What can retail banks learn from the developing world?

12 August 2016

A couple of days back, UK retail banks got a bit of a shock when the government regulator stepped in to tell them they needed to innovate and use the latest technologies to keep their customers happy. It surprised me too. You’d think that these huge organisations would know a thing or two about customer satisfaction and the use of FinTech. But according to the watchdog, they’re not doing enough.

That made me wonder if there were things that retail banks across the world could learn from microfinance about anticipating your customers’ needs and using FinTech for their benefit.

In Africa, 77 per cent of adults remain excluded from the formal banking system. They have no hope of getting a loan from a retail bank, even if many of them could travel to the nearest one. Back in May this year, FINCA announced a collaboration with FinTech company First Access.

This partnership created the world’s largest and most sophisticated alternative credit-scoring approach by a microfinance institution. For our clients, this means that even if they have never been in the formal banking system, they can access a FINCA loan – and much faster too.

This collaboration is just the next step in our work to democratize banking and give disadvantaged people the financial services they want, and need. For a number of years, we’ve also been working in Tanzania with Vodacom, the largest mobile network operator (MNO) in the country.

Through this partnership, FINCA customers can use Vodacom’s mobile wallet platform, M-PESA, to make transactions to a FINCA account for both loan installments and savings. This arrangement enables FINCA customers to transact directly from their e-Wallet, saving them significant travel and other transactional costs typical of microfinance operations. And this is in one of the world’s poorest countries, where around 90 per cent of the very poorest people live in rural areas.

It’s this kind of big thinking that retail banks need to move towards. As a business, it’s easy to focus on what you do best and be happy with that. But if the retail banks want to grab the attention of the next generation of customers, the Millennials, then they will need to innovate, anticipate and start building products that suit their needs right now. Change and innovation should come from within and never be ordered by a government regulator.

Today, across the world in Guatemala, I had a FINCA client who has a hardware shop in the market of Chichicastenango and makes extra money working as an agent for Tigo, a telco FINCA Guatemala partners with to allow our clients to make loan repayments electronically from where they live without having to travel to our nearest branch in Quiche, 28 km distant. The world is going digital, and every business must adapt or become extinct.

Rupert Scofield


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