More than 2 billion adults are excluded from the formal financial system, according to the Universal Financial Access 2020 report by the World Bank.
The challenge is to ensure that by 2020 adults around the world will have access to a checking account or an electronic service to save their money and send and receive payments. This goal is behind the boom in financial inclusion strategies, which are increasingly making use of technology and the services provided by the so-called technological finance (fintech).
Little by little, the first steps are being taken toward broader financial inclusion, where people and companies can safely use a wide range of adequate financial services, including savings, payments, loans and insurance.
These are the seven keys for achieving it:
1. Develop an attractive and significant customer experience.
The key is to simplify everything so users feel they are not wasting their time. And this is achieved through the design of elegant and simple financial services.
One of the inclusion “systems” that has benefited from the use of technology are the so-called ‘saving circles’, also known as ARAC in the United States. It is a popular alternative intended for those people who have no access to a checking account. Through these they can receive and lend money to a group of people they know and trust. The idea behind this concept is that each member of the circle contributes with a monthly amount of money and, in turn, a different member receives an overall amount on a monthly basis.
Technological advances have provided new channels for the future of this system, and many companies in the U.S. and in Latin America, such as Clearstreet, are digitizing these circles to make them accessible to more people.
2. Socialize financial products and services.
Many customers want to participate socially with their savings. Proof of this is the increase in the number of peer-to-peer (P2P) funding sites like Prosper.
3. Commitment between financial institutions and their customers
It should be a commitment in both directions. In other words, in addition to creating an attractive customer experience, banks must be capable of engaging in dialog with their customers.
In this way, more loyal relationships can be built with customers to involve them in certain financial services.
The Juntos financial tool is one example of these practices, as it provides a communication platform via SMS for customers.
4. Boost access to banking resources and improve financial health
Generating new ranges of products that help people build their financial capabilities in an innovative way so they can manage their savings better.
Worth mentioning in this regard is CreditMantri in India, an online credit “trainer” that helps users improve their loan ratings.
5. The use of blockchain beyond cryptocurrencies
This technology offers many possibilities for financial institutions. It can be used to optimize internal processes, to make and check transactions or to streamline data management, among other services.
Another blockchain application is BitLand, which uses technology to build a book where property deeds are recorded in Ghana and Honduras.
Coinbase, for example, uses this technology to boost P2P transactions. It has emerged in the United States, where the bank check culture is still deeply rooted, to encourage other types of financial services.
6. Generate alternatives for making inroads in financial inclusion
The use of information and knowledge through the application of Big Data enables financial institutions to offer more customized packages of banking services.
Make the most of alternative user identification and authentication methods, such as iris recognition and self-portraits. One example of the use of this technology is BehavioSec, a biometry solutions provider that uses automatic learning to identify users depending on how they interact with their devices.
Financial inclusion at BBVA
At BBVA, financial inclusion is based on a sustainable business model characterized by:
- The use of new technologies and digital platforms.
- Innovative and low-cost financial solutions designed specifically for this segment of the population.
- Big Data and non-traditional methodologies, for example, for measuring risks.
- Offering the same customer experience on any channel.
BBVA has worked since 2008 on a global strategy to provide the lower-income population in the emerging countries access to financial services through alternative solutions to the traditional branch office model. This is why BBVA develops digital low-cost and simple channels and products that enable customers to carry out secure transactions quickly, ensuring availability and proximity. The Bank also uses Big Data and non-traditional methodologies for assessing risks and creates standardized customer experiences across all the channels.