From Exclusion to Opportunity: The Untapped Potential of 1.6 Billion Unbanked Individuals

I'm very excited for our next guest.

He is Alessandra Hattami, co-author of Inclusive Finance How Fintech and Innovation Can Transform Financial Inclusion.

OK, this is a topic that is really near and dear to my heart.

So tell me about a little bit about this book and what inspired it.

Well, uh, Megan Johnson and I.

The my co-author have been working in financial services transformation for many decades, and we realized that technology can really enable financial services in ways that were not possible before but we also realized that as people get adopting financial services segments that get increasingly excluded because if you're going from a cash-based society to a non-cash society, there's people who are um.

If they're not banks, they actually become even increasingly excluded.

So we said, but is that a fact?

Is that technology truly a barrier to exits to entry for um set individuals?

And we think the answer is no.

And I think what we wanted to say in this book is that financial inclusion with the use of technology and the use of a changed mindset and the providers could become a really interesting segment that providers of financial services should be exploring because there's ways that it can benefit them financially.

It can be an incremental segment.

So, uh, if you look at the world, we have about 1.6 billion people that are on banks.

So imagine if you go to any financial providers said, would you like to have 1.6 billion people new customers?

I think it would be a resounding yes, yes.

So I would love to hear maybe you have some examples of how technology can do this.

Well, the, the best example of all is the one that is quoted most often, which is MESA in East Africa.

Um, this was a situation where um people working, coming from the rural environments came to the coming to the cities had no effective way of sending money back home.

So what happened is that they.

They were able though to send mobile phones back home, so they were networks that they were able to serve to reach the, the, the, the rural areas where they were coming from.

So people in the cities use their mobile phones to send minutes to their wives or partners phones in the villages and then these people locally would convert these minutes into cash by selling airtime to their their neighbors and that became a means of transferring information once Vodafone realized that that was happening.

Um, they just realized, OK, why don't we allow cash transfer?

So the phone became a means of money transfer.

It also became a point of sale device for smaller retailers that we work based on the rural environment, and it became so powerful, it's so effective, it became bigger than the.

Globally than the actual economy of of uh Kenya and Tanzania for a while so became the biggest um um financial proposition there and that's just an example how do you use technology in a creative way to address the segments need, the segment being beyond the banks.

Yeah, well, that's wonderful incentive because oftentimes when people hear financial inclusion they're really thinking of it as like charity, but this is actually a financial opportunity, a big financial opportunity.

I think it's absolutely is as we said it's 1.6 billion people.

Would you, could you imagine somebody coming to you and saying, would you like 1.6 billion new customers and you say no to that's, yes, obviously not, um, the financial benefit the benefits of financial inclusion are actually threefold if you want.

So the first one is the social benefits.

So if I'm an, I don't have a financial product, I cannot really live my life to my fullest.

I cannot own things, I cannot grow my business if I have one, I cannot receive payments and so on.

So there's the social benefit.

The social benefit then leads to the economic benefit because if I start receiving money and I become wealthier actually contribute to the welfare of the country, so the economy becomes larger thanks to my contribution.

But last but not least is the one that most people forget about provision of these services to these segments can be a profitable means of new new product proposition and what I'm suggesting when we what Megan and I suggesting in this book is.

Uh, what should you do as a big financial services provider to look at serving these segments in ways that are beneficial to them but also reasonably profitable to you?

So I'm not saying take advantage of these segments.

We're not saying that at all.

We're saying how can you create products that allow these people to do the basics of finance, so send and receive payments, for example, um, and then once you have a bit of excess, how do I save?

How do I protect this?

I do a savings account or maybe buy a pension, maybe even consider investing.

And if I have a business idea and I'm a bit short of capital, can I reach out to this financial provider to get a loan to start my business, to open my shop, to buy my home, and so on and so forth?

So all these three things can be brought in together and serving a segment that could really benefit from a bit of help and actually.

Improving their quality of life, right, it's a win-win because it's new revenue streams, right?

And then for this segment they really have to pay a premium by being absolutely.

If you look at, for example, in America there's about 1 million people that are unbanked and about depending on who you listen to between 5 and 20 billion on underbanked individuals.

A lot of these people get still paid in checks.

So they have to get this piece of paper and go to a check cashing environment and they will cash these checks for them, but they will charge a price.

So they're not, not only are they paying taxes on their income, they're also paying a premium to convert this digital piece of payments in in a check into something that is cash.

And why should that be?

Why can't these people be provided a simple payment solution that allows them to receive payments in it.

There's a lot of ways about dealing with it, and I think what we're saying in the book is a lot of these things, some of these barriers are real, so maybe it's not gonna be 1.6 billion people, it's gonna be 1.4 billion people, but to be able to serve that smaller segment of people who are on bank, we need to do two things.

One is look at what technology can provide and also secondly is to think about the mindsets that the providers have about the.

Segments cannot be served.

How can we help them shift the paradigm and think differently about a segment that is so promising?

So is that the big barrier?

Is it just a shift in mindset?

Like why haven't we seen?

I I've been working in financial transformation for many decades, and you realize that the actually legacy mindsets are sometimes the biggest bigger barrier than technology.

So helping people realize that don't look at these the segment as a something that you have to help because it's a good thing to do.

Think of them as a as an interesting potential that how can I do to help them?

How can I find a way that my business can benefit from serving this segment and all of the other benefits are.

You know, cherry icing on the cake, you know, what about me as a, I, I'm not a financial institution, but if I'm a reader and I say I would like these people to have these services, is there anything that the average reader can do?

Well, there's a lot of.

Profit organization that you can collaborate, but more importantly is make it visible make people here that we are leaving these people behind and as we become more and more of a digital financial services economy worldwide, what happens to the segment if they're not backed and what is that we can do to do that?