Financial Inclusion's Next Frontier: Harnessing Data and Technology to Drive Accessibility
Financial inclusion refers to the availability and equity of access to financial services. Over the past decade, significant progress has been made in improving access to banking, loans, investments, and insurance through simplified processes, intuitive digital interfaces, and flexible options. However, data and technology remain key to advancing financial inclusion and unlocking economic opportunities for more people and businesses worldwide.
Rise of Data Management in Financial Services
As data management and analytics capabilities have matured, financial services have become more tailored and risk-based. According to a report by the World Bank, over 50 countries have implemented comprehensive credit bureaus, allowing for more accurate credit assessments and expanded lending [1]. Digital platforms powered by machine learning hold the potential to further transform access by generating detailed insights for risk modeling and fraud detection.
Blockchain and Alternative Data: The Power to Inclusively Assess Creditworthiness
For instance, blockchain-based lending platforms use alternative data sources like mobile phone payment records and utility bill payments to assess creditworthiness and facilitate loans for individuals lacking banking history. Startups such as Branch and Tala leverage thousands of data points from mobile devices to create credit scores, providing millions of people in emerging markets with access to finance [2]. The Consultative Group to Assist the Poor (CGAP) estimates that alternative data could bring 1.6 billion more people into the formal financial system by enabling new risk models that work for the unbanked [3].
Building Bridges: Cross-Industry Collaborations for Financial Inclusion
Collaborations between banks, technology companies, and telecommunications providers will also shape the next decade of financial inclusion. In Sub-Saharan Africa, MTN joined forces with African bank Ecobank to enable mobile money users to access financial services and remittance product [4]. Similarly, Airtel Africa partnered with Mastercard to enhance digital payments and bank account ownership across 14 countries [5]. By sharing data and infrastructure, cross-industry alliances can onboard hundreds of millions of new customers at a lower cost.
Regulating Ethical Use of Data for Financial Inclusion
Policymakers and regulators must play a pivotal role in guiding ethical data use and partnerships. Frameworks around consumer data protection, privacy, and consent are critical as more institutions tap into alternative data for credit and risk modeling. Regulations should balance privacy concerns with financial inclusion, ensuring underserved groups benefit from data-driven innovations. Government initiatives promoting interoperability, open banking, and unified payments platforms can also foster an ecosystem that uplifts more people financially.
Addressing Remaining Gaps in Global Financial Inclusion
While data and technology have unlocked numerous opportunities, it is essential to focus on meeting unique needs. According to the Global Findex Database 2021, about 31% of the world's adult population still lacks access to formal financial services [6]. More work is needed to address barriers related to identity verification, income instability, and capability to serve underbanked groups, such as migrants or those in rural locations. The World Bank also estimates a $380 billion funding gap for micro, small, and medium enterprises in developing economies, indicating a need for tailored products beyond just credit [7].
The Future Vision: Data-Driven Financial Inclusion
The next decade will witness revolutionary changes in financial access, driven by data and partnerships. By harnessing new data sources, maximising infrastructure, and applying machine learning at scale while prioritising human needs, the full potential of financial inclusion can be realised. Financial inclusion is about more than transactions or profits; it means empowering people and businesses otherwise left behind to shape our shared economic future.
I firmly believe that technology holds the key to financial empowerment. Leveraging our technological prowess, we are not only democratising access but also shaping the very fabric of a financially inclusive world. The possibilities ahead point to a more equitable and sustainable world enabled through the combined forces of data, technology, and human ingenuity. The future of finance must be inclusive or not at all.
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Sources:
The World Bank. (2018, April 19). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution.
CNBC. (2020, January 3). Start-up uses mobile data as a credit score for the global unbanked.
Consultative Group to Assist the Poor (CGAP). (2019, October 28). A New Generation of Government-to-Person Payments Is Emerging
Forbes. (2018, April 10). MTN, Ecobank Partner to Grow Mobile Money Across Africa.
Tech Central. (2018, May 15). Mastercard, Frontier, Financial, Digital Inclusion in Africa, Maspro. Tech Central.
The World Bank. (2021). The Global Findex Database 2021
The World Bank (unk) SME Finance
