Banking the World
Two billion individuals and 200 million small businesses in emerging economies lack access to basic financial services and credit. Broad adoption of mobile banking in developing nations could increase GDP by $3.7 trllion by 2025, which is the equivalent of adding to the world an economy the size of Germany. "How Digital Finance Could Boost Growth in Emerging Economies," McKinsey Global Institute.
The global microfinance industry has failed to adequately deliver on its mission and lift the poor out of poverty. MFIs cannot reach enough unbanked people and are not able to give poor people access to all the financial services they need. One of the major impediments to the reach of MFIs is their high operational cost due to manual processes and face-to-face distribution to primarily rural consumers.
By leveraging digital technology to enable alternative delivery channels and alternative credit scoring, operational costs can be reduced, and considerably more consumers can be reached. Today, agent banking and mobile money solutions offer affordable, instant, and reliable transactions as well as savings and credit products at the fingertip of everyone, reaching those customers who have been previously excluded from financial services. Innovative solutions are looking beyond savings and loan products and try to incorporate advanced products such as pay-day loans, bill payments and insurance to offer an even wider range of financial services.
But even though we have seen substantial progress in financial inclusion through the digitization of financial services, there is still a long way to go to ensure appropriate and fair financial products and services for everyone. The third Global Findex published by the World Bank shows that despite the fact that 515 million more adults globally are reporting account ownership in 2017 than in 2014, the global gender gap remains unchanged at 7 percentage points. Furthermore, the usage of financial services remains a challenge with high dormancy rates for mobile wallet accounts globally. Moreover, recent research suggests that, as more people gain access to financial services, some of these services can do more harm than good, especially in markets where regulation lacks behind. The mushrooming of digital credit providers especially in Tanzania and Kenya has raised several concerns ranging from high interest rates over multiple borrowing to aggressive marketing and data security. To address above listed challenges, it is imperative to design new digital products and services that address the needs and wants of poor people, focussing especially on the unique needs of women. These products and services need to be based on trust and fairness, using the customers’ knowledge to make a lasting and positive impact on their lives.
The digital revolution took many microfinance institutions and commercial banks by surprise. If they want to serve their clients well and survive in an increasingly competitive market, they must take advantage of the opportunities that digital finance offers to them. LFS is a specialist advisory firm that supports its clients to make the right decisions and realise their digital opportunities. We have implemented several digital finance and branchless banking projects on behalf of various microfinance institutions and commercial banks. We gained profound knowledge of digital finance solutions and a strong expertise in defining new business models using digital channels and services. Through the consulting work of LFS, AH banks and third-party clients now can offer a variety of digital products and services:
Mobile Wallet Platforms with payments, self- onboarding, mobile loan functionalities and loyalty programs available directly on smartphones.
Mobile Banking which allows customers to deposit money into their accounts via a widely used e-wallet, pay bills, perform internal bank transfers, obtain a balance inquiry and mini statement on the phone, and order a full account statement and check book.
Digital tools to improve the collection and analysis of loan data.
Agent Banking which allows customers to make deposits and withdrawals via agents.
DF readiness assessment: Deploying our customizable DF gap analysis tool, we offer our clients detailed insights into the current state of their digital business and determine the next steps that need to be taken to move their business to its desired state.
DF strategy formulation and execution: We support our clients to identify, articulate and execute on digital opportunities that will increase the institution’s competitive advantage.
Customer centric mobile app design: We are using different in-house developed methodologies to help banking providers understand their customers better and design offerings to meet their digital needs.
We help setup and manage agent networks that provide the physical backbone of mobile money (cash in – cash out points).
LFS gives strategic advice on how to leapfrog existing POS systems using cost-effective fully digital service.
When we decide to introduce such products and services in the banks, our LFS experts build on the in-house knowledge, while also customizing these items to the specifics of the bank, its clients, and the market.
Dan Balke is Managing Director and Partner of LFS, with a multifaceted record of senior management positions in financial institutions as project manager in the area of Digital Finance and Digitization Projects, Small Business Finance, Housing, and Impact Finance Projects. Mr. Balke holds an MBA in Finance from the Manchester Business School and an M.Sc. in Economics. For several years he has been responsible for pushing forward the digital and technological agenda with AccessHolding. Dan has managed projects to success in major emerging markets worldwide.