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Banking & financial services are important for everyone to manage money and save for the future. But not all people can easily use banks. Some face challenges opening an account or getting loans. This is a problem because banking helps improve lives. Banks must serve all customers better. They need products for different needs. Those with less money also deserve help saving and borrowing fair rates. Together we can create retail banking solutions. If we understand each other and cooperate, then everyone benefits. This blog will share ideas for banks to invite more respectfully as family.
What is Financial Inclusion?
At its core, financial inclusion means affordable, accessible banking & financial services and education for all segments of society. This encompasses everything from basic transactional banking and low-fee money transfers to credit, insurance, savings and investment tools.
True inclusion provides appropriate options that are:
• Affordable for lower-income populations
• Convenient with extensive service point coverage
• Responsibly designed to fit diverse cultural/social contexts
• Delivered through appropriate technology channels
• Supported with financial literacy training
Essentially, inclusive banking pulls entire communities into the formal financial system. But it's about more than just opening accounts - it's ensuring access, affordability and values alignment so people have real financial empowerment.
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The Road to Inclusion: Core Strategies
Leading financial institutions are pioneering innovative approaches to inclusively serve underbanked segments:
• Alternative- Data for Identity/Credit Lack of formal credit histories or documentation makes it challenging for traditional banks to serve lower-income or underprivileged groups. But inclusive lenders are leveraging alternative data sources like psychometric testing, mobile call records, utility payments and more to authenticate identities and determine credit risk profiles with the help of risk management solutions.
• Tailored Product Design- Rather than taking a one-size-fits-all approach, inclusive financial services require designing products custom-fit to clients' unique financial lives and cultures. That means crafting affordable transactional accounts, small-scale credit and savings options, plus simple mobile payment tools to drive adoption and relevance.
• Expanded Service Point Networks- For rural areas or regions with limited banking infrastructure, digital-only retail banking solutions still perpetuate financial exclusion. Leading providers are dramatically expanding service points through brick-and-mortar locations plus extensive agent/correspondent banking networks to reach the last mile.
• "Open" Banking and Embedded Finance- While building new branch footprints is costly, embedding finance into platforms people already use is cost-efficient. Many inclusive innovators are partnering with retailers, mobile airtime vendors, gig work platforms and more to offer financial services through existing user touchpoints.
• Financial Literacy- Initiatives Simply providing access isn't enough - many underbanked segments lack knowledge and trust in formal financial systems. That's why inclusive banking pairs access with education campaigns to build financial capabilities through digital training, workshops and classroom programs.
Regulatory Drivers of Financial Inclusion
While financial inclusion was originally driven by social impact agendas, government policies and regulations are increasingly mandating or incentivizing inclusive banking:
• National Financial Inclusion Strategies- Over 60 countries to date have developed comprehensive national strategies laying out roadmaps and commitments for universal financial inclusion. These establish financial ID and credit reporting systems, guidelines for accessible products in banking & financial services, education agendas and more.
• Relaxed Customer Due Diligence and e-KYC- Recognizing customer data requirements were excluding billions, regulators have updated anti-money laundering and know-your-customer (KYC) policies. This allows inclusive providers to verify identities through alternative data sources like mobile numbers, digital biometrics and artificial intelligence.
• Digital Banking Licenses and Frameworks- To increase competition and innovative financial services, many countries are issuing new regulatory licenses enabling non-bank challengers to operate as digital banks or narrow banks. Overhauled digital banking frameworks make way for new inclusive banking models.
• Microlending and Agent Banking Regulations- Rules are being modernized to allow microfinance institutions, mobile money providers, agent banking networks and other new channels to bring inclusive services to underbanked communities across both rural and urban regions.
While more regulatory advances are still needed, forward-thinking policies are gradually removing systemic barriers to financial inclusion globally.
