now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Treasury & Capital Markets
Reaching Asia’s unbanked
Asia's banks are making financial inclusion a reality for the unbanked. For now, nearly two billion people worldwide have no access to basic banking services, but technology is providing hope for financial connectivity.
Darryl Yu 16 Jun 2016
Despite the advances in banking services there is still a wide group of individuals that remain unserved by the financial system. The so-called unbanked are often in rural parts of the world where electricity and stable infrastructure are considered luxuries. World Bank estimated around two billion people are without basic banking services such as a savings account. Asia-Pacific accounts for more than half of the world’s unbanked population.
 
China, India and Indonesia represent 40% of the world’s unbanked adults globally. Steep barriers to entry are cited the main reason many of these individuals are not getting any banking services. According to the Global Findex 2014 survey, the majority (59%) do not have enough money for an account, while 30% of surveyed participants say that they rely on another family member’s bank account and see no need to have their own accounts.      
 
“Access to financial services can serve as a bridge out of poverty. We have set a hugely ambitious goal – universal financial access by 2020,” comments World Bank group president Jim Yong Kim. “This effort will require many partners – credit card companies, banks, microcredit institutions, the United Nations, foundations, and community leaders. But we can do it, and the payoff will be millions of people lifted out of poverty.”  
 
But the common view has been that banking the unbanked is unprofitable. A survey of 30 banks by Accenture reveals that around 78% of them currently see financial inclusion as a corporate social responsibility exercise instead of a long-term part of their corporate growth strategy.
 
“The traditional view has been that banking the unbanked and underbanked tended to be low-end unprofitable and philanthropic,” explains Simon Whitehouse 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.”  
 
Many financial institutions have yet to see the opportunities arising from developing unbanked products. According to a joint report by Accenture and CARE International UK, banks worldwide could generate an additional US$110 billion in revenue by including unbanked adults.
 
Going forward, there needs to be a continued push from commercial clients to reach out to these unbanked communities.
 
Technology can be a game-changer. Mobile money, for example, is flexible and often easy to implement within communities and offer financial solutions to reach the unbanked. Kenya, with its mobile penetration rate of 72%, has been a fertile ground for mobile wallet operators such as M-Pesa. Founded in 2007 by Safaricom and Vodacom, M-Pesa has become a vital part of life for people living in Kenya without formal bank accounts allowing easy transfer of funds amongst each other through mobile devices. It is estimated that almost 50% of the GDP value of Kenya goes through the M-Pesa platform.
 
Treasury centres operating in developing regions are keen to tap these type of technology to optimize their collections and payment process with the use of new technology. Just recently the United Nations Development Programme (UNDP) in Bangladesh along with Standard Chartered Bank put in place a mobile wallet solution that allowed the organization to reach end-beneficiaries in remote locations improving the reach of aid disbursement within the country.
 
In Indonesia, delivery and transport firm Gojek last year opted to work with CIMB Niaga to help with a system that pays its drivers. As a rising e-commerce company, Gojek had to deal with paying low-income workers who don’t own bank accounts. With physical cash payments being a manual and time consuming process, Gojek encouraged it’s over 95,000 drivers to use CIMB’s Rekening Ponsel system that linked Gojek’s cash management system to a mobile-based e-wallet with the driver’s mobile number acting as a bank account number.
 
Other companies are using point of sale (POS) technology for cashless payments of employees and suppliers. Chongqing Grain Group (CGG) joined forces with DBS Bank in creating a POS machine that enabled the company’s suppliers – that include unbanked farmers – to receive payments in real-time via a swipe of their debit cards. The solution provided extra security for farmers and other suppliers. It also gave added benefits to CGG allowing them to better track its funds flow via auto reconciliation. 
 
Krungthai Bank reduced the operating cost of Thai-based Ubon Bio Ethanol Group (UBE) by getting rid of cash transactions and providing UBE farmers with an e-money card that credits funds after every completed transaction. Like CGG the cashless solution provided extra security to farmer and gave them the flexibility to withdraw cash in ATMs without having to necessarily open a bank account.   
 
Standard Chartered has partnered with several mobile wallet operators such as Vietnamese Momo and Bangladeshi bKash for retail banking purposes, but now is starting to further integrate these operators to their corporate banking platform “Straight2Bank.” It represents a win-win scenario with wallet operators receiving more participants into their eco-system and corporates connecting with the unbanked.   
 
Financial inclusion is a focus of many governments in the region. In India, the government has launched its Unified Payment Interface (UPI) system as a way to simplify and bring financial services to its citizens. A PwC report shows that 233 million of India’s citizens are lacking basic financial services. The UPI system hopes to tap into the country’s biometrics-enabled national ID system named Aadhaar. Under the UPI scheme, users will be able to transfer funds across different banks using a single identifier that is linked to their mobile devices.    

    

Conversation
Taie Wang
Taie Wang
chief business development officer
Hang Seng Indexes Company
- JOINED THE EVENT -
Webinar
Developing strategies supporting sustainable investing
View Highlights
Conversation
Edwin Gutierrez
Edwin Gutierrez
head of emerging market sovereign debt
abrdn
- JOINED THE EVENT -
18th Asia Bond Markets Summit - Europe Edition
Taking advantage of the great bond re-set
View Highlights