and green operations at your organization. 

Let's Connect

I am interested in Go