Leveraging Data To Bridge The Underbanked Gap

by | Nov 30, 2021

In 2017, the Global Findex Database, an initiative by the World Bank, estimated that there are approximately 1.7 billion underbanked people in the world. Just 3 years ago, in 2014, this number was estimated to be 2 billion and although we have come a long way since then, even then, reaching the underbanked population remains a primary focus area and challenge for leading financial institutions across the globe.

In our experience as technology catalysts to some of the leading financial institutions across the globe, we have come to realize that by leveraging data, the gap between banked and underbanked can be efficiently bridged, and thus in today’s blog post, we will share with you, our findings on the same.

Table of Contents

  1. Cloud-Native Architecture
  2. Robust Data Analytics
  3. Extended Field Mobility
  4. In Conclusion
  5. The Reference Shelf

Cloud-Native Architecture

In a previous post at this blog, I highlighted how the modern banking customer is a digital-first one; however, although it might appear that this is the case only for first world nations, the reality stretches across geographies.

While offline banking architecture has been leveraged by banking institutions over the past decade, it is only now that institutions are recognizing the power of digital banking powered via cloud-native architecture in serving the underbanked and underserved.

To understand this better, let’s draw upon an illustration.

Bank ABC is a national banking institution with branches across the country (primarily in high-density urban areas). While it is easy for consumers in proximity to these branches to avail their services, the challenge becomes imminent when the distance between the consumer and the banking branch traverses beyond a certain radius of operations.

Since these consumers cannot physically arrive at the banking branch and avail its services, they are naturally pushed to the underbanked population, irrespective of their desire to open a bank account.

On the other hand, by leveraging a cloud-native architecture and transitioning core banking services to the cloud, not only can bank ABC reach out to a wider array of customers but also ensure that these core financial services are available right at their fingertips.

Additionally, adopting a cloud-native architecture to serve the underbanked arrives with several advantages, such as

  1. Reduced cost of operation
  2. Higher penetration of banking services
  3. Efficiently reaching customers across geographies and from all walks of life
  4. Effortlessly placing core banking services at the customer’s convenience resulting in increased loyalty and retention

Robust Data Analytics

Second, to adopting a cloud-native architecture, the need of the hour is for financial institutions to leverage a robust data analytics platform. Superficially it might appear that every customer across geographies reflect the same needs and wants in terms of banking services; however, the reality could not be further from the truth.

Source : MobileAppDaily

To understand this better, let’s extend the earlier example.

As bank ABC extends its digital presence across geographies, it will undoubtedly need to collect, categorize and efficiently store a humongous amount of customer data.

Among them, one key vertical will be their desired financial services. By leveraging a robust data analytics platform, not only can bank ABC accurately understand the exact needs of its customers across segments but also undertake decisions to increase the availability of these said services.

For example, bank ABC might uncover that customers who have a monthly income of less than ₹15,000 desire for a micro-loan to upgrade their lifestyle as compared to those with a monthly income of ₹25,000 who want to open a basic savings account and save for their future.

Likewise, bank ABC can detect and recognize patterns across age groups, such as those between the ages of 25 to 30 irrespective of earning potential who wish to invest in bank-sponsored mutual funds to save for a brighter future.

Leveraging a robust data analytics platform not only enables the financial institution to accurately recognize patterns, desires and needs of consumers from the available data set but also intelligently act on these emerging trends for maximum output.

For instance, a certain segment of customers might only be interested in zero cost personal loans, while the other might be interested in a reducing balance interest system.

Recognizing and spotting these distinct patterns among customers, both existing and upcoming, will help the financial institution in

  1. Efficiently recognizing patterns and trends
  2. Intelligently undertaking business decisions
  3. Streamlining business processes for maximum efficiency, and
  4. Reduce cost of operation while inflicting a positive bottom line

Extended Field Mobility

Last but not least, banks can leverage advanced and cross-platform mobile applications to efficiently extend field mobility. By equipping the field agent, be it the customer relationship manager or the loan agent, with a robust mobile application, banks can not only extend their field coverage but also serve customers better.

For example, even among today’s digital-first consumers, there exists a population that banks on physical interaction and intimacy; however, the same is challenging to replicate in a fully digital approach.

By embarking on a mission to design mobile applications such that field agents can physically visit and interact with the customer from time, answer their questions and solve their doubts all within the mobile application, banks can not only increase customer satisfaction but also their loyalty and retention towards the organization.

Developing and intentionally designing robust mobile applications equally arrives with significant advantages such as

  1. Extended field coverage across geographies
  2. Increased customer satisfaction, loyalty and retention
  3. Faster onboarding and subsequent verification of customers
  4. Increased revenue across the board

In Conclusion

As internet penetration continues to increase across nations and consumers become more financially and digitally aware, the need of the hour is for banks to leverage cutting edge technology to truly reach the ones who matter.

Thank you for reading, and I will see you in the next one.

The Reference Shelf

  1. Leveraging Digital Solutions to Bridge Financial Inclusion Gaps in Asia and the Pacific [Link]
  2. Leveraging technology to drive financial inclusion [Link]
  3. Bridging the Gap: The Business Case for Financial Capability [Link]
  4. Why is Data So Crucial for Fintechs to Reach Out to More Underbanked People? [Link]
  5. National Strategy for Financial Inclusion (NSFI): 2019-2024 [Link]