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CubeMatch: Reaching the World’s Unbanked – How and When Can We Do It?

Financial inclusion has become a big priority for financial services across the world as the pandemic has opened the eyes of many as to how technology can be used to make sure everyone has an equal opportunity to banking services. Not only would this benefit the unbanked populace, but the services would receive a huge influx of customers, who have no previous loyalties to rivalling companies. There is a win-win opportunity for both companies and the unbanked if inclusive actions are taken.

Francis Kiwanuka is Managing Director of Risk and Compliance, at CubeMatch UK, a global change and transformation consultancy, specialising in Financial Services

Kiwanuka argues that the future of banking must be viewed in the context of different geographies and emerging economies. He explores the opportunity to tap into the unbanked populations in Africa, in Latin America, and the subcontinent, concluding that whoever is able to reach these individuals and successfully drive financial transactions is going to be the winner.

Francis Kiwanuka, Managing Director of Risk and Compliance at CubeMatch UK
Francis Kiwanuka, Managing Director of Risk and Compliance at CubeMatch UK

Why should the banking system care about financial inclusion? As the World Bank had argued for years, financial inclusion is the most solid building block we can hope for, in reducing poverty and enabling economic growth in developing nations. But let’s not ignore the fact that serving the world’s unbanked will also generate some of tomorrow’s largest fortunes. As fintech expert Jeff Kauflin notes in Forbes: “This is both capitalism’s moral imperative and the route to one of the most significant untapped markets.” So how can this opportunity be realised, and who’s getting there first?

Collaborations count

In many cases, success comes when an opportunistic start-up collaborates with a finance giant. We’ve seen recently how Pakistan’s mobile account provider, JazzCash, having teamed with Mastercard, is strengthening the country’s digital payments ecosystem. Thanks to recent developments, JazzCash users are able to apply for a physical or virtual Mastercard Debit Card and make payments to merchants accepting Mastercard QR payments, safely and seamlessly.

The sooner citizens in emerging-market countries have access to digital financial services like this, the sooner they and local businesses can be active in the new digital economy. By simplifying access to digital payments for millions of Pakistanis and driving financial inclusion among those without access to a formal bank account, the country’s payments industry is being transformed.

‘Mobile money’ boosts emerging digital economies

Another service driving financial inclusion is Tala, a consumer credit app that helps the traditionally unbanked borrow, save and grow their money. It claims to offer “the world’s most accessible financial services”, with the ability to instantly underwrite and disburse loans to people who have never had a formal credit history. Tala is scaling up quickly. More than 6 million people across Kenya, the Philippines, Mexico, and India, have used Tala products to start and expand small businesses, manage day-to-day needs, and pursue their financial goals.

Meanwhile, the M-PESA mobile money service, which allows users to send and receive money via a simple SMS message, was introduced to Kenya in 2007 and has spread rapidly to eight countries, including Egypt and India. Today M-PESA offers further financial services, such as access to savings and credit. It is used by at least one person in 96% of Kenyan households, who can deposit and withdraw money from their accounts through a network of local agents.

Living standards and equality improved

A study by Poverty Action found that in areas where M-PESA expanded more, the numbers of households living in poverty dropped, driven primarily by female-headed households. The drop was accompanied by a shift in women’s occupations from subsistence farming, to business and retail occupations and a boost in savings.

Financial access, as these three examples confirm, facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies. Women gain economic empowerment. The organisations pushing ahead with digital services for the unbanked are gaining too, with well-established financial names, telecoms giants and fintech start-ups all muscling in on the action. The idea of setting up the M-PESA digital money transfer system that operated through personal mobile phones was the brainchild of Nick Hughes, a Vodafone executive. Through its various subsidiaries, M-PESA generates some $840million in annual fees for Vodafone.

Digital banking growth potential

Furthering financial inclusion is clearly rewarding on a great many levels. Accenture noted back in 2015, that traditional banks alone could boost annual revenue by at least $380billion if they turned all the unbanked into customers. Economic growth can be achieved too, with consulting firm EY Global estimating that broader access to banking, savings and lending products could boost GDP by up to 14% in large emerging countries such as India, and up to 30% in frontier economies such as Kenya.

More than 1.6 billion adults fall into the category, according to the World Bank, with the five largest unbanked populations to be found in Morocco, Vietnam, Egypt, Philippines and Mexico according to a study by the British research platform Merchant Machine. There is also extreme financial exclusion in the Middle East and Africa, South and Central America, and across Eastern Europe.

The World Bank Group – the World Bank and IFC – has committed to enabling 1 billion people to gain access to a transaction account through targeted interventions and over 30 partners have pledged commitments toward achieving universal financial access. Progress is being made, and it’s thought the covid pandemic was a booster of financial inclusion everywhere, as banks expedited their mobile money and online banking services.

Financial-inclusion innovators will win

My view is that the financial services sector would be wise to invest even more vigorously in this movement now, to fight global poverty and to build a powerful revenue stream for the future. It will require great people and a coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive, simple to use and secure financial products.

Far from being a low-end, unprofitable and purely philanthropic enterprise, banking the unbanked is now all about exciting new business models, enabled by the latest digital and mobile technologies. By striking up partnerships with alternative providers, fintechs, NGOs and the development sector, and hiring innovative thinkers and skilled technology developers, banks can write a new rulebook for financial inclusion.


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