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The drive to digital and its impact on financial inclusion

A couple of hikers see a farmer leaning on his gate and stop to ask for directions. “We’re looking to get to X,” they say. “Well, I wouldn’t start from here,” the farmer replies.

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The drive to digital and its impact on financial inclusion

But that’s precisely the point with the move to digital. Countries — and the communities and people within them — start their journey from different places. The causes and effects of the drive to digital may also be slightly different. Yet the enabling infrastructures and ecosystems share many similarities – writes Patrik Centellini, Head of Business Development, Financial Services, Tieto.

Causes and effects

One view of the move towards the cashless society goes something like this: customer behaviour and expectations have been transformed by the introduction of new technologies in their personal and social lives. This is forcing industries across the board to raise their standards, digitise their offerings and speed up their service or risk extinction.

Generalising hugely, I’d say that this is how developed markets see the interaction between technology, innovation and changing customer behaviour. Customers are in the driving seat and service providers trying to keep pace with and satisfy their expectations.

In emerging markets, the same three factors interact, but the emphasis is slightly different. Only around 20 percent of the population is banked. So, while all people have financial relationships, in underbanked markets, they are more likely to be with alternative providers and prone to be more costly and inefficient than electronic payment systems.

In the absence of formal providers, it is common to spend a working day to pay your monthly bills, travelling from a rural area to a city center and que up at the post or bank office. Similarly, a loan via informal channels might pose both a risk to personal security and come with a hefty interest rate that put the borrower in a negative spiral.

Financial inclusion is a significant policy objective in developing markets. Which is also why governments and central banks play a crucial role in the drive to digital. The forces operate as market-pull rather than as customer-push.

Similar way-stages

Irrespective of where you start and how you plan the route, the digital journey involves similar way-stages. One of those is realising that whilst technology is important, it is not the be-all and end-all of any project. Strange as it may seem coming from a software provider, technology is not even the starting point.

A successful nationwide project is really about the ability to collaborate and create an ecosystem. For example, getting governments, central and commercial banks and mobile operators to connect networks for interoperability. But also getting retailers and consumers on board early in the process.

As part of what might be labelled a “Nordic DNA”, collaborative ecosystems has been a common practice in the Nordic financial services industry since the 1970s, for instance around ATMs, e-invoicing and digital identity.

We bring stakeholders together to devise common solutions around rules and rails. This approach is more important than ever, but today we need to take a fresh look at how we define “the ecosystem”.

Gone are the days when only banks controlled the value-chain to reach end-users. This is why we need to include both banks and non-banks, retailers and other key stakeholders in the build-up of successful payment ecosystems. This evolution of the collaborative approach Tieto adopted with the Finnish instant payment initiative Siirto. And we are currently working with the Kenya Bankers Association, an industry body comprising 45 banks, on establishing a similar approach for instant payments in Kenya and East Africa.

How Tieto can help

To find out more about how Tieto could help you take advantage of the move to digital, please contact me Patrik Centellini, Head of Business Development, Financial Services, Tieto,

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