A study of the unbanked and underbanked in six developing markets found that those in urban centers are reasonably well educated and largely employed and understand the benefits of prepaid cards, but don’t often use them. Many of the findings challenged previously-held ideas of these two groups.
The report, “Road to Inclusion”, was commissioned by MasterCard and studied the financially excluded and underserved in India, Indonesia, Vietnam, Philippines, Egypt and Nigeria to gain insight into their reasons for not being part of their country’s financial system and look at how to bring them into the economic mainstream."
The report stated that: “Roughly half of the world's adult population lack access to formal financial services. The financially excluded lack access to formal banking facilities while the financially underserved lack access to any form of electronic payment.
Across the six markets surveyed, the average age ranges from 28 in Nigeria to 41 in the Philippines. Most have a secondary education or above and hold a job. For the majority of this group, financial transactions mostly involve the receipt of monthly salary, followed by payment from family and friends, and monthly pensions. The average monthly household income is low across the board, ranging from $200 to $500.
The findings showed that the financially excluded or underserved in urban centers are reasonably well educated and largely employed. “So inclusion efforts in cities should be primarily focused on building more relevant, lower-cost products and services rather than basic financial literacy,” said Matthew Driver, president of MasterCard Southeast Asia.
The research found four common themes across the six markets:
1. Cash is king. Most tend to save through social saving schemes or by storing cash at home. Despite this, people have strong safety concerns about having cash around. Many acknowledge the benefits a bank can offer in terms of security and the interest earned.
2. Financial institutions like banks do not play a large role in their lives. Some perceive banking services to have intimidating requirements and complex processes.
3. Access to technology is limited and usage of mobile banking is low. While 70% have standard phones, the potential for online banking will increase as smartphone uptake rises.
4. Prepaid cards could be an entry point into financial inclusion. Although most have heard of prepaid cards, usage is extremely low among those surveyed (below 5%). Interestingly, once educated about the concept, many of those surveyed found prepaid cards to be relevant for their financial needs.
The high use of mobile phones in these emerging markets also creates an opportunity to drive financial inclusion, Driver said.
“We believe that a prepaid card linked to the mobile phone account can provide a simple entry point into the financial system and bridge the gap between the formal financial services sector and the millions of underserved or unbanked individuals, especially when combined with services such as bill payment and P2P capabilities. The key is providing relevant services with high convenience and low cost that empower them to change their lives for the better.”