The global economy is a complex network of transactions and connections in which financial services play a critical role in fostering growth and progress. Despite the importance of accessing economic opportunities, millions of people worldwide still find themselves excluded from traditional financial systems.
Financial inclusion has emerged as a pressing issue in the banking industry, aiming to ensure that underserved communities have access to the financial services they require. According to the World Bank, a staggering 1.7 billion adults around the world lack access to formal financial services. In the UAE, an astonishing 85 percent of adults use at least one form of financial service, leaving the remaining 15 percent financially excluded, as revealed by the 2020 Central Bank of UAE survey.
The absence of financial inclusion can lead to various negative outcomes, including difficulties in saving for emergencies, inability to invest in education or business, and increased vulnerability to financial upheavals.
Enabling Financial Wellness
Envision a world where everyone, regardless of their background or income, has access to essential financial services, empowering them to create a better future for themselves and their communities. This is the vision of financial inclusion, a core concern in today’s banking sector. By granting access to financial services for underserved communities, banks can empower individuals to save for the future, invest in education and business ventures, and build financial resilience. Ultimately, this improves the quality of life in underserved communities and drives economic growth and development.
Banks are also taking steps to help underserved communities become more financially literate and responsible. They offer financial education and training programs through mobile apps, and design financial products and services that are user-friendly and easy to understand. For example, Liv., a digital bank targeting a youthful demographic, offers a range of blogs and in-app resources to enhance financial literacy.
Boosting Financial Literacy
By empowering underserved communities to better understand their financial options and make informed decisions about managing their money, banks are enhancing financial inclusion and building more resilient communities.
The banking industry is committed to bringing financial services to every corner of the world, including underserved communities, and is dedicated to incorporating cutting-edge technologies to achieve this goal. Data, data analytics, machine learning, and artificial intelligence have become indispensable tools in the pursuit of financial inclusion. Banks are now using non-traditional sources of data, such as payment history for utility bills, to better assess the creditworthiness of individuals without a traditional credit score.
This means that more people, who were previously deemed ineligible for credit, can now access financial products and services that meet their needs. Furthermore, these technologies enable banks to effectively manage risk while addressing the financial needs of underserved communities.
The Power of Technology and the Cloud
The banking industry is turning to cloud data management platforms to address issues surrounding financial exclusion in underserved communities. Cloud-based platforms enable easy access to the necessary data for banks to gain a better understanding of these communities’ financial needs and behaviors. This knowledge helps banks design products and services tailored to their customers’ unique requirements.
In certain regions, mobile banking apps are revolutionizing financial inclusion. With smartphones becoming ubiquitous, these apps provide a convenient way for underserved individuals to access financial services, even in areas without traditional banks.
Ultimately, by leveraging data analytics, machine learning, and AI, banks can now target these communities more effectively, creating products and benefits that cater to their specific needs. This leads to reduced client acquisition costs, making financial inclusion efforts more profitable. These technologies not only promote financial inclusion but also drive earnings and profitability for banks by expanding their customer base. It’s a win-win for all involved.
Authored by Karim Azar, Regional Vice President of the Middle East at Cloudera.