Globally, some 1.4 billion adults remain unbanked. These people are hardest to reach – and more commonly women, poorer, less educated, and living in rural areas. (World Bank)
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Banks are essential for the proper functioning of an economy. They provide the financial services that allow businesses to invest and grow, and they also offer savings and credit products that help people manage their money. However, there are still many people around the world who don’t have access to banking services.
This is a big problem because it means that these people are cut off from the formal financial system. This can make it very difficult for them to save money, access credit, and make payments.
The good news is that there are a number of ways to provide banking services to the unbanked population. In this article, we will explore 5 of these methods.
Why is providing banking services to the unbanked population important?
Providing banking services to the unbanked population is an important step towards financial inclusion. Without access to the formal financial system, these people are more vulnerable to exploitation and volatility. They are also unable to benefit from economic opportunities and save money for the future.
Having access to banking services can also empower people to create more secure livelihoods. This can be achieved through providing access to savings, credit, and financial education.
Creating a more inclusive banking system can also play an important role in promoting economic development. By extending access to banking services to unbanked populations, governments can expand and diversify their sources of income, create better opportunities for businesses, and create more jobs.
What are some common barriers to banking services for the unbanked population?
There are various barriers which make it difficult to provide banking services to the unbanked population. Some of the barriers are:
1. Unawareness: Many of the unbanked population are unaware of the benefits of banking services, or they are not educated enough to understand it.
2. Lack of Access: People who live in rural or remote areas have limited access to banks or ATMs, and this makes it difficult for them to open a bank account.
3. High Costs: The cost for setting up a bank account or for using services may be too expensive for the unbanked population.
4. Difficulty in document verification: Most banks require users to provide documents such as a proof of address or a passport for their account opening process, and these may not be accessible to the unbanked population.
5. Linguistic Barriers: Customers may not be able to understand the language used by the banks or they may not be familiar with the terminology used. This can be a problem in countries where the majority of the population is illiterate.
How can technology help provide banking services to the unbanked population?
Technology has been instrumental in helping break down many of the barriers to providing banking services to the unbanked population. Here are five ways technology can help:
1. Education & Awareness: Technology can be used to create awareness about banking services and their benefits, as well as to provide educational materials about the banking process. This can help increase users’ confidence in the system and make it easier to open a bank account.
2. Mobile Bank Accounts: Many financial institutions are now offering mobile-based banking services where users can open a bank account using only their smartphones. This eliminates the need to visit a physical bank branch, and the cumbersome identification documents process.
3. Mobile Payments: Mobile payments allow users to easily transfer money to other users without having to visit a bank or ATM. This can be especially beneficial for the unbanked population.
4. Biometrics: Biometric verification such as using facial recognition, fingerprints, or voice authentication is a secure way of verifying user identification. This helps eliminate the need for documents, which is a major barrier for many people.
5. Mobile Apps: Mobile apps are a great way for unbanked users to access banking services, as well as carry out transactions on the go. These apps provide a great platform for users to take advantage of all services offered by the bank.
What are some other creative ways to provide banking services to the unbanked population?
In addition to the ways mentioned above, there are other creative and innovative ways to give access to banking services to those who do not have access to banking services. These include:
1. Human-Centered Banking – Human-Centered Banking employs the use of mobile organized banking centers that go directly to rural and low-income areas to offer banking services. This approach eliminates the need for a physical branch and provides services to those who don’t have access to a bank.
2. Advanced Biometric Authentication – Advanced Biometric authentication such as Iris and Voice identification allow unbanked people to be identified using their voice and eyes, providing a level of security that can be trusted but also be simpler than the existing identity methods that require documents.
3. Digital Wallet – Digital wallets are becoming increasingly popular and are a great way to offer banking services to the unbanked population. They provide a secure and convenient platform to store, spend, and receive money from, eliminating the need for physical cards and passwords.
4. Agent Banking – Agent Banking is a system that uses intermediaries such as shops and other stores to provide basic banking services like cash withdrawal, deposits, and payments, to those who don’t have access to a traditional bank.
5. Community Initiative Banking – Community Initiative Banking leverages the power of organisations and small collective groups to create large-scale financial inclusion initiatives.
To wrap things up
In conclusion, there are anumber of solutions available to provide banking services to the unbanked population. By using advanced online services, as well as creative solutions such as human-centered banking, agent banking, and community initiative banking, the unbanked population can gain access to the banking services they need.
By working together to find innovative solutions, it is possible to create a more inclusive banking system that provides the necessary secure access to financial services to those who are currently left behind. This will help create a more equal society, reduce poverty and inequality, and improve the quality of life for those living in underserved areas.
