From Financial Inclusion to Financial Health: Addressing the Fundamental Barriers to Financial Inclusion – Part 2

Customers should have tools and an offline network that enable them to connect to an online financial services platform in an affordable way. They should also respond to a fundamental requirement: legally exist.


Mobile ownership is widespread among most markets – from 82% in Mexico and 87% in the Philippines to a staggering 93% in Nigeria – and they can be great tools to distribute financial services, as the 270+ mobile money services currently live globally show.

Smartphones in their turn present an opportunity to increase the scope of services offered and improve user experience. Their penetration vary massively across emerging economies though, and is much lower – say, 45% in Venezuela or only 4% in Uganda.

To tackle this issue, a hybrid model could be built. Simple transactions could still be SMS-based, while more complex operations would require access to a smartphone or tablet that the offline network would provide.

As smartphone adoption picks up – it is set to reach 63% of the population of emerging economies in 2020 – the need (and cost) to provide hardware to the offline network will gradually decrease. The migration from an O2O model to a purely (or mostly) online will improve its economics, which will, in turn, attract more competitors, which will contribute to a more efficient market and reasonable pricing for customers in the long run.

Offline network

In cash intensive markets, a network of offline agents is necessary to build the interface between the physical and digital worlds. Banks can be part of the network but, in most markets, sufficient capillarity will only be achieved with non-banks’ support.

Emerging markets showcase several success cases of effective offline networks. M-Pesa, with its >100k cash-in/cash-out agent network (mostly composed of airtime resellers), is a good example. Ayannah from the Philippines has built software to enable >7k retail outlets to become multi-product agents, selling dental and health insurance, but also airtime and online game pins.

Governments have a key role to play to enable other successful offline networks to flourish, by reviewing regulations that might limit the role of non-banks in the distribution of financial products, while maintaining adequate levels of risk management and oversight. Companies should provide their agents with a minimum level of financial literacy as part of their agency force onboarding process to ensure customer protection and transparency on product features and pricing.

Whereas offline networks will remain essential in the coming years, their importance is likely to decrease over time as transactions increasingly migrate from cash-based to electronic, naturally (as economies develop and formalize) or forcefully (as governments implement demonetization plans, such as the recent case in India shows).


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