10 reasons why Financial Inclusion is key in today's hyper-competitive banking landscape
Let's start with the story of everyday people; John and Jane. They're a hardworking family living in a neighbourhood without a nearby branch of the bank in which they have an account.
There was a time when they would have had to spend hours on public transport to get to the nearest branch, posing difficulties (and possibly security risks too) in managing personal finances.
But one day, a positive development comes about. The bank has released an all-new mobile banking app that lets the family manage their finances and payments end-to-end securely, entirely from their phones!
With this new degree of access, they can deposit their respective earnings securely, pay bills well on time, and even start monthly savings and investments towards supporting their children.
The adage often goes 'Time is money'. But in today's competitive world, spending either resource is one and the same. People's lives are transformed dramatically by rendering their financial journey smoother and more accessible. And that's what financial inclusion centres itself on.
Financial inclusion is not just about transformation through technology; but about breaking down obstacles in the end user's financial paths, empowering them, and creating a world letting everyone participate fully in their economy, regardless of their origins or whereabouts.
And in today's hyper-competitive banking landscape, financial inclusion is critical for 10 compelling reasons:
Economic Growth and Development
Put quite simply, the more the economies are financially inclusive, the greater the economic growth and development. With greater financial inclusion, people and businesses have enhanced capabilities in their ability:
The aforementioned areas are faciliated when people have access to formal financial services such as savings, credit, insurance, and payment systems. In the process, the economy advances as a whole.
Rectifying Poverty and Inequalities encountered
Reducing inequality and poverty entails having financial inclusion as one of the main pillars, if not the foundation itself.
Low-income and marginalised groups are limited in their means to save, invest, and obtain credit. Given this, financial inclusion empowers such groups to advance to a better quality of living. Fostering more equal opportunities for social and economic advancement can facilitate the reduction and end of the cycle of poverty.
Stabilising Financial Systems as we know it
Greater stability of financial systems calls for less reliance on informal, and potentially risky financial channels. In promoting greater transparency and accountability in the financial environment, financial inclusion can prevent crises and protect consumers from predatory practices, particularly in areas such as lending, which when abusive, can cripple their financial stability.
Access to Formal Credit
For lack of collateral or credit history, access to formal credit is a frequent struggle point for small and medium-sized businesses (SMEs) and individuals. Financial inclusion renders this possible, in turn spurring entrepreneurship and accelerating economic growth.
Digital Transformation
in today's fluid technological environment, digital financial inclusion is becoming more and more of the essence. For remote/rural areas that lack the traditional infrastructure (such as brick-and-mortar banking), digital banking and mobile money services provide value solutions to reach underserved populations in practical and affordable ways.
Financial Literacy and Empowerment
Knowledge is indeed power, empowering people with the information they need to make wise financial decisions improves money management, boosts savings, and lessens vulnerability to financial shocks. Financial inclusion doesn't just entail ensuring access to financial services; it also entails ensuring that the people such services are catered to have financial literacy and education.
Social Welfare Programs
Vulnerable populations can be more effectively supported by governments and social welfare organisations via the use of digital payment systems. This is achieved by financial inclusion's principles in:
Innovation and Competition
It's an economic principle that a country's standard of living depends on its ability to produce goods. With financial institutions now having access to previously underserved segments of the population, new markets and opportunities open up. This incentivises new ideas for the creation of goods and services, which in turn improves customer satisfaction and strengthens a company's position in the market.
Data-Driven Insights
With the sale of goods and services come transactions, and with those transactions; data. The data generated from these transactions can provide useful insights and analytics into consumer preferences and behaviours as financial services become more digital. Designing more specialized and efficient financial products and services is possible with the help of this data.
Regulatory and Policy Objectives
As a goal of policy, the cruciality of financial inclusion is acknowledged by a host of nations and international organisations; with regulations and policy initiatives frequently created to incentivise inclusion and guarantee that all citizens have access to financial services.
In a nutshell, financial inclusion is a strategic impetus towards economic growth, stability, and social well-being, and is also a moral requirement. Institutions placing an emphasis on inclusive practices and utilising cutting-edge technologies are better poised to meet evolving customer needs while also advancing broader societal development in a competitive banking environment.