Digital transformation, whether for organizations or across a sector, is hard work. It requires patience, attention to detail, and a willingness to be in a perpetual mode of evaluation and learning. In the area of financial services, digital transformation is making huge gains at record speed.
As the CEO of NetHope, I have personally witnessed this through our financial sector work and while driving collective impact with our members and partners. We launched our work in the sector in 2011, at a time of global conversation on the potential of financial inclusion as a tool to reduce poverty and build resilience. Through expanded service offering and global support, 1.2 billion adults have now opened financial accounts, which means 69% of the world’s adults are now financially included. These gains were fueled in large part by such digital transformation, especially in developing economies and particularly in sub-Saharan Africa. In my travels, I have witnessed how mobile money offers an entry point to the financial sector for women in Kenya selling their produce in a marketplace and for entrepreneurs who need access to micro-credit to help address monthly cash flow fluctuations.
As we enter our eighth year of work in the financial sector, I am struck by how NetHope’s work has evolved along with the digital transformation in financial services delivery. Looking back, I see three phases to our work:
- Facilitating the global conversation on the value of digitally enabled financial inclusion.
- Focusing on the how of digital transformation.
- Bridging the gaps in the financial services ecosystems in emerging markets.
Facilitating the Global Conversation
When we began our work in 2011, we joined the global conversation on the role of digital technology in deepening the reach of financial services to those excluded. Our work centered on building understanding on why digital payments were “better than cash.” We established a working group among our NGO members to begin to build organizational capacity on digital payments and to learn from organizations pioneering use of mobile money in places like Haiti and Tanzania. We developed guidance that addressed treasury level fears about using non-traditional payment methods that rely on the mobile phones and kiosks of agents rather than bank branches.
Focusing on the How
As the global conversation advanced, consensus emerged on reaching universal global financial inclusion, set ambitiously by the World Bank as a 2020 goal and at the country level by regulators adopting financial inclusion strategies. With this, NetHope’s work moved from the question of why digital financial services is important to how to make it happen. We conducted and published market assessments on the landscape for digital payments where our members work, including Kenya and Tanzania. We developed and launched the e-Payments Toolkit in 2013, a public resource that uses best practices to build tools for development organizations making the journey from cash to digital payments and advance digital financial inclusion. (It is one of our more downloaded resources.) We awarded a series of grants that allowed organizations to digitize their payment processes and, through Visa-funded innovation grants, funded organizations to test innovative application of digital payments in health, agriculture, and microfinance. Through this work and as best practices developed, frameworks were developed for facilitating digital transformation in financial inclusion. This included our leadership in developing principles with the humanitarian community for use of financially inclusive digital payment products in cash assistance.
Completing the Market System
While digital financial services took stronger hold globally, the gains are not uniform, and areas of exclusion continue to exist, especially for women and rural populations. Therefore, we began to focus our work on the gaps in the market systems at the country level. Inclusive financial systems require coordinated effort by key stakeholders, including regulators, suppliers, and consumers. Increasingly, our role is implementing programs at the local level to bridge the capacity gap between financial service providers and underserved market segments. In Indonesia, our eMITRA program helped build capacity of banks’ use of agent banking supported by regulatory reform. In Uganda, our work on digital financial education with smallholder farmers expanded their use of mobile money and offered insights to providers on bundling new services. In India, we are supporting acceleration of merchant acceptance points for digital payments by a range of service providers.
As we continue to mind the gap in financial inclusion, the toughest challenges are ahead of us. Challenges in serving populations outside the urban core where population density may be sparse and sources of liquidity scarce. Beyond account opening, active account use will require continued innovation in offering services that are relevant and affordable. Mainstreaming gender in our financial sector programs will be essential for the gender gap in financial inclusion to finally begin to fade. While we are making impressive gains in financial inclusion, we can’t just celebrate yet, as 1.7 billion adults still lack a financial account. Transformation takes time, but if past is precedent, universal financial service is within our reach.