The un(der)banked is FinTech’s largest opportunity

Exhibit 1
Percentage of adults with traditional bank accounts (by geography)
100 94%
80
69%
60
40
34%
46%
51%
52%
20
0
14%
Middle
East
Sub-Saharan
Africa
South
Asia
Latin America
and
Caribbean
Europe
and
Central Asia
East Asia
and
Pacific
High-income
OECD*
countries
* Organisation for
Economic Co-operation
and Development.
Source: Global Findex
database
Many of these basic banking services also help the un(der)banked
avoid high fees. Fee reduction or elimination, according to the Federal
Reserve, is the single largest benefit of having a formal bank account in
markets where alternatives already exist. In the U.S. market alone, the
un(der)banked spend 2.5% to 5.0% just to access payroll funds. Further,
with a lack of cards or checks, the un(der)banked incur additional fees
when they use money orders or other noncash payment methods; these
fees often exceed average bank fees.
Mobile is the essential enabling technology for financial inclusion.
To begin to reach the un(der)banked, ubiquitous reach or access is
needed, and mobile has proven to be the answer. Mobile has moved
beyond being a new delivery channel and now provides basic banking
services to un(der)banked populations in remote areas that lack
financial services infrastructure.
There are several examples where mobile-delivered services have
improved financial inclusion. The most notable is in Kenya, where
regulatory exemptions permitted mobile network operators (MNOs)
such as Safaricom to enter the payment market with an agent-based
banking model. There are now more than 26.2 million mobile money
accounts in Kenya, 4 roughly equal to the adult population of 26.8
million. 5 However, transitioning to the next step, a formal account,
remains elusive in many developing nations (see Exhibit 2, next page).
Mobile has
moved beyond a
delivery channel
to now provide
basic banking
services.
8 Strategy&