An estimated 2 billion working-age adults all over the world do not have an account at a formal financial institution.
Financial inclusion efforts include delivery of financial services at an affordable cost to sections of disadvantaged and low-income segments of the society. Using digital technology in finance can result in successful financial inclusion efforts.
Financial inclusion is ensuring that all households and business organizations, regardless of income level, have access to appropriate financial services they need to improve their lives. Currently, the poor or people with no fixed income live and work in what is known as the informal economy. Even though they have little money, they do save, borrow, and manage day-to-day expenses. But, as they do not have access to a bank, savings account, or insurance they have to rely on informal means of managing money. Sometimes these choices are insufficient and risky. For successful implementation of financial inclusion efforts, organizations must use digital technology in finance, thereby facilitating simpler ways of making day-to-day monetary transactions.
Digital connectivity is important for enhancing financial inclusion efforts. Thus, it is important for organizations to strengthen factors that interact with technology like regulation and compliance policies. This can help in making digital technologies work for the poor. With proper implementation of digital initiatives, appropriate financial services and products like payments, credit, and insurance are readily available to people of all income groups.
Moreover, these services can be made available at a cost affordable to the customer. The benefits of using digital technology in financial inclusion are wide-ranging: helps people better manage their lives, overcome income shocks, smooth their cash flows, and invest their money in skills, health, or new businesses. Let’s take a look at some of the benefits that come with digital technology in financial inclusion.
New players in the finance industry, such as non-banks and non-MNOs (mobile network operators), can offer financial products and services directly to customers. They can also offer services such as data analytics, payment mechanisms, and credit scoring to financial service providers.
APIs can enable development of new applications on top of pre-existing products. This helps in capitalizing on the product’s existing customer base. Open platforms and open APIs are still relatively rare, but they hold the potential to facilitate access to a broad range of products and services, and thereby enhance financial inclusion.
Customization using digital technology provides better data collection and analytics, thereby resulting in more accurate customer segmentation and customer-centric product design like clearer user interfaces or targeted alerts and notices to consumers.
The benefits of financial inclusion are not only limited to individuals but extend to economies as well. Financial inclusion can also be linked to a country’s economic and social development, and thereby play a role in reducing extreme poverty. Recent research indicates that using digital technology in financial inclusion efforts has not only been correlated with growth but has also brought in employment.
Naveen is the Founder and CEO of Allerin, a software solutions provider that delivers innovative and agile solutions that enable to automate, inspire and impress. He is a seasoned professional with more than 20 years of experience, with extensive experience in customizing open source products for cost optimizations of large scale IT deployment. He is currently working on Internet of Things solutions with Big Data Analytics. Naveen completed his programming qualifications in various Indian institutes.