- …..the case for managing the imperatives of financial inclusion
In developed countries, there is a greater awareness of the positive role financial inclusion can play in empowering the low groups for economic development. Official policies in these countries actively promote inclusive practices, going as far as to give them statutory sanction. Clearly, there is much to learn from both international development partners and the experience gained within countries which have made serious impacts with the financial inclusion practice.
Besides, building inclusive financial systems and allowing access to them is a goal that’s relevant to economies at all levels of development. The primary objective lies in making financial systems available to all and ensuring that as many people as possible enjoy access to a financial system, thereby tapping the full potential of the economy. However, critical attention needs to be devoted to enhancing the quality, reach and range of financial services and credit, savings, insurance payment systems for sustained growth and productivity of all citizenry.
Evidently, many shops now sell their products via well-established websites and market places like Facebook, LinkedIn and Amazon instead of creating their own websites. Travel websites, for instance, immediately allow one to book hotels, buy tickets and travel insurance, and book airplanes. These movements are driven by customer expectations and experience. The customer wants a fluent end-to-end experience, which does not include having to go to specific websites and install separate mobile app to access solutions.
The drive for financial inclusion reflects a deep call and concern for increasing change in customer needs and expectations with regulatory pressure for systems compliance, new technological breakthroughs and new architectural design principles. The trends for open banking and insurance, data capturing, experience banking enforce each other for the financial industry to be financially inclusive. An all-inclusive agenda thrives on collaborative partnerships with some basic common goals and expectations. Indeed, in the financial inclusion space, access to data sharing, integration of products, expansion of third party app or web access, lead generation and internal partnerships are all aimed to bring about win-win solutions.
The desired results of any state, generally, is where conditions and resources are used to continue meeting human needs without undermining the integrity and stability of the natural system order. The financial ecosystem with its sustainability agenda has had a chequered history over the decades. Discovery leadership talks about sustainable development through the management of key imperatives for financial inclusion.
An Overview of Development
Development is a value-laden issue demanding explicit analysis and understanding. From the perspective of economic development, all efforts that seek to improve the economic well-being and quality of life for a community is regarded as a developmental agenda. This is achieved by creating and retaining jobs and supporting or growing incomes and the tax base. The approach to economic development encompasses improvements in a variety of indicators such as literacy rates, life-expectancy and poverty rates.
However, for any country to experience economic development in any form, it is imperative to see economic growth as a fundamental pillar. For companies to invest so an economy is able to grow, stable environments, efficient institutions, functioning markets and access to sustainable financial services are all essentially required. More importantly, to enhance the right competencies for dynamic economic development means tailoring the people’s needs to strong practical relevance, and integrating as many population groups as possible into the broader economy so to ensure a broad effect on growth and sustainability.
The Financial Ecosystem
The financial ecosystem encompasses the entire range of market players in the financial system, having a role in different and sound capital allocation to sustainable, value adding projects by matching savers and investors. The ecosystem in the financial services industry is a logical evolution of a number of trends.
The trend to be more open with regard to data is fundamentally crucial to well-functioning of the ecosystem. The practice speaks to ensuring that companies move ownership of data from the company and make it much more accessible, in order to meet the legal requirements of a user’s right to inspect or access and correct or transfer his data (portability). Banking and insurance initiatives fit perfectly in this trend.
The increasing need to be agile and fast to market is another common feature in the ecosystem. Here, financial services companies which lack flexibility and have a culture of risk-adversity (no culture of innovation) need to partner with small companies (fintechs) which can bring innovations much faster, and can better deal with the risks associated with new products and services. The companies without adequate resources are forced to partner with existing institutions with larger customer bases.
Meanwhile, technological evolutions like cloud and developer portals equally make partnerships and ecosystems much easier to set up, as it becomes easier to expose internal services in a secure and controlled way to the outside world. Furthermore, technologies like cloud, micro services and containers allow for startups to be much more scalable and meet other non-functional requirements like security, availability and performance.
Increased transparency and facilitation in finding the right offer presents another critical point. Customers tend to compare more and more the offers of different financial institutions, with marketplaces and online. As a result, financial service companies are forced more and more to be present on these digital platforms where demand and supply is matched.
Additionally, the drive for innovation is a considerable factor in the financial ecosystem. As innovation becomes more and more costly due to increased complexity, it becomes difficult for players within the financial services to build every innovation service or product on their own – hence they must invite partnership support from third party companies with different services offerings for synergistic impact. This allows a financial services company to invest in multiple innovation products and services without having to do enormous investments and undergo a big digital transformation, which is costly.
