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 produced jointly by Accenture
through Accenture Development Partnerships, and CARE International UK, a
leading humanitarian organization fighting global poverty.
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, according to Accenture research*.
Until
now, supporting financial inclusion has not been viewed as a viable business
plan for banks. Seventy-seven 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.”
For
example, Janalakshmi Financial Services increased its delivery of microloans to
India’s unbanked consumers with help from Accenture in customer onboarding and
process operations, doubling the number of loans it disbursed in 17
months. Other banks are leveraging mobile phones in new ways to reach
customers; the Zambia National Commercial Bank now serves more than 200,000
customers through a mobile banking service that targeted the unbanked
market. And new entrants into financial services are using analytics to
improve loan assessments. China’s Alibaba, for example, uses customers’
commercial transactions on its Taobao ecommerce platform to establish credit
records and conduct small- and medium-sized enterprise lending.
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.
Report co-author
Senior Policy Advisor at CARE International UK, Gerry Boyle said: “It may not
seem like an obvious poverty fighting tool but providing access to basic formal
bank accounts has been proven to have a transformative effect for those living
in poverty, especially women. Decades of working in this area has proven that
even the poorest, those living on less than $2 can save and make for viable
customers.”
“It
is clear that many banks recognize the opportunity of greater financial
inclusion, but are struggling to make progress,” Louise James of Accenture
Development Partnerships added. “This is where cross sector collaboration can
play a critical role – by bringing together a range of relevant parties who can
help financial institutions build their understanding of the customer needs.
These partnerships, while helping banks realize commercial benefits, also ensure
that new customers are integrated in a way that underpins wider social
development and long term involvement in local commerce.”
