Scaling inclusive financial services since the Pandemic

Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries and a shift in flows from cash to digital and from informal to formal channels.

“During Corona, I was very upset with receiving my salary in the envelope and needing to disinfect the money. Being paid into an account is much safer. Also visiting my local remittance branch was too complicated during lockdowns, so I began to experience the convenience, speed, and affordability digital transactions can bring.” Valeria, Social Worker, Spain.

For Valeria, as for many low-income workers, the COVID-19 pandemic has brought the physicality of cash into sharp focus: it is time-consuming, insecure, and disempowering.

As the recovery from COVID-19 begins, and with the World Bank projecting that the pandemic will push 100 million people into extreme poverty, financial inclusion is more than ever in all minds. Vulnerable populations desperately need innovative and relevant digital solutions to build resilience to the challenges of today and those to come.

But how to effectively support our customers into this digitalization without exacerbating inequality?

Balance tech and touch to bridge the digital divide

The Global Digital Remittance Market size is expected to reach $33.9 billion by 2026. On one hand, the outward digital remittance segment promoted by customers to faster and simplify money transfers and the inward digital remittance market in developing countries boosted by the Increasing adoption of mobile payment technologies.

Mobile money services are now available in 64% of developing countries, and their spread is likely to increase with the growing penetration rate of mobile connections-, estimated to exceed 100% globally by 2020. In sub-Saharan Africa for example, the share of adults with an e-money account nearly doubled from 2014 to 2017, to a level of 21%. Globally, 52% of adults used digital payments in 2017, up from 42% in 2014. In Asia, some countries' governments have pushed digital cash transfers during the pandemic to reduce in-person contact while still providing critical economic relief.

But while technology has served as a gateway for many, the lack of consistent and affordable internet access or the lack of digital skills has created a digital divide that risks barring the pathway to growth. Some reports have already highlighted the exclusion of beneficiaries, especially women.

Financially underserved people have varying levels of digital maturity, attitudes, and behaviors. Some segments may not have internet or smartphones, or simply do not trust digital financial services due to unfamiliarity or privacy concerns.

Closing that digital divide and moving business forward with an eye on digital inclusion sits at the heart of our mission. At Moneytrans our aim is to ensure that every customer gets the human touchpoints he needs to feel supported and engaged; our hybrid model, - retail / digital-, leverage digital to automate manual processes while still maintaining the human touch that customers value. By blending several elements into an integrated whole, omnichannel removes the boundaries between digital and physical spaces, optimizing brand communication and, most importantly, improving the consumer lifecycle by customizing its touchpoints, whether he’s digital or offline.

Bring more with less to facilitate the financial journey

With the pandemic, although our digital platform attracted more and more new customers, we also observed that a portion of our more loyal retail ones were not able to digitalize. To use online services, it requires a bank account – access to which is far from universal, with more than 165 million citizens who still lack access to formal financial services in Europe. The most vulnerable people often lack the proper documentation to comply with banks’ customer due diligence requirements. In some cases, they live too far from a bank branch or find the maintenance costs or minimum balances too onerous. Sometimes it is just a lack of trust in the banking system.

As a financial institution, we have a critical role to play in supporting the most vulnerable, equipping them with the tools they need to enter the digital economy. Using all that information, we have reimagined the user experience for underserved customers by addressing the barriers to adoption with a clear and compelling value proposition: bridging the gap between these 2 financial services, offering both money transfers and banking services to them.

In the end, we are reducing the need for customers to look elsewhere on their financial journey and rely on numerous products to achieve a larger goal: receive, store, manage and send money.

Partner to achieve digital and financial literacy.

No one should be denied financial services because of a lack of access to connectivity, digital devices, digital identity or digital literacy.

Ten days ago, and during the 2021 APEC Business Advisory Council Dialogue, President Rodrigo Duterte called for "greater public-private collaboration" to promote that literacy. We need to embrace an integrated approach to skilling and empowering vulnerable groups and rural communities.

With comprehensive digital trainings in developed countries and in rural areas, many NGOs contribute to this cause. By organizing trainings, workshops, seminars, they make access to information a reality. But as private companies we also need to fulfill that promise.

To serve their customers, many remittance players have pairs innovation in their fast-growing digital network with scale in their retail presence. Many of our agents operate in locations that are open outside of traditional banking hours, for example on nights and weekends. They have been supporting our customers for years with their remittances and their administrative paperwork. Now, their support can minimize frustration and help ease any anxiety surrounding the use of technology.

At the same time, we cannot ignore the strong impact financial literacy has on usage. Financial education must be part of any product roll-out targeted at underserved populations. A recent World Bank study showed that individuals receiving personalized counseling in addition to financial education were 38 percent more likely to have introduced monthly budgeting to their routine, marking a distinct change in financial behavior and literacy.

Now that our global partnership with Mastercard has laid a solid foundation toward our goal of helping millions of people fully participate in and benefit from the digital economy, at Moneytrans we went a step further by also partnering with non-traditional financial service providers, such as microfinance institutions and education NGO’s which are on the same mission than us: leverage the social and financial inclusion of the migrant communities.

Educate and awareness to build the trust

Digital transformation requires balancing our long-term vision and short-term agility as it must be built on solid technological foundations. The more digital an organization becomes, the more it needs to invest in building resilient platforms that can easily connect to open APIs and cloud to ensure backup and recovery on the go, where possible. But it is not all about technology.

20% of the respondents surveyed in the 2017 Global Findex identified distrust in financial institutions as a reason for not maintaining a bank account. This factor is even more pronounced in certain regions such as Eastern Europe, Central Asia and Latin America.

Users, especially those who cannot afford even small losses, have true concerns when using financial services. There is fear regarding the security of the funds in the account or fear of fraud; but also concern about the fairness of the terms of the service or about how their data is being used. And the highest among customers’ concerns is network unreliability. Network drops during transactions such as money transfers can result in users losing access to funds, delayed bill payments, double payments with no recourse and users having to pay multiple transaction fees unnecessarily. The complexity of product information and user interfaces, including language barriers, are also major drivers of distrust.

So, at the same time than companies need to view cybersecurity as one of the cornerstones of their digital transformation, there is a need to work on transparency on products and services, education and awareness raising, protection of data and privacy and complaint handling or dispute resolution.

Interesting private sector initiatives, such as the GSMA Mobile Money Certification providers, also use a self-regulatory approach to educate, benchmark and measure industry participants’ practices to protect consumers.

Digital transformation is a journey, not a destination.

COVID-19 accelerated the move to a digital economy. While celebrating milestones achieved along the way, yet much remains to be done, - both by governments and the industry at large-, in order to avoid exacerbating inequality and contributing to financial (re)exclusion.

This shift could leave many people behind unless the financial institutions that serve them get the support needed to adapt their traditionally high-touch service model to an increasingly digital world.

That is why at Moneytrans we use our digital transformation efforts to reduce, rather than exacerbate, the existing digital divide: by redefining our value proposition to bring low-income workers into the formal financial system and thereby increase their ability to store, save, plan, and respond to crises and by designing a financial system that does not produce exclusion as an outcome of its operation.

In the end, we must keep in mind that financial inclusion is much more than connecting people through remittances or to a bank account; it is building an infrastructure that enables the consumer’s journey to financial health. A truly compelling adventure!