NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, July 30, 2015

For most of us including Singaporeans, not having access to credit and debit cards is almost unheard of. Beyond the Little Red Dot though, citizens in Asia, Africa, Latin America and the Middle East continue to transact with cash and coins. They are the world’s unbanked who have minimal contact with banks and financial services. Though the unbanked make up about half of the world’s adult populace today, emerging financial technology startups including Singapore fintech startups are amplifying efforts to bring financial inclusion to the unbanked right at their fingertips.

Today the unbanked stand at 2.5 billion people. Across the regions from Africa to Asia, rural farmers, women, the poor and the youth make up the largest pie of the unbanked. They grapple with the lack of access to proper banking infrastructure, tedious documentation and paperwork requirements, resulting in financial exclusion from the global financial economy.

All that is about to change, according to Managing Director at Singapore fintech consultancy firm Coobitsah, May Chuah. With global investment in the burgeoning fintech sector showing significant growth of US$928 million (S$1,273 million*) to US$2.97 billion (S$4.1 billion*) from 2008 to 2014, digital currencies for the unbanked have increasingly become a focal point for traditional banks and fintech startups to approach the money economy in a different light. The unbanked can now remit, save, transfer, loan and purchase goods and services using mobile money.

The Unbanked and Mobile Money

At least one billion unbanked citizens are already on mobile money services accessed through their mobile phones. In Sub-Saharan Africa, a region one would least expect, mobile money accounts per citizen have seen significant growth. A 2014 Groupe Speciale Mobile Association (GSMA) report found that by December 2014, 23 per cent of mobile connections in Sub-Saharan Africa were linked with a mobile money account, whereas smartphone connections only represented 16.4 per cent of total mobile connections in the region.

Similar developments are also surfacing in Southeast asia where 270 million unbanked citizens may already have access to mobile banking via their mobile phones. The Philippines, high in mobile penetration and known to be the third largest remittance market, have been identified as an ideal testbed for startups including Singapore fintech ones to experiment with mobile banking including remittances services for the unbanked. Today, some startups experiment with cryptocurrencies like bitcoins for mobile financial services without the need of banks or other established financial platforms. Telcos and banks in Indonesia, having anticipated the dawn of mobile banking for the unbanked, introduced mobile wallets for daily transactions to citizens early on.