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Regulating Digital Financial Services to Promote Financial Inclusion

Financial services delivered over mobile phones are key to improving financial inclusion in developing countries, especially of the poor living outside major cities. The bottom line is that very few banks anywhere are genuinely interested in the poor, and the absence of physical banking infrastructure in remote parts of developing countries is a major obstacle to the provision of banking services.

However, another industry sector knows how to profit from serving the poor, as it does so already, and that is telcos providing mobile phone services. Their business model is sufficiently low-cost to be viable and in many countries, their customer base is already massive. Today, globally, over 1 billion people have a mobile phone but no bank account. Telco-provided mobile financial services (MFS) offer these people ways to save, make payments quickly and conveniently, and often, acquire insurance and credit.

The story of Vodafone in Kenya, with M-Pesa, is well known. Today, 10 years after its inception, M-Pesa provides a broad range of financial services to a sizable propo ...

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