The Banking Executive Magazine - February 2022

The Horizon Of Digital Financial Inclusion In Arab Banks usage of financial services with a special focus on closing the gender gap, managing climate change risks, mitigating of de-risking challenges, advancing the inclusion of forcibly displaced persons, reducing the fi- nancing gap for small businesses and lowering costs for cross-border remit- tances while simultaneously promot- ing financial stability and integrity. The importance. Finextra, the independent newswire and information source for the worldwide financial technology community, highlights the impor- tance of digital financial inclusion as a driver of change. Financial inclu- sion is a major global challenge that can be difficult to define. However, most commentators agree that it be- gins with access to mainstream fi- nancial products. In the U.S. an estimated 14 million adults are un- banked, and a similar number under- banked. Likewise, more than one million adults in the U.K. are un- banked. Virtually no country has 100% financial inclusion. Most banked consumers enjoy the con- venience, certainty and security of digital banking and payments. Over 64% of American adults now use on- line banking; the volume of digital payments grew by 20% in first half of 2020 alone. While this is good news for banks and their customers, it also widens the divide between the banked and the unbanked. Financial inclusion is both a chal- lenge to be confronted and an oppor- tunity to be grasped. There is no one-size-fits-all solution to solving the problems of underbanked popu- lations around the world, but more affordable and accessible digital ac- cess to financial services could go a long way. As customers gain access to more re- liable financial services and advice, they are better positioned to grow fi- nancially, and empower themselves and their communities. Banks like- wise benefit from new customer seg- ments they can cultivate over the long-term. The overall economy is more likely to flourish, as more peo- ple are able to gain access to the fi- nancial system and begin to build wealth. The business models. According to business insider re- search, evolving business models, regulatory policies, open banking, and new payment methods also have implications for financial inclusion. Such initiatives expand the breadth and depth of financial services in ways that support financial inclusion. For example, innovative ways of per- forming credit assessments can help people with thin or invisible credit histories gain access to credit which previously was unattainable. With access to a holistic view of their financial position, people can make better informed decisions based on data and real-life events. Increased data sharing, which is made possible with open banking, will also help people manage their money more easily. The Open banking model may sup- port digital financial inclusion by im- proving the customer experience and offering smoother customer journeys. Moreover, innovation and digital technology will play a crucial role in adapting financial services to meet the needs of all. DIGITAL FINANCIAL INCLUSION TECHNOLOGY According to the International Banker, although digital exclusion is a major global problem, technology can also be an enabler to better so- lutions and better outcomes. With the right technology and business strategy, banks can promote financial inclusion by: • Reducing barriers to entry with lower cost digital services. Com- pared to traditional banking, digital banking services are cheaper to manufacture, distribute and sup- port. These savings can make banking services more cost-effec- tive and affordable to those who need them most. Rethinking bal- ance requirements and fee struc- tures will also go a long way to making banking more accessible to a broader population. • Removing biases. Systemic biases have contributed to the issues we’ve faced with financial inclu- sion for years, but these can be eradicated. Artificial intelligence (AI) – with proper scrutiny and oversight – offers a powerful tool that can be leveraged to remove biases from processes, systems, and decisions. • Providing bespoke services that are easy to access and easy to use. With digital technology, banks can offer services that mimic cash, for example with real-time balances, immutable payments and intuitive budgeting tools. Banks can edu- cate and encourage people to show them that it is actually easier and more convenient to use digital payments than physical cash. • Fighting cybercrime and reducing the risk of theft or loss. Digital serv- ices offer a safe and secure alterna- tive to holding cash, particularly for businesses that primarily en- gage with cash transactions. How- ever, there are bad actors out there and banks must be supremely vig- ilant in ensuring security in the dig- ital age. In addition to internal security measures, teach your cus- tomers about the warning signs and risks of identity theft and cy- bercrime. Everyone needs com- plete confidence in digital financial services – one bad expe- rience will undermine trust, but ro- bust security and informed consumers form the blueprint for building trust and loyalty. • Harnessing the power of data. Leverage data to help educate and advise customers, particularly those with limited experience in fi- nancial management. Help cus- tomers of any income be advised of the affordability of purchases be- the BANKING EXECUTIVE 44 ISSUE 158 FEBRUARY 2022