By Buhle Goslar, Chief Customer & Sustainability Officer at JUMO
The rapid increase in mobile money usage globally, particularly in emerging markets, is eliminating the need for costly infrastructure investment and removes the distribution challenge faced by traditional banks. We now have the opportunity to use technology to scale progress on financial inclusion, giving millions of previously unbanked and financially underserved customers access to financial services for the first time.
The focus to date has been on credit, but this addresses only part of a customer’s financial needs, which are nuanced. True value is in giving customers digital borrowing, savings and insurance options, that allow them to decide for themselves how to achieve their goals and dreams. Technology companies and traditional financial service providers can work together to offer customers the opportunity to leverage their data footprint and good financial behaviour to full advantage, giving them greater product choice and flexibility at the lowest price.
The case for savings
In the present landscape, however, credit continues to dominate addressing the challenge of financial inclusion. But in my experience, customers with access to borrowing and savings options toggle between the two, finding broad utility in both. So while credit takes us a step closer toward our inclusion goal, it is only the first step – the next, I believe, is savings. We know there is a strong correlation between savings and economic growth, and studies have shown strong evidence for the welfare impacts of microsavings, especially among entrepreneurs. Its potential to compound positive impacts for the individual, community and society mean that it should receive even greater emphasis than credit.
Moving from ‘Why?’ to ‘How?’
The economic advantages of savings solutions are clear. So how can technology help drive the creation of healthy savings cultures? Firstly, as with lending, savings products must be market-appropriate and tailored to the individual based on their digital identity. This means unlocking value by understanding the customer through their transactionaldata. With credit, AI helps us predict a loan’s affordability and the timeframe within which payment can be expected.
When it comes to savings, we should shift the focus to highlight the opportunity to use data and technology to enable customers to identify small pockets in their income that could be used for savings. This effort must be supported by a clear articulation of the individual benefits the practice of saving can offer, as well as the use of behavioural economics and psychology in product and communication design to improve savings habits.
In more developed markets, we have already seen the potential impact of using technology to encourage healthy financial behaviours. Banking apps, for example, now allow customers to swipe and save at the same time, or automatically direct small cash amounts into investment or savings accounts.
The value of teamwork
Cash is exposed to theft and fire and must be transported to be used, incurring further cost. Fortunately, with the growth in mobile money users, more and more people are becoming comfortable using technology for financial transactions. To address the need for appropriate savings products requires a combination of progressive thinking, the latest techniques in machine learning and AI, and technology that is capable of storing and distributing capital at a fraction of the previous unit costs, making it commercially viable for traditional financial services providers. What’s promising is that this creates a space for all players – banks, mobile money operators and technology companies – to have a positive impact.
The future lies in drawing on the expertise and strengths of each. Using technology and big data empowers people to take full advantage of their digital footprint and access financial choices. It’s time to reframe the digital financial services conversation and focus on delivering holistic financial services enabled by technology.