Financial inclusion is one of the biggest challenges in the world of economics. It is enabling the delivery of banking services at an affordable cost to the vast section of disadvantaged and low income groups. The idea behind the concept seeks to promote affordable, timely and adequate access to a wide range of regulated financial products and services. Financial inclusion has a long-run impact on human capital development as well as its short-run impact on economic growth.
Unrestrained access to public goods and services is the sine qua non for an open and efficient society. Banking services are essentially for the public’s welfare. It is therefore imperative that the availability of banking services to the entire populace without discrimination should be a prime objective of the public good. Financial inclusion has positive externalities which lead to increases in savings, investment and thereby spurs the process of economic growth and enhancement.
Arguably, with a majority of the people being beyond the scope of the formal financial system, their savings remain untapped and their credits needs remain unfulfilled. The keys to accelerate financial inclusion for this group stems from the fact that policymakers must play a multi-faceted role in balancing promotion, protection and stability to propel socioeconomic development and bring this group on board.
The financial inclusion agenda must however be aimed at building the capacities of companies and economies to expose their services to the outside world, so that external partners and competitors can use these services to bring added value to their customers. Financial inclusion usually thrives on good collaborative partnerships with the underlying considerations: that partners must culturally fit; have roles and responsibilities clearly defined; ensure good communication between partners; and act as the model for a win-win situation for all parties.
Sustaining the impacts of financial inclusion
Sustainable development goals have targetted the strengthening of financial inclusion as a critical policy priority to advance the course of governments for many countries. By this, the confidence, information management quality enhancement for transactions of vulnerable communities in the economy receive a boost and restoration.
The Financial markets continue to act as the primary directors of economic activity in a global society, but they also have an important societal role in encouraging investments that are beneficial to natural and human ecosystems. In this financial space, behaviour is influenced by the availability and price of capital finance and sustainability factors. Meanwhile, the quest to leverage financial inclusion to the advancement and sustainability of the economy provides practical tools to advance the conversation to critically look at the importance of increasing social responsibility in economic activity.
Managing the Financial Ecosystem
- 1. The financial ecosystem should be powered by a tangible platform, built and maintained by a central party that acts as the digital and governing partner and owner of the ecosystem, but can potentially also be a player or partner on the ecosystem. The platform ensures a fluent exchange of information between actors in the ecosystem, enforces rules and takes care of the monetisation of the interactions. The ecosystem can be closed but would be best as open as possible.
- The most successful ecosystems bring together players from different industries which previously had little to no direct interactions. To ensure a win-win relationship for all involved parties, each party should have a clear benefit of being on the platform (reducing costs, branding, extra revenues). The ecosystem must ensure each party creates value for at least one other party. This means that an ecosystem owner should not fear removing partners which are not being used, as they will create confusion and overheads.
- Remove friction as much as possible on the platform. This means the users’ experience should be much more fluent, compared to them accessing each partner separately. The ecosystem should have a clear strategy and scope relative to improving the user experience around specific products, services or use.
That notwithstanding, all these practices still cannot guarantee success of the ecosystem – but are good for practicing best user experience and most compelling offers to ultimately make it survive.
Transforming organisations through Financial Inclusion for Sustainable economic development
With the financial industry undergoing its most fundamental transformation in decades – driven by the fast digitisation in the sector, the entertainment, media and retail industry, and the Internet – has changed the way of doing business completely.
Players within the financial ecosystem are advised to shift from building end to end solutions to best of breed products and services tailored to meet the customer needs. This means the traditional product-centric distribution should be transformed to services-providing, deep financial insights and integrating services of other sectors. This innovative drive will ensure the customer is in the driving seat to choose the functionality or services that suits him best. Once customers can switch from one service to another easily, it boosts efforts for innovative results and coming out with new service offerings which are superior in terms of cost, performance and convenience.
A robust financial ecosystem is likely to ensure a significant impact on organisational and economic wellbeing where bridges between business and IT functionalities are elevated and enhance greater accessibility of products and services for all.
In conclusion, the prevailing conditions for financial inclusivity are not a choice – because every individual who desires to live life in full and to realise his or her potential must take advantage of the various financial services available; and leverage appropriate technologies such as the Internet, mobile phone and so on to advantage. It is axiomatic to emphasise that all well-functioning financial systems boost economic growth, which reduces poverty. Therefore, the financial market imperfections such as high transaction cost flowing from asymmetry of information must be addressed by well-functioning financial systems to improve sustainable development and wellbeing of the people.
Discovery….Thinking solutions, shaping visions.
ABOUT THE AUTHORS
Frank is the CEO and Strategic Partner of AQUABEV Investment and Discovery Consulting Group. He is an Executive Director and the Lead Coach in Leadership Development and best Business Management practices for Discovery Leadership Masterclass.
Dr. Obuobi is a Banker/SME Consultant and Leadership Strategist