A reality check on inclusive innovation

A frequent claim made about new financial technology is that it will bring more consumers into the financial system, expanding financial inclusion for the unbanked and under-banked globally. This is an easy line of thinking for innovators in places like London, New York, Frankfurt and Silicon Valley, who create and consume products with their own needs in mind.

Yet to accelerate inclusion, financial innovation must consider the needs of customers in markets across the world. Without this global lens, we will fail to reach billions of people with the newest innovations in finance, creating a missed opportunity for businesses and customers, and fueling the growing inequality gap.

The digital divide in fintech

The past decade has seen an explosion in digital financial innovation including digital wallets, peer-to-peer lending, alternative insurance underwriting, new payment gateways, digital-only banks, mobile payments, cryptocurrencies and RegTech (regulatory technology). Yet despite this advancement, billions of people globally – whether in rural Tennessee, Tajikistan or Tonga – cannot yet access a “digital only” world.

This is not simply a divide between the developed and developing worlds; many people in developed countries have limited digital access: including rural communities with poor broadband and mobile connectivity; people with physical or mental health challenges that make it difficult to use digital services; and those who don’t have access to financial products that would enable them to use online services, or take part in e-commerce.

One factor that constrains more inclusive innovation is lack of understanding of local market realities: a crypto solution to a payments problem means little to a consumer in Bangladesh, who does not have internet access or a bank account. For businesses hoping to sell products and services to rapidly developing markets, the implications are significant, as they will need the tools, knowledge and/or partnerships to do business with populations that may scarcely use cards, yet are poised to drive global growth in the coming years.

How to close the gap

I believe there is much more that businesses can do to foster the philosophy and decision-making needed to spur more inclusive innovation that addresses the needs and situations of a diverse and global customer base. From my experience at Western Union, where we process digital remittances, this boils down to three basic principles:

A global customer-centric mindset

Having a customer-centric mindset is more than thinking about what customers want, or even trying to always make decisions with the customer in mind. Rather it means fundamentally structuring a business around the customer, such that the operations and decision-making of the business flow naturally from the starting point of the customer.

For example, at Western Union, we have spent the last several years building a future in which our customers don’t have to choose whether to send or receive money in person at a retail location, via a computer, or using their phone. Regardless of where they come from, in many cases they can do any or all of these. We strive to give our customers a choice in how they send money or make payments, we glean insights from what they’re choosing, and we adjust our offerings based on their choices. In Jamaica, for example, we’re simultaneously expanding our retail money transfer network and our ability to make payments electronically to and from Jamaican bank accounts, based on customer demand.

Local knowledge

A lack of understanding about local market dynamics is a significant factor in the disconnect between innovation and inclusion. Overcoming this disconnect requires local knowledge, whether from an on-the-ground presence or partnerships in these markets. Local knowledge is also required when it comes to regulatory know-how. Understanding the dynamics and needs of constituents in each country paves the way for solutions that satisfy the demands of local regulators.

At Western Union, we operate in more than 200 countries and territories, and have deep local expertise built over decades. Now, through partnerships, other brands are leveraging this local knowledge and our platform to move money and make payments. Consumers in 20 countries buy globally online and pay locally for their Amazon purchases, using local currency at a Western Union agent location.

A commitment to meeting customers’ current and future needs

A customer-centric mindset and local knowledge alone are not enough. Inclusive innovation demands a true commitment to meeting customers’ changing needs. This means developing flexible products and solutions that meet customer needs today, while being responsive to shifting needs going forward.

We know that the shift from cash to digital payments will accelerate in the coming decade, yet we are also committed to meeting our customers’ needs for cash today. Even in Europe, according to the global security company G4S, an estimated 79% of all point-of-sale transactions were conducted in cash last year, which was actually up from 60% in 2016.

In Sub-Saharan Africa, though millions remained unbanked in 2019, the use of mobile money accounts is accelerating, and the middle class is growing fast and is expected to reach 212 million by 2030. This is why we offer both cash transactions at our retail locations across Africa, and also real-time payments into bank accounts of customers in many African countries. To drive inclusion, we must ensure that we can deliver for our customers based not only on anticipated demands, but on their needs today.

Innovation has undoubtedly helped accelerate financial inclusion, but if we are to unleash its full potential for the benefit of consumers and businesses alike, financial innovators would do well to adopt a more global and inclusive lens that considers the lives of billions of people across our world.