Guest Articles

January 17

Josh Gosliner

2020 Will See Mass Market Adoption of Financial Inclusion. Here’s Why.

For many years the idea of financial inclusion has been considered a social initiative, part of corporations’ “doing good” role. But it’s becoming increasingly clear that companies that see financial inclusion as a corporate social responsibility (CSR) initiative aren’t taking financial inclusion seriously. CSR budgets are some of the first to be cut when companies or economies hit rough patches. As a result, their CSR efforts are at risk of falling short, and they’ll likely miss out on the business opportunities that exist. On the other hand, a business unit serving the underbanked that is profitable, is inherently sustainable. At the end of the day, there has to be a bottom-line incentive for companies to direct the necessary resources to the problem.

I work for a company that, while headquartered in Silicon Valley, works exclusively in emerging markets. At Juvo, we’re focused on building financial identities for individuals who are “off the grid” to the formal economy because they conduct most (if not all) of their transactions with cash, outside of the banking system. As part of my role of overseeing market strategy, I have the privilege of getting to work directly with mobile network operators, financial institutions, government regulators and individual consumers across many different countries all over the world. It’s proven to be an interesting vantage point from which to watch the transition towards financial inclusion – and the business opportunities this is generating.

The last several years have seen the emergence of an exciting new paradigm, as we have discovered the value of applying alternative data sources to customers who have previously been overlooked. For example, Juvo is using data from mobile network operators and consumers to build financial identities, with various forms of aggregated alternative credit data. This represents a transformative opportunity for financial inclusion. Rather than creating new solutions or new companies to address the issues of financial inclusion, we’re now able to empower existing institutions to better serve the markets they are already in. Based on conversations I’ve had with financial service providers, enterprises, telecom operators and government officials all across the globe, I see immense possibilities ahead for financial inclusion in 2020. Below I’ll discuss three trends that are likely to shape the sector in the coming year.


Financial Inclusion Will Move Past CSR to Become a Mass-Market Opportunity

As I mentioned above, financial inclusion is often lumped in with charitable initiatives. But in the coming year, more companies are likely to realize that this approach misses a massive market opportunity – one that’s adding billions to global GDP, according to recent research. Oxford Economics estimates that by addressing the issues around financial identity for the world’s unbanked, we can effectively increase the world’s GDP by US $250 billion every single year. That translates to a $512 billion increase in global household savings and a $400 billion boost in household credit.

Never before has technology been as capable of delivering sustainable, measurable market value for the unbanked. Through advancements in cloud scalability (now nearly ubiquitous), data collection and data discovery (as companies of all sizes are prioritizing their data management and business intelligence capabilities), there is a viable pathway for building identities for the previously anonymous unbanked and financially underserved.

The most exciting part of this is that the Oxford Economics data – as impressive as it is – represents only the beginning. It’s incredibly difficult to accurately measure the numbers of anonymous individuals in the world, and so any data related to the unbanked is, at best, a guess. But as more data comes in, as opportunities continue to unfold for individuals in emerging economies, the addressable market for financial services will skyrocket. As part of this process, mobile operators – who have long had the best access to individuals in emerging economies (and the most complete data on these customers) – will begin to leverage that data in partnership with financial services companies in ways that will prove beneficial to both partners, helping them to find new customers and build additional revenue streams.


Challenger Banks Will Take Center Stage

Challenger banks – i.e. newly established digital banks that provide customer service through digital channels at a much lower cost of delivery – are gaining significant momentum in both developed and developing economies. This will continue in 2020, and we’ll see these banks put additional pressure on their traditional counterparts to rethink customer engagement and digital services.

This is particularly exciting in emerging economies, where challenger banks tend to already realize the massive business opportunity inherent in financial inclusion. Digital banks enter the market at a substantially lower cost, free from the burden of infrastructure and capital costs. Moreover, their modern technological architecture enables them to connect to more third parties – for example, leveraging alternative data for real-time credit decision-making.

In 2020 we’ll see well-established digital banking markets, such as Mexico and Brazil, pave the way for other emerging economies to follow suit across Latin and South America, as well as in the Asia Pacific region.  In response to this transformational movement, government regulators will also find new ways to make digital banking licenses easier to get, encouraging competition among all players. In fact, we may see regulators from emerging economies drive strategy for more established economies, as they seek to open digital banking services up to all of the people they represent.

Challenger banks have enormous potential to shake up the financial industry, particularly for previously anonymous or underserved individuals, in every corner of the world.


Data Privacy Will Start to Shift from Regulatory Compliance to Consumer Control

While financial inclusion shouldn’t come at the cost of data privacy, regulatory frameworks are currently presenting challenges for the continued advance of financial access. Frameworks created to protect the privacy of fully banked customers in well-developed markets are now being applied to developing markets, where the bigger challenge is that a lack of financial history data among unbanked individuals is preventing them from accessing financial services in the first place. But as data regulations mature, there will be greater recognition that we cannot solve data privacy issues on a global scale by using a limited, regional point of view. There simply isn’t a “one size fits all” approach to the dilemma of data privacy versus financial inclusion.

However, it’s also important to recognize that the previous “anything-goes” approach to online privacy is currently undergoing a shift. Governments are starting to catch up with widespread internet usage and are working to avoid the scenarios we’ve seen in recent years, in which companies like Equifax, Facebook and Target have grossly violated public trust with their exposure or misuse of consumer data. In the coming year, as digital financial services proliferate, consumers will be able to realize the value of making their data available to the right people at the right time, to open up access to new products – from credit to insurance – designed for the underbanked. Technology can and will be a benefit in making greater data control possible, and in 2020 we’ll see more opportunities for anonymized, aggregated data that can still deliver powerful value to individual consumers and companies alike. As emerging economies continue to develop, one can only hope that common-sense regulations will enable these technological advances to deliver on their promise of greater financial inclusion.

While this is more a hope than a prediction, I’d like to see regulators look at the needs of their citizens, not simply copy and paste regulatory frameworks from different parts of the world where consumer priorities are quite different. Data privacy is a luxury for those who live in economies where a lack of data, in the form of financial histories, is the status quo. Empowering these emerging customers to make decisions on how companies can use their data will create new opportunities for both consumers and providers of financial services. Working toward a world with greater freedom of movement of data has the potential to advance a more transparent and inclusive financial system that benefits everyone.


Josh Gosliner is Senior Director of Market Strategy at Juvo.


Photo courtesy of Aiconimage.




corporate social responsibility, financial inclusion