How Fintech will Drive Financial Inclusion – A Report by Nairobi MasterCard Lab

Dennis Gikunda of MasterCard launching the MasterCard Report at Metta Nairobi

At the recent ‘What’s Next’ Series of meetups at Metta Nairobi, Financial Inclusion was the topic of discussion. MasterCard unveiled a report that revealed how fintechs are creating solutions for the 31% of the unbanked in the world.

The Rise of Informal / Community-based Financial Tools

One of the insights that stood out from the MasterCard report was the increasing reliance on informal tools such as community-based savings schemes, mobile banking and lending solutions, and other cultural money-management solutions.

These informal solutions are more preferred over banks giving rise to Financial Service Providers (FSPs) such as StokFella, Lenddo, Branch, and Tala.

According to the report, the low uptake of formal financial services, which in turn has fueled the growth of informal FSPs, is caused by the following:

  • Lack of formal IDs
  • Inaccessible branch networks
  • Low digital literacy levels
  • Inflexible products
  • Varied trust in banks from country to country

The 68% Hurdle

The report also revealed some interesting insights when it comes to the use of digital money. Access to financial services is not a problem, but rather the use of these services beyond just saving and withdrawing.

The report showed that 30% of bank accounts are dormant in the developing world. It also revealed that over a 90-day period, 68% of mobile money accounts in these countries tend to be dormant.

In order to improve usage and connections, some companies like M-Kopa Solar in Kenya and Upi in India allow for payment of services via mobile money.

Mastercard has also partnered with Facebook to offer payment solutions right on the Facebook platform providing a real use case for financial services.

Looking Ahead

Some of the predictions from the report included:

  • Use of AI and open APIs for faster and smoother payments eg. AliPay
  • Creating simple, habit-forming solutions for easy and secure payments eg. KYash
  • Search for new ways to improve connections eg. M-Kopa Solar

The Mastercard report revealed that financial services in developing regions will be
reimagined through the innovative use of data solutions, a deeper understanding of
customer needs and a new wave of collaboration.