Panel, Conference Presentation
FinClusion: Connecting the Unconnected
- The sector anticipates that 1.6 billion adults can be included in the financial system today via digital scenarios, with 80% of working-age adults in emerging markets owning smartphones by 2020 to enable digital credit assessment, while 2 billion disconnected people represent $4 to $5 trillion in purchasing power by that same year.
- Digital banking services are forecast to cost approximately $10 annually, yielding a 90% saving over traditional models, which is expected to unlock over $2 trillion in new credit for small businesses as deposits migrate to the digital system.
- Governments are predicted to drive volume in developing markets by moving payments, pensions, salaries, and revenue collection online, with specific nations like India, Mexico, Indonesia, the Philippines, and Pakistan actively reforming regulations and opening siloed ministries to foster fintech innovation.
- Key initiatives include the digitization of social transfers to reduce leakage, the leapfrogging of traditional infrastructure via mobile telephony in countries like Peru and Myanmar, and the establishment of "smart nation" concepts in Singapore, Rwanda, and Peru within a five-to-10-year timeframe.
- Industry collaborations involving Citigroup, FinTech companies, and MasterCard aim to provide integrated corporate and small business solutions, while partnerships like those with On Deck seek to expand capital access in both developed and developing markets.
- Technological advancements such as interoperable mobile money, micro-leasing of solar units, and mobile micro-insurance are expected to lower transaction costs and connect users to tangible family benefits, with distributed ledger tests in Peru and Kazakhstan anticipated to enable modern collateral registries for low-income populations.
- A strategic shift is foreseen from basic account access to utilization for goods and services, supported by global commitments to include 500 million people and 40 million merchants by 2020 to reach full financial inclusion.
- Potential risks identified include the creation of a mini household credit bubble, increased indebtedness, and eroded trust in digital banking if financial inclusion strategies are mishandled or if regulatory frameworks fail to prevent anonymity for illicit reasons.
- The transition to mobile-driven financial services is expected to occur over the next five years, with blockchain technology applications in emerging economies projected to mature in approximately two years pending necessary internet infrastructure improvements.
- Future market conditions in the next five to 10 years are expected to feature lower cost bases for private providers, increased competition regarding customer value propositions, and enhanced household control over funds with reduced fees and greater economic efficiency.