Financial Inclusion through Digital Savings
The importance of financially including underserved and low-income segments and expanding access to formal financial services has led to the development of advanced, technology driven products across developing countries. Digital Financial Services (DFS) recognises that although there are strong saving tendencies among adults in low-income countries, the usage of saving products at financial institutions is still low. Digital savings however, is still blossoming and identifying the market, product and policies is important as all these factors influence the usage of digital savings. The essential components of digital financial inclusion include: retail assets, digital transactional platforms, devices and additional financial services via the digital transactional platform.
The World Bank conducted an analysis in markets across Sub-Saharan Africa and Asia and concluded that digital technology and innovative business models enable the disaggregation of the digital saving products value chain leading to synergies such as greater access channels, product improvements, leveraging the entities’ comparative advantages and upscaling of micro-banking institutions; greater accessibility, flexibility, affordability and tailored, flexible products; as well as leveraging the existing DFS ecosystems by fostering competition. These product and market properties promote the savings segment of DFS.
The most important strategies to consider when implementing the DFS model include establishing partnerships with other non-bank entities (mobile network operators, merchants etc), supporting the development of interoperability between banking institutions and nonbank e-money issuers; and harmonising customer due diligence standards for emoney wallets and low-risk customer deposits.
In a four-year study (2014 to 2018) study conducted by IFC and Mastercard, there is number of financial institutions which have implemented the DFS platform to expand their outreach and boost the revenue generating streams. The key players include FINCA, Baobab and LAPO. New players in the banking industry consider DFS platform as the best strategy to strengthen their position in the market through expansion of their outreach to the underserved population.