Financial inclusion is about making financial services accessible at an affordable cost to all individuals and businesses, regardless of their size and financial worth. It is a movement to identify and create solutions that can ease the difficulty encountered by marginalized communities when they try to participate in the financial marketplace.
Technology Leads to Financial Inclusion
There has been a large increase in the number of bank accounts since 2011. At present, more individuals have access to bank accounts and other financial services than ever before. This is an extremely positive change in the modern financial community. Mobile phones greatly facilitate the access to a variety of financial products. Financial institutions worldwide now provide mobile phone account access to their customers.
The 2017 Fin Scope Report, a national financial survey taken in Tanzania, revealed that, because of the use of mobile phones, the availability of and access to financial products and services went up from 50 to 60 percent in the last four years.
Mobile phone access increased from 15.8 to 65.3 percent within the last eight years. These increases attribute to innovations in technology and increasing data availability to financial institutions. Data is information that is of great value to the financial community. With it, they can provide finely tuned products to fit their client’s ever-changing needs in the new market economy.
Underprivileged communities include the poor, the undereducated, low wage earners, and women. Women who are low earners have especially been marginalized in the financial sector. They have historically been excluded from access to loans, savings accounts, and insurance products. The banking deregulation that occurred in the 1990s, led to the closing of many banks located in underprivileged communities. This, in turn, led to the proliferation of pawn shops and check-cashing businesses in low-income neighborhoods. These over-priced, predatory financial alternatives are all that remain in underprivileged communities.
Data Leads to Better Tools
Mobile phone usage and the data it provides is proving to be a very effective tool for financial institutions. Banks use mobile phone data to understand their customers better so that they can more easily provide services specific to their needs. This is especially important for their underprivileged customer base. Banking services have improved by expanding the type of transactions available through their clients’ mobile phones. Banking customers can now process money transfers, deposits into savings and checking accounts. Checks no longer have to be physically delivered to a bank. With their mobile phones, customers can now take a picture of a check with their mobile phones and have it deposited into their accounts.
Mobile phone usage is now years beyond its beginning stages when only early adopters could afford to pay for them. Today, mobile phones are in use across all socioeconomic levels around the world. This has translated to greater access to savings and checking accounts, insurance products, microloans, grants, and electronic banking services such as electronic fund transfers to a wide margin of the world population.