The untapped opportunity of the unbanked


2.5 billion individuals in the developing world do not have access to a bank account. Classified as ‘unbanked’, they are said to present a serious challenge to governments when it comes to lifting their respective nations out of poverty and creating prosperity. Becoming part of the banking system, we are told, is an absolute when it comes to driving an economy forward. But is it really?

We’ve already seen in countries like China, that having access to socially powered mobile wallets has enabled people to leapfrog plastic bank cards, something companies like MasterCard and Visa will battle for years to achieve in the West. Old habits die hard. Could the developing world be an opportunity to leapfrog straight to a better kind of financial inclusion? A better type of banking?

It doesn’t help that the word ‘banking’ comes with some serious baggage. Perhaps it’s better to imagine the emerging markets as a blank canvas for a better financial model. In the future, as long as you have access to affordable and useful financial services, being unbanked might not be such a bad thing after all.

So where are we currently? Well, it’s not as if the developing world is devoid of innovation. In fact, some seriously interesting things are happening there right now.

Mobile Money

The most impactful innovations to date have been in the mobile money space. With 1 billion of the 2.5 billion ‘unbanked’ individuals owning a mobile phone, products in Kenya like M-Shwari, a collaboration between M-PESA and the Commercial Bank of Africa (CBA) have tapped into mobile phone data to make bank account approval and on-boarding as simple as sending an SMS. M-Shwari is entry into the banking system as we know it – giving customers an interest bearing account for saving purposes and access to credit.

But challenges still remain. While ease of access has led to the creation of 9.2 million accounts (7.2 million unique customers), the platform has struggled to get customers to move past transactional type behaviour and into real wealth creation – saving money – pivotal to creating return for both CBA, M-PESA and the account holder.

Although there are some “super savers” on the platform, a World Bank study shows the vast majority use their account for short-term savings only, to smooth ups and downs in cash flow. The average savings balance on all accounts on M-Shwari is 504 Kenyan Shillings (KES), roughly AU$6.88. The CBA itself acknowledges that while M-Shwari has helped significantly in picking up deposits and creating accounts, the bank is typically not able to trade on it because of the high velocity involved.


Before mobile money there was microfinance. And wherever there is poverty, you’ll find some derivative of a microfinance startup – government backed, non-profit, bank sponsored. Even developed economies are now in on the microfinance gig, the US in particular looking to service the 9.6 million households it considers unbanked.

In the emerging economies, two of the more well known non-profits are Zidisha and Kiva , who both leverage people power, via p2p technology, to move money between developed and developing nations for the purposes of microlending.

And yet while the wealth transfer intentions of the microfinance movement have always been admirable, many question whether it is having any material impact. Despite being in practice for over 30 years, a recent study by UK body the EPPI-Centre found that, no clear evidence yet exists that microfinance programmes have positive impacts.”

No clear evidence, after 30 years? Would you continue investing? It probably explains why the sector is dominated by non-profits, and now, even more so by predatory loan sharks dressed up as microfinance providers. The classic wolf in sheep’s clothing.

While the jury may still be out on microfinance, some academics argue that we need to go back to basics. In an article for the Guardian, The Microfinance delusion: who really wins?, author Dr Jason Hickel, an anthropologist at the London School of Economics argues that, ‘direct cash transfers [donations], with no strings attached…appear to be the single most impactful anti-poverty intervention available’. Is this a completely radical idea, or one that a fintech, for-profit startup could experiment with?

Human centred thinking

So far the two big themes when it comes to servicing the underbanked fit squarely within the ‘banking as we know it’ model. The challenge or opportunity, depending on how you view the glass, is to create a new model. One that starts from a human-first approach, rather than trying to fit emerging markets into the saving and lending products we feel most comfortable in.

The reality is that people in developing nations think differently to those in the developed world. They behave differently. They interact with each other differently. They have different problems. To ignore these cultural and very human differences is to miss a unique opportunity to create something truly revolutionary when it comes to financial inclusion.

Proponents of philanthrocapitalism tell us we can bring a businesslike approach to solving society’s problems. As I write this I wonder, isn’t that what business has always been about? Perhaps, we just need a reminder now and then, like we need a reminder about the dangers of bank deregulation and sub-prime lending practices…

I’m under no illusion about how easy it is to be an armchair critic when it comes to efforts to service the underbanked, especially from the comfort of a first world living room. But I do think we need to turn our collective intelligence more in this direction. As they say, a rising tide lifts all ships and, in an increasingly interconnected world, their problems are ultimately our problems. Social and financial issues are not mutually exclusive.

Over an upcoming series of blogs I intend on experimenting with an ideation to implementation process using a practice called Human-Centred-Design. Proponents believe it may hold the key to solving the big issues. It will be interesting to see if I can come up with anything meaningful. I hope you can join me on the journey!

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