Payal Dalal, VP for Centre for Inclusive Growth at Mastercard
Chetna Sinha, Founder and Chair, Mann Deshi Bank & Foundation
Emma Bickerstaffe, Advisor, The Big Issue Group
Pooja Warier Hamilton, Managing Partner, Impact Investing, The Conduit
In 2017, there were 1.7 billion adults globally who did not have access to basic finance or banking – a number of staggering scale.
While the situation is worst in developing countries such as India and Pakistan, the issue of financial inclusion is significant even in economic powers including China and the USA. The Conduit community gathered together to discuss what we really mean by the term ‘financial inclusion, the role of design thinking in creating access to financial services and what the developed world can learn from the initiatives springing up in emerging markets.
What does ‘financial inclusion’ mean and is the term still relevant?
‘Financial inclusion is an equation’, said Payal. ‘You can’t just take into account whether people have access to financial services, but also whether or not they have the capability to use them.’ She explained that, while there has been an increase in account registrations over the last few years, many of them are largely unused. ‘It’s like a gym membership: you might be registered at a gym but that doesn’t mean you’re physically fit or exercising every day.’
Emma named a lack of trust in the banking sector as a key barrier to financial access. ‘Over half of people in the UK without a bank account have actually had one before but have chosen to close it. Financial inclusion is all about teaching bankers to cater to the needs of different people.’
Chetna agreed, speaking to her own experience as the founder of a bank made for, and run by, women. ‘I had never thought of starting a bank, but I kept hearing from women who wanted to save.’ Through her work in rural communities, Chetna has learned that the less money you have, the more transactions you tend to make. ‘People tend to dismiss poorer individuals and assume that they have no need for financial services, but the demand is there. Bankers need to listen to, and serve the needs of, their clients.’
Fintech: a useful tool or a magic wand?
There are currently around 7,000 fintech companies emerging globally and in the first half of 2018, global investment in fintech companies hit $57.9 billion. But are any of these companies creating greater financial access for the ‘unbanked’, or are they simply providing slicker solutions for those with existing financial privileges?
While Payal believes that fintech is ‘absolutely changing the game’ when it comes to financial inclusion, referencing the impact of initiatives like e-wallets in Uganda, Emma was more reserved. “Fintech companies like Monzo may want to tackle financial exclusion, but they’re not necessarily best placed to do so”, she said. “First they have to establish a sustainable business model and build up brand trust. When dealing with vulnerable people, you have to prove that your business is reliable.” Partnerships can be a useful way of winning consumers’ trust, especially those with organisations that already have a relationship with vulnerable groups, such as The Big Issue.
Pooja echoed Emma’s remarks, emphasising that, in the pursuit of technology, we can’t forget the needs of the people we’re trying to support. “Fintech is just the tool; inclusion is the end goal.”
What role can design thinking play in a more inclusive financial future?
The legacy infrastructure in the UK banking system means that we’re lagging behind many developing markets in terms of agility and struggle to implement any kind of design thinking”, stated Emma. “Regulation has really slowed us down. We need to put pressure on traditional banks to challenge their thinking.”
But what does design thinking in banking really look like? “First you think about how people live their lives and the behaviours they use to get around red tape. Then you think: ‘how do we digitise that?’ It creates a completely different type of product.”
Payal agreed. “At the Centre for Inclusive Growth, we started with traditional models like workshops, but quickly realised that the entrepreneurs we were targeting didn’t have time to come. Then we started sending trainers directly to entrepreneurs, but it became clear that wasn’t scalable.” Now Payal and her team are looking at digitised models of learning, such as chatbots. “You have to think about customers’ actual needs and desires.”
Where do developing economies fit in? They are embracing design thinking more quickly and successfully than developed countries, said Chetna, as well as paving the way for a more inclusive future by paying greater attention to small businesses and micro-economies. “Many of my female clients are more creative than established bankers, because they aren’t held back by traditional and limiting beliefs.”
She explained how a female vendor at a local market sparked the idea for one of her bank’s financial products. “I saw that, although she was saving money with us, she was borrowing from a loan shark and paying high interest, instead of taking loans from the bank.” When Chetna asked why, the woman told her that she was aware that the interest was high, but that the bank’s loan was much more difficult to get. “It wasn’t about ignorance; it was about need.” Inspired by this encounter, Chetna and her team developed a product based around the cash flow support the vendor required.
“I’ve learned that those who want to use a bank will pay for the interest and the technology, because it will still cost them less overall than their current financial habits. Don’t provide poor solutions to poor people. They are smart and they know what they need.”
Gains in financial inclusion, gains for a sustainable world
7 billion adults worldwide do not have access to a bank account
Monzo on financial inclusion