Financial Inclusion

How to Bridge the Gap between Financial Access and Usage

A new white paper outlines lessons learned in banking the unbanked and creating a path to prosperity.

Customers utilize an E-banking ATM Center in Chennai, India. (Credit: Arun Sankar/AFP/Getty Images)

By: Dan Salazar

October 29, 2018

Financial inclusion is more than connecting people to a bank account. It is helping level the playing field for small farmers by providing access to buyers, pricing and speedier payments. It is replacing unwieldy paper voucher systems in humanitarian crises with preloaded digital cards for food and supplies. It is offering tools to help people manage income streams and plan for their future. It is helping small and micro-merchants expand their business by using their purchasing history with suppliers to assess their credit-worthiness. 

Access to these and other digital financial tools is a critical element of financial inclusion. Mobile networks reach nearly 90 percent of the population in developing nations today, making digital financial access ever more feasible. But, access is meaningless if people do not use the service. Today, about one in five bank or mobile money accounts is inactive.

That conundrum is the topic of a recent white paper by Mastercard, “The Next Frontier in Financial Inclusion: Moving Beyond Access to Usage.”

The paper is the first in a series by Mastercard’s Global Prepaid team that focuses on topics critical to building robust, commercially viable approaches to financial inclusion. For Mastercard, that means developing products that are actively used and benefit consumers. Helping populations connect to networks that help them save, expand their business and become financially secure means that government and corporate partners do good not only for the individuals they serve but for local economies as well.

To achieve these goals, we must put the consumer and his or her needs front and center with well-designed products. We must also build an infrastructure that enables the consumer’s journey to financial health. 

The papers in the series build on lessons we are learning from programs that have connected more than 330 million financially excluded consumers to the formal financial system.  From our perspective, there are three key components necessary to move the newly included from access to usage:

  • Focus human-centered design on customer needs and cultural considerations. Our market research in 16 focus markets across five regions shows, for example, that urban residents are more commercially engaged, have greater access to financial services and are more familiar with their use. Rural residents, in contrast, rely more on cash and are more risk-averse. Two-thirds, for example, were afraid of losing control of their money or savings if they didn’t have physical control of them. These insights can help product design teams tailor tools to different audiences.   
  • Build financial knowledge and change behavior. Knowledge and trust are major hurdles in any financial transaction. Access to mobile accounts is nearly universal in the Middle East, for example, yet use of mobile financial services is still rare, mainly because of a lack of trust. To overcome this, financial service providers in Egypt created a text messaging option to open a dialogue and answer key questions about finances and financial pain points. Growing knowledge and trust led to a 5-8 percent rise in monthly transactions. 
  • Build robust ecosystems to enable scale. New models for deploying technology, along with new payment flows and channels, are key to expansion. In Pakistan, for example, a partnership between the national bank, two of Pakistan’s leading telecommunications players and Mastercard led to progress in expanding digital payments. In the spirit of cooperation, the partners recognized the value in allowing a consumer to pay at any accepting merchant, regardless of provider. This payment interoperability was critical to improving the overall level of acceptance. By addressing consumer and merchant needs collaboratively, the service providers were able to reach a far larger population more quickly.

Partnerships such as that in Pakistan will be imperative to continued success. In subsequent white papers, we will provide additional details on developing robust payment systems and robust partnerships.

There are opportunities beyond the payments industry for actors with an interest in the benefits of digitization to partner and help drive the growth of payments. Stakeholders across different industries, from agriculture to telecommunications to consumer goods, all have important roles to play in the extension of digital payments to the base of the pyramid. These nontraditional stakeholders, who may not have previously recognized payments as an opportunity to expand into new markets or to reduce costs, have considerable incentives to adopt digital payments.

By engaging with a broad and diverse group of strategic partners we can tackle this enormous challenge and help move hundreds of millions of people toward financial health and inclusive growth. 

Read the full report: The Next Frontier in Financial Inclusion: Moving Beyond Access to Usage

Dan Salazar is director of product operations for new consumers at Mastercard. He manages Mastercard’s pre-paid humanitarian products and tracks progress toward reaching the company’s financial inclusion goals. He is currently developing a series of papers to share insights from Mastercard’s financial inclusion programs and partnerships.  He previously led acceptance strategy and engagement efforts at Mastercard focused on financial inclusion.