Champions of Financial Inclusion

Thursday, August 19, 2010

Technology as a transformative force in financial inclusion

 “what according to you has been the benefit of today’s modern technology”. “What do you use it for”. these are questions that we constantly encounter nowadays in surveys after surveys that seek to identify the perceptions of different age groups on technology and its uses. Think about it and the first thought the hits one is that technology has made faster communication and information exchange possible and hence brought people closer; reducing time and cost of communication and information exchange. When we say so our thoughts are motivated by that which we regularly use; mobile phones and the internet and email ; that have facilitated our communication to be faster and allowed us to exchange data across vast distance at a fraction of the time it used to take earlier. our answers are touched by a  tinge of bias that lies rooted in an understanding of technology as a possession of the privileged and those able to afford it and capable (in terms of possessing education and the technical know how) of using it. even our understandings of the associations between technology and banking and finance is colored  to a large extent by how it has allowed for international trade and commerce; cross country economic information exchange and planning, global stock trading and electronic money transfers of massive amounts between countries etc.
But today when we look around us what we see is something far more expansive; the ability of technology to be not only a plaything of the privileged but also its ability to transform; in combination with innovative ideas and genuine social concern; the lives of millions of people across the world who constitute the very bottom of the development pyramid and who in no way can be called privileged. It is not charity but business with a social conscience that seeks to earn even while transforming the lives of millions of people for the good. Be it the biometric smart card based branchless banking system that is employed by FINO in bringing financial inclusion to the rural poor across the geography of India (which has opened bank accounts for 17 million + bottom of the pyramid customers and linked them to formal financial system) or the mobile banking technology that today has revolutionized the way people do banking in countries like  Kenya, Brazil and South Africa; technology has today made it possible to overcome geographical, social and economic barriers to take banking to people previously unbanked and under-banked and integrate them into formal financial systems. Added to this is the fact that as far as the customer is concerned these technologies are not complicated or difficult to use; despite the immense sophistication and complexity that characterizes the networks and back end processing systems into which the front end customer interfaces and data input devices in these systems are integrated.
Take for example the system being employed by FINO in India which is the Business correspondent model (BC). Important characteristics of this system currently in place include (1) access to the most remotest regions of the country through agents (bandhus) drawn from these communities and regions who go to customers villages with equipment to facilitate branchless banking processes (2) ability to Capture Customer details including biometric  and non biometric details easily (using fingerprint reader, webcam, mobile software interface, computer interface) and facilitate Unique Identification using the equipment in the hands of the Agent that satisfies banking KYC norms(2) ability to provide non-repudiable and user-friendly authentication mechanism that ensure individuals identity during transactions (3) ability to ensure reliable connectivity up to the last mile supported by the ability of the system to operate in online and offline mode (4) ability to offer Financial products tailored for the specific target group and system ability to be adapted to add on other financial and non financial products (5) ability to support the use of innovative User Interfaces and work in harsh rural environmental conditions and (6) Low Capital and Maintenance costs as compared to costs that would be incurred was a bank to set up branches in rural areas.  By virtue of its inherent features this model being employed in India possesses distinct advantages not merely over the brick and mortar model but also over other models being practiced in other countries
Technology provides numerous solutions to bring financial inclusion to the millions of  teaming masses who are outside the formal financial system. But the fact also remains that technology is never and can never be a standalone solution. It needs to be supported by favorable regulatory frameworks that allow flexibility, growth and innovation while also spearheaded by comprehensive understandings of the geographical, social and economic characteristics of the environment in which it is going to be implemented. If these enabling conditions are ensured then financial inclusion for all is not far away.

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