How to Create Synergy Between Banks and Telecom Companies to Boost Financial Inclusion Rates
“If the converging industry players can move towards greater interoperability and partnerships, the end result must be an increase in payments offerings and better financial services, which answer customer needs with greater effect.”
Dr Martyn Davies, Deloitte Africa’s Managing Director for Emerging Markets and Africa.
Financial inclusion: an overview
Since the beginning of time, banks have been striving to expand their financial inclusion footprint on a global scale. However, it’s not all sunshine and roses for banks these days. So far, their efforts have shown mixed success depending on a targeted market. And while the business development strategies banks deploy in countries with advanced economies are relatively successful, the expansion in developing regions leaves much to be desired.
The figures above, provided by International Monetary Fund, showcase the lack of ATMs and bank branches, especially when it comes to providing financial services in emerging markets. The Global Findex data revealed by the World Bank echoes the IMF survey, telling that nearly 2 billion adults remain unbanked worldwide nowadays.
To make matters even worse, there seems to be a sort of financial apathy the existing bank customers demonstrate towards utilizing today’s banking services all around the globe. Thus, Mastercard in its recent paper reports that one-fifth of both current bank and mobile money accounts remain inactive, meaning no transactions have been conducted in recent years.
Given this, all the indicators are that banks have already reached their financial inclusion cap. All the further attempts to bridge the financial accessibility gap for developing countries can no longer bear any positive results. For instance, banks in India experienced a sustained pull-back in their branch and ATM network expansion in FY2018 and FY2019.
How telecom companies can contribute to boost financial inclusion
Unlike the bank sector, the telecommunications industry looks vibrant and healthy, and keeps growing in leaps and bounds. The United Nations Capital Development Fund (UNCDF) cites significant progress in the mobile and Internet adoption in developing countries. That said, a number of unique mobile users is expected to skyrocket as much as roughly 6 billion by 2025.
Telecom companies provide their users with a wider range of services than any bank ever could. As the stats above show, making calls remains the main function for the underdeveloped regions. However, leveraging financial services via phones is also gaining more and more traction.
Should banks team up with telecom companies?
Definitely so. Marrying with telecom providers can give banks a competitive edge for a number of reasons. All of these reasons can be boiled down to 4 key aspects:
- Customers
- Product
- Support
- Business approach
All in all, meeting each other halfway can truly help all the stakeholders capitalize on reachin new nuderbanked audiences, especially when it comes to expanding their footprint in developing countries.
Here in this article, I’ve just scratched the surface of way deeper challenges and perspectives both banks and telecoms face while striving to boost their outreach initiatives. In my next pieces of writing, I’m going to delve into more profound fintech analytcis starting off by outlining the financial inclusion situation in ASEAN countries. So, your following my Medium account would be truly appreciated. Let’s stay in the loop of innovative fintech events and solutions!
