How digital innovation is bringing prosperity to the world’s poorest
There are approximately 2m adults in the UK who don’t have bank accounts. This statistic is shocking for a global finance hub, but it is dwarfed by the 2bn people worldwide who lack access to financial services.
For the unbanked, having no means of saving or managing their finances can mean being locked in a cycle of poverty for a lifetime. Conversely, gaining access to a safe, affordable way of handling money can open up real possibilities for a better life.
Next month, some 1,500 leaders in financial services and technology will gather in London for the Innovate Finance Global Summit. There, finance and government officials and financial technology entrepreneurs will explore how we can use technology to reimagine financial services. And there may be no greater potential for growth and innovation than in reimagining services that are accessible to everyone, including the poor and unbanked.
The potential is so great because, not only is it an opportunity to include billions in the formal economy, it’s also an unprecedented business opportunity. In the digital/mobile era, creating products that address the needs of the bottom of the pyramid isn’t charity or corporate philanthropy. It’s a promising path to profit. And it’s all about ending the era of cash.
Right now, cash is all many poor people know. They receive their wages in cash, hide and ferry money to pay for food and housing, take time off from work or pay couriers to share money with faraway relatives. When emergencies strike, such as an illness that prevents them from working or a drought that destroys a harvest, these families are left with no place to turn, no savings, no access to credit.
Luckily, there is hope – and it comes in the form of a mobile phone. According to the World Bank, approximately 90 per cent of the world’s poor are now covered by a mobile signal. Riding this signal, digital financial services are rapidly spreading in lower-income, previously cash-dependent markets. M-PESA, in East Africa, is the most successful product, with 17m active users. Easily accessible and low-cost financial services like it are not only making banking viable for the world’s poor, but they are also opening up a massive new market for financial services providers.
That’s exactly what’s happening in Bangladesh, where a mobile banking service known as bKash was launched in 2011 with a $5m investment. In only three years, the company had registered more than 10m accounts and started turning a profit. Like with M-PESA, bKash uses the customer’s phone to access a “mobile wallet,” through which they can access wages, transfer money, save, and make purchases. Transferring money is as easy as sending a text message.
The company makes its money from withdrawals, charging 1.85 per cent per transaction. Some 100,000 agents around the country serve as cash-in/cash-out access points. It’s all regulated by the central bank in Bangladesh, which has granted licenses to 25 other businesses to operate similar services – a nice example of the public-private synergy necessary to make these systems sustainable and successful for everyone. While bKash stands more or less alone at present, in a few years Bangladeshis could have many different digital products to choose from.
The Bill & Melinda Gates Foundation invests in the creation of digital financial services because we believe that connecting the unbanked with digital financial tools is a powerful way to help them escape poverty and lead productive lives. And we know full well that, in order to be sustainable, financial access has to be as beneficial to providers as it is to customers. With digital financial services, that’s the case.
With so much power in digital and mobile technology, this is the time to invest in financial services that everyone can use. And the Innovate Finance Summit is an excellent place to explore the possibilities.
We are within reach of an economy that includes and benefits everyone. What better use of our talents and technology could there possibly be?