Two characteristics are common to many financial inclusion-oriented programs around the world. The first is that they all seem to have some positive impact on the lives of the individuals they aim to reach, and in the communities where they are targeted. But the second is that they all tend to be small scale in nature, meaning that we rarely see programmes of sufficient size to drive wide scale impact.
Yes, there are exceptions. India’s UID scheme, which offers the opportunity for a payments account to 700 million cardholders and mPESA, the mobile money service which was being used by over 70% of Kenyan households within three and a half years of its launch, come readily to mind. However, these examples are exceptions – not the rule. Less than 6% of the 200+ mobile money schemes in the world today have more than one million active users. In fact, the vast majority of financial inclusion programmes are sub-scale because they are standalone, closed loop programs that often do not extend beyond a national border. Thus while the potential is there for any of the programs to be a (replicable) winning ticket, it remains just that: potential.
Why is scale important? One answer is obvious: the size of the problem is so great. More than two billion people lack any kind of financial account with a formal institution and more than four billion have been unable to save any money through a formal institution over the last year. The only way to make more than a small dent in these figures is if the global community can develop scalable solutions.
Second, scale is also the only way private sector-led solutions will be sustainable long-term, given the high investment required to build infrastructure and the small nature of the transaction sizes which are representative of consumers at the base of the income pyramid. Scale attracts volume and the promise of volume will attract meaningful innovation and serious investment. The bigger the market, the bigger the potential for innovation.
At Visa, the financial inclusion unit is focused on developing solutions and partnerships that “solve for scale”. To be sure, we will continue to invest behind programmes which benefit coffee growers in Colombia, healthcare workers in Kenya, women banking agents in Nigeria and garment workers in Bangladesh – some of which are featured in the Guardian’s Financial Inclusion Hub. But our primary goal is to develop and incubate solutions that have potential to impact hundreds of thousands, if not millions, of individuals.
And Visa is known for delivering scale. It is a principle on which we have built our business. Successful interoperable network businesses like Visa bring scale by definition. Visa solutions, which enable people to access the world’s biggest payments network – connecting them with 2.3bn cards, hundreds of thousands of merchants and tens of thousands of financial institutions – can and must be part of the global financial inclusion mix.
Hints of this potential are already here. For instance, our mobile branchless banking solution, mVISA, is successfully competing in Rwanda with local providers and provides the additional benefits that come with interoperability: you don’t need to be a subscriber with any particular mobile network operator, nor an account holder at any particular bank to use the service. Growing interoperable network solutions are key to unlocking scale.
But beyond specific product and channel solutions, we need to think differently about business models. Business as usual, no matter how successful this has been for Visa over the last five decades, will not lead to the kinds of solutions that work for people who typically earn less than $10 a day and live in areas out of reach of traditional financial institutions.
Charlie Scharf, our chief executive, has consequently challenged us to think differently about distribution, economics and partnerships in order to meet the needs of poorer consumers. An example of such a partnership exists in Mexico, where Visa and Bimbo, the world’s largest baked goods distributor, are partnering to provide Bimbo’s millions of daily customers with a Visa transaction account linked to a financial institution, through hundreds and thousands of small “mom and pop” merchants who act as a form of branchless banking agents.
We believe these kinds of programs offer the possibility of scale because of how they tap into existing distribution points and touch millions of consumers, and we are encouraged by the early signs of success. These kinds of partnerships will make a difference in the long run.
The search for scale continues.
Erin Steinhauer is vice president, Global Financial Inclusion at Visa. She manages a team of regional payment experts focused on developing financial inclusion solutions across Africa, Asia, Latin and North America.
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