The commercial viability of financial inclusion

Abstract

Mobile phone penetration, regulatory trends, technological
efficiencies and the development of low-value payments
infrastructures now make it feasible for financial institutions to
deliver financial services to more people in more places. With a
few basic prerequisites in place, financial institutions are now
able to develop commercially viable approaches to financial
inclusion. However, they must first rethink traditional notions of
‘viability’ and approach inclusion as a long-term strategic play
rather than a short-term profit play. Moreover, the regulatory and
infrastructure hurdles are so significant that achieving scale will
require public–private partnership. The financial services industry
is characterised by its focus on short-term financial metrics and
quarterly reporting. Because financial inclusion efforts are a
longer-term play, they are typically relegated to CSR initiatives.
The model described here allows for a longer-term, stra­tegic
approach to product and service development within a financial
institution’s core business functions. Using the example of
goMoney, a mobile banking platform launched by Australia and New
Zealand Banking Group, this paper makes the case for evaluating
financial inclusion efforts through the lens of market-level
P&L, rather than firm-level profits. It proposes a model that
considers a combination of above-the-line returns, alongside
social, relationship and regulatory returns that affect the
economic activity of communities and nations.