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Inclusion for Individuals
For individuals lacking access to financial services, the negative impacts add up quickly. Here are some of the key ways inclusive banking uplifts people's lives:
Breaking Free from Predatory Lenders
Low-income unbanked families typically rely on high-cost payday lenders, loan sharks or pawn shops for credit needs. Without better borrowing alternatives, cycles of debt and poverty are inescapable. Inclusive lenders offer reasonably priced loans, savings accounts and paths to build credit safely.
Seizing Entrepreneurship Opportunities
Access to formal business banking, loans and merchant services empowers financial self-sufficiency. Inclusive products facilitate entrepreneurship, allowing individuals to start income-generating businesses that create upward economic mobility.
Building Household Resilience
No interest-bearing bank accounts make it near impossible to build emergency savings. Access to inclusive credit, savings and insurance products gives lower-income households resilience against financial shocks from medical issues, accidents or other unexpected hardships.
Expanding Consumer Participation
Transactional accounts and digital payment methods allow fuller participation in the modern, digital economy. Individuals can make secure online purchases, protect personal assets and access a world of new consumer products and services.
Strengthening Identities and Rights
Official financial footprints establish identities, documentation trails and legal recognition. This unlocks access to public benefit programs, property ownership rights and legitimizes legal statuses.
For underbanked individuals stuck relying on informal finance, inclusive banking offers a path to financial stability, security and empowerment over their own lives.
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Fintech and Digital Drivers
Emerging retail banking solutions are democratizing financial services and powering new inclusive banking models at unprecedented speed and scale. Banks Globally, a new wave of mobile-first digital banks is disrupting how people access financial services. These branchless challengers leverage digital workflows, AI and cloud to rapidly build inclusive products at dramatically reduced costs. By stripping overhead from traditional banking fees, fintech challengers can offer quality services affordably.
APIs Many inclusive fintech innovators bypass structural barriers by integrating financial products into non-bank platforms through open banking APIs. By embedding access points into consumer apps, working capital services and corporate banking solutions are seamlessly offered to gig workers, supply chain financing for micro-merchants, savings options built into pay checks, and more.
Protocols Decentralized finance protocols like blockchain and cryptocurrency open up innovative ways to participate in global finance and markets inclusively. These democratize issuance and access to assets, lending capital, crowdfunding and more to bypass traditional financial gatekeepers cost-effectively.
New fintech players facilitate peer-to-peer lending and investing at a micro scale. Individual investors can directly fund loans or microcap small businesses in exchange for returns. This taps household capital to enable inclusive financing. Advanced analytics allow inclusive lenders to more accurately assess risk and creditworthiness through AI algorithms and risk management solutions. Digital footprints like mobile usage, psych scoring, social data and more replace requirements for formal financial histories.
Identity proofing and authenticating customers without formal ID documents remains a key challenge. Capabilities like biometric scanning, facial recognition, behavioral identities and blockchain identities enable inclusive onboarding. Secure, portable digital IDs unlock access.
The Future is Financially Inclusive
With these multi-faceted forces converging, inclusive corporate banking solutions are transitioning from a philanthropic niche into a burgeoning global mainstream financial services market. Leading providers like neo banks, mobile money services and challenger banks are racing to capture shares of this historic opportunity. FinTech startups and mobile network operators capitalize on digital product delivery. And traditional institutions from retail banks to microfinance pioneers are revamping their approaches for the inclusive future.
The business case is clear. More inclusive economies benefit everyone through expanded economic productivity. Those with capital gain profitable new investment opportunities. And entire communities gain newfound financial empowerment.
For forward-thinking and socially conscious institutions, inclusive corporate banking solutions not only appeals to shared values around equitable development - it represents a massive, largely untapped revenue growth frontier.
Conclusion
When banks help all people with different needs, communities gain. Practical Solutions, Inc. (PSI) believes technology enables positive change when used with wisdom. PSI works with banks developing easy tools for customers. Banks assist customers better understanding options. PSI creates programs teaching money management too. Together through respect and cooperation, barriers fall away. A better future emerges when previously excluded feel trusted accessing fair services. With open hands and hearts, PSI pursues partnerships advancing inclusion for everyone's dignity.
