Leveling the banking playing field for the masses

Banked, underbanked and unbanked. Clear and self-explanatory labels, right? Well, not exactly.

Banks need to recognise the different market segments between unbanked and banked, and stop making assumptions about what either group needs

Despite popular belief, being banked does not necessarily mean you are not underserved. Being unbanked is not the same as having no access to financial services, and choosing to not use a bank can still mean that you are banked. As you can see, it’s the nuances that really underline the lack of basic knowledge from both consumers and banks. But the real question is, what does it all mean?

Stripping it all back to its essence, it is about financial inclusion and accessibility. Regular reported data often points to emerging markets and geographical barriers as limiting to financial access. While this is a critical and central component to the issue, the gap in accessibility on a global scale is often a grey area that spans beyond what meets the eye.

Over the past decade, advancements in technology have brought financial services to a group of new users with more smartphones than people, yet there is still a gap in the accessibility of critical financial services and products to many. Even with the unparalleled access that mobile phones provide, there are still approximately 1.7 billion unbanked adults globally, according to the World Bank, with 40 million in Europe.

Looking at the state of financial accessibility across several markets, those who find themselves traditionally banked (those that have a bank account) or unbanked may both feel underserved when it comes to accessing and understanding the myriad of financial services that should be readily available to them.

Whether it’s to easily open a bank account, invest or be offered a mortgage, concerted efforts are needed in order to overcome these barriers and pave the way for a fully inclusive financial system.

To get a deeper and more comprehensive understanding of what financial accessibility means to both banked and unbanked individuals, we conducted a global survey of 2,000 people to find out. And our findings clearly highlight the need for increased awareness and education around financial services.

Communication breakdown

Elliott Limb, Mambu: More acute consideration and understanding is required to drive meaningful change

Not only did our research find a financial accessibility gap between banked versus unbanked, it found a gap in understanding of financial accessibility. 81% of banked customers felt their situation would be better if they knew more about how finances worked, with 58% of unbanked customers feeling the same.

Since the abrupt onset of COVID-19 we have seen this come into play, with 77% of respondents noting that the pandemic has demonstrated the importance of being able to understand and access a wide range of financial services. However, we found that according to consumers, financial institutions aren’t taking the necessary steps to boost access for all.

Even looking at rich economies such as Germany, Sweden and Hong Kong, about one in five people experienced a financial shortfall over the past year, with the Organisation for Economic Co-operation and Development predicting that the added pressures of the crisis would put “a severe test on individuals’ financial resilience”.

Though recent developments in technology have brought financial services to more people than before, the state of financial accessibility across several markets tells a different story and has a long way to go.

Turning to tech to personalise

Thinking back to some of the earlier advancements in technology, these led to the development of innovative business models like mobile money reaching the mass market. With a newfound emphasis on personalisation, technology is among the easiest and most effective ways to offer these types of services, automatically attracting a wider customer-base.

Enabled by innovation, fintechs and neobanks are taking the market by storm with customer-centric service models and propositions that educate customers to better understand how their finances work and how to manage their money.

These market disruptors are set apart by their agile approach to adapt their offerings to meet the needs of customers and react to evolving market conditions. Fintechs and neobanks are offering more flexible products and services that better serve a wide range of applicants, for example, by finding new and innovative ways to build credit history and creating products that are fast, simple and user friendly.

From what we’ve seen, banks are not always speaking – or listening – to their customers and potential customers in a personalised way. By missing this trick banks are missing out on understanding the myriad of demands, needs and concerns that individual customers have.

Personalisation is going to be key for banks if they want to avoid being sidelined by new entrants that give more inclusivity and access. Banks need to be using the technology available to understand their consumers’ habits and in turn, anticipate their needs, with hyper-personalised recommendations and services.

If banks flip the script and show their customers the same level of personalised service, regardless of circumstance, they will start to break down the obstacles that hold back unbanked and underbanked people from accessing financial services. From offering more accessible services to financial literacy and education, personalisation plays a vital role in building trust with customers and closing the financial accessibility gap.

Inclusive banking for billions

There is a clear need for better awareness and education around financial services. Banks need to recognise the different market segments between unbanked and banked, and stop making assumptions about what either group needs. It will require more acute consideration and understanding to drive meaningful change.

The fact that challenger banks and fintechs have been able to cause such a wave of change is an important lesson for incumbents, and should prompt swift action to avoid losing relevance.

By Elliott Limb, Chief Customer Officer, Mambu

READ MAMBU’S COMPLETE REPORT ON FINANCIAL ACCESSIBILITY HERE