Mobile payments solutions have transformed geographies that were once underbanked or even unbanked, allowing for modern finance and commerce to take hold.
Though the path to financial inclusion is still long and many geographies still lack many services, the transformation is underway.
A recent study by PWC highlights the opportunities mobile payments have in addressing regions that lack broad access to financial services.
The unbanked don’t have a formal bank account. People who have a formal bank account but, because of lack of funds or poor credit history, rely on ancillary services, are considered underbanked.
There are about 2 billion unbanked and underbanked individuals in the world today. The unmet deposit demand of the unbanked demographic is at least $360 billion, according to the study.
Mobile payment solutions are the first step in tapping into the underbanked opportunity. According to the GSMA, an association of approximately 800 mobile operators around the world, in 2014 there were 255 mobile money services operating in 89 countries. In 2014, there were more than 300 million registered mobile money accounts globally, with half of them located in sub-Saharan Africa.
Kenya is the poster child for mobile payments. There are now more than 26 million mobile money accounts in Kenya, roughly equal to the adult population of 26.8 million, according to PWC.
In other markets, penetration of mobile payments is still low. For example, although 91 percent of adults in Ghana own a mobile phone, only 5 percent have used a phone to pay bills, and 1 percent have used a phone to pay for goods in a store.
However, a clear trend of startups offering more advanced mobile financial services on top of payments is emerging.
Even advanced services such as insurance have seen an uptick in developing countries. Premiums from developing markets now represent 18 percent and 16 percent of total non-life and life premiums, compared with 7 percent and 4 percent, respectively, in 2000.
Incumbent banks and fintech upstarts are exploring ways to expand the services they offer to unbanked and underbanked. In order to do this successfully, they must create solutions that are accepted by customers, are easy to implement, and mitigate risk. Among the offers that are being tested are lending marketplaces, P2P insurance and blockchain-enabled financial services.