A man displays his phone in Kenya.
The use of digital financial services will continue to be one of the main drivers for financial inclusion in 2015. In the Alliance for Financial Inclusion (AFI) Network, we have noted quite a few interesting trends both on the technology side and the policy side that should have a direct impact on advancing financial inclusion through digital means this year.
1. Agent Banking Expanding in Other Regions
While agent banking has been around for several years in Latin America, it will expand quite a bit in other regions, especially Africa, Asia and the Pacific Islands. In the past couple of years we have seen 17 new Maya Declarations by central banks and policymakers around the world focusing on agent banking regulations and targets.
The number of policies and regulatory changes increased significantly in 2014. We are beginning to see the impact of these policies in a number of countries, which are serving as models for other policymakers to look at especially in countries such as Kenya, Tanzania, Bangladesh, Pakistan, Solomon Islands, Papua New Guinea, Fiji and others in the Pacific Islands region—which have seen updates to their policies and experienced significant increases in access to financial services largely due to digital financial services and agent banking.
2. New Changes to National Retail Payment Laws and Regulations
There were 14 commitments made under the Maya Declaration, mostly during 2014, which are related to national retail payment laws and regulations and several other countries are now also updating their policies to deal with new players and new technologies. In 2015, we should see changes in national retail payment laws and regulations that will have an impact on the opening of markets to new financial players as well as new rules that will govern the supervision and oversight of payment systems.
A man walks in Rwanda as mobile financial services clients conduct business.
3. Governments Driving Electronic Payments
Governments in many developing countries will speed up their investments to promote electronic payments in 2015 and this, followed by changes in payment laws and regulations, should be a significant driver to supporting financial inclusion. Commitments by several countries to adopt electronic payments should see an impact in markets such as Bangladesh, India, Indonesia, the Philippines, Nigeria, Brazil, Mexico, Russia, China, Malaysia, Thailand, Afghanistan, Kenya, Malawi, Rwanda, Ghana, Senegal, Peru, Colombia, Ecuador and Uruguay.
See also Developing a Safe and Secure Digital Payment Ecosystem to Promote Financial Inclusion
4. Rise of New Financial Players
New companies are entering the market in a number of countries and expanding their reach. These include e-payment operators like QIWI and AliPay as well as social network operators like WeChat’s WeBank. We are also seeing many new specialized and payment banks that are being established due to recent regulatory changes in markets such as Peru, Brazil, Colombia, Cambodia and India. Expanded use of e-money and e-payments and especially the use of electronic payment kiosks now powering solutions in several markets not only in Russia, Eastern Europe and Central Asia where they have been around for several years but also in China, India, Malaysia, Jordan, Brazil, Argentina, Chile, Peru, Colombia, Panama and even in rural parts of the United States.
5. New Digital Financial Service Partnerships
New investments and joint ventures by banks, payment providers, mobile network operators, social media companies and large distribution networks should likewise drive a new convergence focus on the use of digital means to promote financial inclusion in 2015 and beyond.
A man in Jamaica uses his mobile phone to access financial services.
6. Smartphone Penetration Rates Reaching a Tipping Point
For several years, people have been waiting for smartphone adoption to start to offer a better range of financial services that are more intuitive. Smartphone penetration rates have dramatically increased in 2014 and will create new opportunities and challenges, especially in markets where mobile payments have been set up to operate largely on feature phones. This trend will provide new opportunities and challenges for mobile banking and mobile payments that can have a profound impact on the types and variety of digital financial services. In Latin America, countries like Brazil, Mexico and Peru will be the leaders in terms of penetration rates. However, for the first time, it is expected that Chile and Colombia will have more smartphone users than feature phone users and, in Asia, Myanmar may also leapfrog over other countries in terms of smartphone adoption.
7. More Competitive Remittance Options
A renewed interest in lowering the costs of remittances, driven by numerous policymakers and governments around the world, should push for more competitive financial service alternatives like e-money and mobile channels. This will be especially important in Africa which has some of the most expensive cross border remittance corridors in the world and which already witnessed the power of mobile-enabled cross border remittances with costs coming down in Tanzania and Rwanda from an average of 12 percent to five percent in 2014.
For more information read AFI’s recent guideline note on Mobile-Enabled Cross Border Payments
8. Global Payment Providers Focusing on Financial Inclusion
New developments and investments by global payment providers like Visa and MasterCard are now providing opportunities for governments and more players to offer payment services including microfinance institutions and credit cooperatives. Both players are also making significant investments in financial inclusion such as MasterCard Center for Financial Inclusion and continued focus of Visa on the area of financial inclusion.
With all the excitement around digital financial inclusion, what do you see as the most significant trends in your market? Please feel free to share them.
ABOUT THE AUTHOR
John Owens is the Senior Policy Adviser, Digital Financial Services & Financial Inclusion Policies, at the Alliance for Financial Inclusion. Follow John on Twitter: @Jvowens.
