Financial Inclusion Week

Anthemis Brown Bag Lunch20th October 2016

Diana Biggs, Fellow 2016/17

This event is hosted under the auspices of Financial Inclusion 2020 (FI2020), a global multi-

stakeholder movement to achieve full financial inclusion and initiated by the Center for Financial

Inclusion at Accion. During Financial Inclusion Week stakeholders across the globe are participating

in conversations exploring the most important steps to achieving full financial inclusion, while

keeping clients first in a digital world.

About me

Current work + involvements:

Pastwork+involvements:

@dianacbiggs 2016

About me: past work in social enterprise and financial inclusion

What do we mean by financial inclusion and why is it important?

Financial InclusionFacilitates day-to-day living

Helps with planning & risk management (for goals and/or emergencies)

Enables investment, e.g. in health and education

Improvement in overall quality of life

Financial products & services for individuals and businesses which are:

● Accessible

● Affordable

● Available

● Sustainable

● Responsible

● Competitive

@dianacbiggs 2016

Who are the financially excluded?Currently, there are an estimated 2 billion adults worldwide; groups particularly affected:

● Women

● Rural poor

● Other remote or hard-to-reach populations

● Informal micro and small firms

Image source: World Bank Global Findex Database 2012 @dianacbiggs 2016

What are the barriers to financial services?Barriers to banking include:

• Cost / affordability

• Geographical distance from a financial service provider

• Lack of necessary documentation (e.g. ID, credit history)

• Lack of trust in providers

• Gender or religious barriers

• Lack of financial literacy / need for education

• Lack of relevant products

• Regulation & policy (allowing alternative service offerings; ensuring consumer protection)

Image source: World Bank Global Findex Database 2012 @dianacbiggs 2016

There is increasing global recognition of the need for financial inclusion

20161970s

Early studies in

Microfinance

Launch of Aadhaar ID, India (2009)

Launch of Kiva

MPESA Pilot in Kenya

Enablers:• Global ubiquity of mobile phones• Growing access to internet / data• Introduction of digital FS offerings / digital

cash

• Government commitment / enabling policy• Digital ID offerings• The problem is understood (increasing

data)

Financial Inclusion:

enabler for 7 of 17 UN SDGs

(2015)

G20 Financial Inclusion

Action Plan (2010)

2005

World Bank Universal Financial

Access (UFA) goal 2020

2010

Yunus / Grameen win Nobel Peace Prize (2006)

MPESA launch (2007)

Launch of M-SHWARI

(2012)

UN Year of Microcredit

Yunus launched Grameen bank

(1983)UK banks looking at

financial edu

@dianacbiggs 2016

Financial inclusion means economic expansion and can bring long-term market development… but it can also go wrong

@dianacbiggs 2016

The role of digitalTech plays a pivotal role in bridging the gap between financial service providers & unbanked populations

A Digital Pathway to Financial Inclusion

Image source: Bill & Melinda Gates Foundation, Financial Services for the Poor @dianacbiggs 2016

A role for digital currencies in financial inclusion?Virtual currencies and their underlying technologies can provide faster and cheaper financial services, and can

become a powerful tool for deepening financial inclusion in the developing world.”- Christine Lagarde, IMF Managing Director

• Global• Decentralized• Digital• Instant• Available 24/7

WeaknessesStrengths

Opportunities Threats

• Lack of governance• Reputational issues due to link to illegal activities• Price volatility• Need for internet access in order to process transactions• People know and trust cash (particularly in markets with

limited current alternatives)

• Open source: opportunities for collaboration• Removing the middlemen: reduce corruption, cut costs• Service populations currently excluded (e.g. for social

or other reasons)• Elimination / reduction of physical cash has positive

implications for safety, health, logistics

• Fragmented market – inability to agree on standards?• Over-regulation (to the point which benefits are lost)• Cybercrime on service providers• Lack of consumer insights from provider services

means it may miss the mark → lack of consumer adoption due to lack of trust, education or other

• Low to no cost transactions• Peer to Peer• Open source (ability to

customize and code)

@dianacbiggs 2016

The path forwards...

• Cost of customer acquisition when working with branch networks

• Legacy IT stacks

• KYC & AML requirements within existing regulation for informal populations

• FS typically takes a supply-led approach: assumption that if something is working here, that others will want it

• Harnessing the power of fintech / digital

• Market knowledge: “We don’t properly understand these markets. Even the people who think they do don’t”

• Find out how people are doing things today >> how can this be done better

• Simplicity: asking consumers what is easy for them to adopt; getting the language right –how do you explain the concepts to them

• Affordability and accessibility: Low income can mean you are hyper rational: services need to have a good offer

Key success factors Challenges for existing systems

@dianacbiggs 2016

Example start-ups in this space

Credit scoring

Remittance / payments

Lending (P2P, SME) and Debt reduction

Microfinance / mobile banking platformSavings

Identity

Financial Literacy

@dianacbiggs 2016

● The UK Financial Inclusion Commission is an independent commission working to address financial exclusion in the UK; data from 2015 report

● Nearly 2 million adults in the UK outside the banking system: opportunity (and responsibility) for both traditional FS and startups to develop products addressing the needs of the unbanked and the underbanked

● Technology can be an enabler, but increasing move to digital can also exacerbate a divide

Financial Inclusion in the UK

@dianacbiggs 2016Image source: UK Financial Inclusion Commission report 2015: Financial Inclusion: Improving the financial health of the nation

Headline statsFinancial Wellness state of the nationCourtesy of

Exponential Ventures

Defining Financial WellnessHalf the UK population are ‘financially exposed’ to unforeseen financial

events”Financial wellness is a continuous process of financial planning, management and behaviour adjustment with the aim

of affording your planned and unexpected expenses in order to reach your goals over your lifetime” – MMI Holdings

Courtesy of Exponential Ventures

Financial Wellness of the UK, 2016 Report

Other Factors affecting?

Human capital?Environmental?

Social capital?Age / Life Stage?Geography? Physical Stressors?

Courtesy of Exponential Ventures

Financial Wellness Customer NeedsAn individual's financial wellness needs can be categorised in four broad areas

Understanding a customer’s Financial Wellness needs helps to identify startups that are solving the most significant, large-scale financial wellness challenges. These challenges need to create commercially

attractive and sustainable opportunities for startups to be viable and willing to solve them

Note: startups highlighted are simply for illustration

Courtesy of Exponential Ventures

We encourage you to follow this week’s events online at

www.fi2020week.org and to tweet about your experience using

#finclusionweekTwitter:

@dianacbiggs@anthemisfellows@anthemis