In the last 25 years, globalization has lifted one billion people out of poverty. World Bank President, Jim Yong Kim is now able to seriously and credibly suggest that we may be capable of ending global poverty by 2030 .
Around the world, many working people do not have the bank accounts and other financial services they need to connect them to markets and to each other.
In Asia, up to 73% of adults do not have a bank account . In Africa, that figure is around 80% . Even in US, the Center for Financial Inclusion estimates there are 68 million financially underserved adults .
This kind of financial exclusion is more than just an inconvenience. It stops its victims from buying the things they need at the best prices, it limits their participation in all but the most local of labor markets and it makes it difficult for them to sell their goods and services for the best price.
In the past, tackling financial exclusion was hard. Countries had to find a way to build more bank branches in new locations. This was a slow and expensive process. But that is changing. The advent of Open Banking has made it easier than ever to end the financial exclusion of millions of people worldwide.
Why connectivity changes everything
According to the World Bank, between 2014 and 2018 the number of people in Sub-Saharan Africa with a mobile money account doubled, to 21% . In Latin America, the number of people making digital transactions also sits at around 20%. In Asia, it's an astonishing 71% .
In Asia, 51% of mobile phones in circulation are Internet-enabled smartphones . By 2021, that figure will be 62%. Globally, smartphone penetration is expected to reach 40% by 2021 .
Around the world, millions of people who don't yet have bank accounts do have internet-enabled mobile phones. And many of them already use mobile-money accounts to transfer cash or make small payments, so they are already comfortable with using digital financial services.
Open Banking is the logical next step
By freeing the expansion of financial provision from the need to build physical infrastructure financial service providers are instantly better able to offer a broader range of financial services at a lower cost.
In India, for instance, the 'fintech Teknospire which specializes in financial inclusion' is helping banks develop accessible banking and payment products for customers on low incomes . In Brazil, digital-only affordable bank accounts have massively boosted financial inclusion, with one bank signing up 70,000 new customers in just nine months .
In Kenya, familiarity with simple mobile-money accounts is driving the uptake of more sophisticated digital financial products, with 46% of Kenyans now using some form of financial service (with 43% using a digital financial product) .
As Open Banking makes an ever-wider range of financial services open to a wider and wider audience at a lower cost, it will help improve financial inclusion, increase commerce and broaden people's range of economic opportunities. This is something to be celebrated.
Find out about Virtusa's role in improving financial inclusion.
Download our white paper, Open Banking: The New Customer Frontier to learn more about how Open Banking will revolutionize the banking and financial services industry.
We also examine what banks and other financial services companies can do to meet the initial challenge of transformation and then to go beyond that first step by developing new business models that will anticipate changing consumer demands and build the winning companies of tomorrow. Download here
Download our new white paper, Open Banking Beyond Compliance to learn about why monetizing Open Banking APIs is vital for long-term success.
In this white paper, Virtusa surveys the current Open Banking landscape and puts forward recommendations for effective API monetization, including API pricing models, risk and quality control mechanisms, potential new business models, and strategies for open banking. Download here
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Financial institutions, enforcement agencies, and regulators have been trying to evolve mechanisms at global, regional, and local levels to offer better collaboration while combating compliance issues with low code framework.