Financial inclusion is an opportunity worth $380bn

LONDON, UK: Banks can address an additional US$380 billion market in annual revenues by targeting micro-enterprises and bringing unbanked and underbanked adults into the formal financial system, according to a new report by Accenture.

The report “Within Reach” outlines how to make financial inclusion a viable business strategy. It notes that closing the small-business credit gap at average lending spreads and adding fee-based services could generate about $270 billion in additional revenue for banks, while including unbanked adults into the formal financial system could generate another $110 billion.

Until now, supporting financial inclusion has not been viewed as a viable business plan for banks.

77 percent of the 30 banks surveyed for the report were focused on short-term profit-driven commercial opportunities in a piecemeal manner, or were driven by philanthropic ambitions, the corporate social responsibility agenda or regulatory pressures.

Only 23 percent of banks surveyed had financial inclusion as part of a coherent corporate strategy leading to long-term, sustainable investment plans to develop inclusive business models.

“The traditional view has been that banking the unbanked and underbanked tended to be low-end, unprofitable and philanthropic,” said Simon Whitehouse, a senior managing director in Accenture’s Financial Services Operating Group. “But new business models, enabled by digital technologies, are helping banks write a new rulebook for what is possible.”

To make financial inclusion viable, the report advises banks could:

Simplify existing products and use digital-enabling solutions. NMB Tanzania created an entry-level savings account, targeting Tanzania’s unbanked population through an agent banking model. Agents are equipped with smartphones and point-of-service devices that enable fast account openings (in under 10 minutes) and instant, branch-free transactions.

Be willing to partner with alternative providers. Fidelity Bank, Visa, telecoms company MTN and CARE International work together with support from FSD Africa to enable community savings groups in Ghana to open and operate a Fidelity Bank Smart account without visiting a bank branch. Opening accounts is entirely digital and can happen in less than five minutes. Group members can access their account through an MTN mobile money wallet.

Also join forces with the development sector. NGOs can provide access to savings groups; support development of suitable responsible products and services; and provide access to the mobile wallets and agent networks that can help overcome issues of remoteness. In Uganda, Barclays partnered with the Grameen Foundation and Airtel to develop a mobile product, called eKeys, which links a savings group’s mobile money wallet to a Barclays savings account. By visiting any of Airtel’s nearly 30,000 mobile money agents, the savings groups are able to make a deposit or withdraw funds from their bank account anytime, anywhere.

Use digital to drive efficiencies.  Commercial Bank of Africa teamed with Safaricom to launch its M-Shwari mobile banking service. The M-Shwari account-opening process is initiated remotely by the customer, then fulfilled electronically using automated processes to verify know-your-customer information in a few seconds. Tapping into Safaricom’s mobile phone registration data eliminates the need for CBA to conduct additional checks. Customer transactions are 100 percent straight-through, allowing the platform to be supported with only seven back-office and IT staff.