Telenor talked to the World Bank Group (WBG) to get their perspective on the importance of financial inclusion, both from a global economic and societal perspective, and to find out what they think about the role that telcos play in this landscape. Peer Stein has been working for the International Finance Corporate (IFC) and the WBG since 1996, and he has been leading their engagement with the G20 on financial inclusion. WBG has a long track record working with Telenor all the way back to Grameenphone in the late 1990s, and at the start of Telenor’s investments in Tameer Bank in Pakistan.
Universal financial access by 2020
The WBG has set a goal for universal financial access to basic transaction accounts by 2020, an important stepping stone in eradicating poverty and boosting prosperity by 2030. A key catalyst includes introducing policy actions to governments in emerging markets that will help in creating a more levelled playing-field, and provide affordable and convenient financial services to the majority of the population. Since 2011, 700 million new adults have been added as account holders, and this progress, Stein believes, is partly due to making the national financial systems more open.
“By open I mean that governments in emerging markets are allowing the entry of non-banks and the provision of payment services through e-money and mobile money products. Key actions also include introducing agent-based models, modernizing the national payment systems, and providing access to the network infrastructure to mobile operators. Combined, these measures probably have a significant contribution, so that banks and non-banks players can provide a more levelled playing field for the population,” he says (image right).
According to Stein, there has also been great progress the last years in terms of creating awareness around financial inclusion. The G20 has put financial inclusion on their agenda, and over 50 countries now have specific policy goals to pivot financial inclusion. “We now see that a lot of the debate has shifted from the why to the how governments need to work to best accommodate the development of financial access for all adults,” adds Stein.
Mobile phones as a key catalyst
The evidence of financial inclusion and its impact is well documented. Out of the now two billion unbanked, one out of five adults report costs and fees as one of the key reasons not to be banked. And, one out of five states distance as a key reason (Ref: most recent WGB findex survey).
“By addressing these constraints and using technology to ensure access, we can overcome these hurdles. Of the 2 billion globally unbanked, 80% say they live in a household with a mobile phone. I personally belive that mobile phones and mobile operators play a key role in attaining universal financial access,” says Stein and adds, “If we look at the progress we have made from 2011-2014 on a global scale, mobile money does not make a huge difference, as there are merely about 2% users of mobile money accounts. But, if you break it down regionally it has really taken off in some regions and countries. There are now countries where there are more adults using mobile financial services than traditional banking services. I expect this to develop rapidly if the right conditions are in place, there is much more to come.”
Telecom operators need staying power
“Telenor is quite remarkable as you have provided an early commitment to this space. Mobile operators that want to get it right have to invest in mobile financial services as a real business, not just look at it as a way to reduce churn and increase the average revenue per user. The biggest mistake operators can make is looking at mobile money as a short-term investment and under-investing. It’s a scale business; you have to understand agent economics, invest in networks, and provide the customers with the right value propositions,” says Stein.
“This also puts a greater emphasis on mobile operators as to how you educate your clients, and on your product design, ensuring you keep it simple and straight forward. There is a greater responsibility in terms of communicating fees, terms and conditions, and building a transparent way of communicating with your clients. These customer groups are highly price sensitive and appreciate transparency. Nothing would be worse than loss of confidence in our services, that would affect not just one provider, but the industry as a whole,” Stein concludes.
Universal financial access will require the help of several partners, including mobile operators, governments, financial – and other institutions. It is safe to say that 2015 will be an exciting year for the development of Telenor’s mobile financial services, especially within emerging economies.
Photos in this article by Hege Berg, Telenor Finanicial Services. Taken in Bangladesh.