February 3, 2017

Financial Inclusion & Digital Platforms

Financial Inclusion is undoubtedly one of the most important milestones that must still be attained for sustainable growth of the world population

since it doesn’t only close the gap between the rich and poor, but also because access to the formal financial system allows for proper integration of the different actors in a country’s socio-economic system.

“Over 2.5 billion people are unbanked” – Juan Carlos Teran-Vela, General Manager Inteca Ecuador

It is estimated that today about 2.5 billion people worldwide don’t use formal financial services provided by the financial sector. Out of these, more than 1.7 billion people have a cell phone.

Looking at service providers, we can split experiences across the world into 3 models of Mobile Banking:




Transactional platforms for mobile wallets have been adapting to the realities of each country. Over several years, the Alliance for Financial Inclusion (AFI) – through a decision called the Maya Declaration, formulated in 2011 – has formed a measurable set of commitments to increase financial inclusion, setting goals to increase access to formal financial services for the 2.5 billion unbanked in the world.

Countries like Colombia, through Law N. 1735, Peru with the issuance of Law N. 29985, Ecuador through Resolution JB-055-2014-M, Paraguay with Executive Order 1971, and Uruguay with the enactment of law No. 19210; have become major players in the new digital wallets payment ecosystem with clear state policies for financial inclusion. I deliberately avoid the use of “electronic money” since it can generate comments regarding the currency per se, and that’s not the subject of this article.

Another very important pillar to consider is financial education, a sine qua non condition for real financial inclusion to happen. I recently attended the CLEIF 2016 congress held in Montevideo, organized by the Latin American Federation of Banks (FELABAN); all the initiatives that the countries in the region are pursuing are highly disruptive and innovative, seeking that these new customers who join the formal financial sector have the necessary tools to avoid problems of over-indebtedness and that there’s specific and focused management of the credits to be granted, so as to generate a process of actual creation of new micro and small enterprises (SMEs) and that fosters entrepreneurship.

I believe that the challenges facing the banking and the cooperative sector in Latin America can be summarized in seven key points:

Technological development, innovation, changes in consumer trends, macroeconomic environment, regulatory reforms, risk management and demographic changes.

One of the biggest challenges for financial institutions in the coming years has to do with changes in consumer trends; the consumer is more informed thanks to the Internet and therefore demands new forms of customer care, requiring increasingly disruptive digital platforms.

“Financial institutions that don’t capitalize on the benefits of technological innovations will be left behind”

This is precisely why I believe that innovation and technological development are such relevant dimensions for financial institutions in the future, contributing to improved offerings or greater operational efficiency. Financial institutions that don’t capitalize on the benefits of technological innovations will be left behind.

Change is constant, and technology is making financial services focus on solutions provided “As a Service”: Software as a Service (SaaS), Infrastructure as a Service (IaaS), Identity as a Service (IDaaS). Business concepts based on cloud and Big Data reflect the cost-effectiveness of processes from innovative technological solutions, which – unquestionably – set the standard to follow in the orchestration of the services that Latin American customers are seeking from their financial institution. There’s no doubt about this.

“Technology has become a vital tool for financial inclusion”

Also, as in any service industry, distribution channels allow financial institutions to market their products and take them to the customer in different ways. Selecting the right distribution channels is crucial to understand that the services delivered through efficient and reliable technological platforms create a competitive advantage and an opportunity to expand their business at a faster rate than organic growth.

There’s no doubt then that technology has become a vital tool for financial inclusion, because of its potential to reduce and streamline the cost of financial transactions, allowing financial intermediaries to provide products and services to sectors of the population where the establishment of traditional channels presents very high operating costs.

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