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Beyond the Transaction: Every Transaction Has a Story

Financial Inclusion from the Ground-Up – Redefining the Hierarchy of Consumer Financial Needs

50% of the world’s adult population, or around 2.5 billion adults, still don’t have access to formal financial services. What is interesting is that this is happening despite the fact that banks have existed for over 100 years. I am not here to focus on the problem but rather discuss what can be done about this.

Can something be done? Absolutely, through a logical and structured approach which I believe has been missing. That is why I am proposing to redefine the hierarchy of consumer financial needs beginning with the most basic/foundational needs, such as a secure account for holding payment transaction funds and electronic bill payment, and moving to more complex needs like borrowing and insurance.

Redefining the hierarchy of consumer financial needs

Redefining the hierarchy of consumer financial needs

I think if needs are addressed along this hierarchy there is greater chance of them being met and accelerating financial inclusion. For example, if consumers pay electronically instead of with cash than payments can be tracked, that information can be used to assess their risk and extend loans to them. If people get credit, they will have greater opportunity to create wealth and invest/save, which in turn will create a need for insurance products. In fact, this progression was validated by M-Pesa when they recently announced they are moving beyond payments by offering interest-bearing deposit accounts and loans.

Where does this lead to on how to approach financial inclusion? First, it should be considered a progression along the redefined hierarchy of consumer financial needs. Second, it is a big opportunity that must be a core pillar of the strategy of payment/financial institutions. There is no harm in accepting that there is money to be made from financial inclusion if it benefits society and creates value from all stakeholders. And I think it is time companies start doing that.