Financial inclusion, defined as the availability and accessibility of financial services to underserved communities, is a critical issue facing the banking industry today. According to the World Bank, 1.7 billion adults around the world do not have access to formal financial services, meaning that they cannot open a bank account or access credit, insurance, or other financial products. This lack of financial inclusion can lead to a range of negative outcomes, including difficulty saving for emergencies, reduced ability to invest in education or business opportunities, and increased vulnerability to financial shocks.
Access to financial services and credit can help lift individuals and entire underserved communities out of poverty. By providing access to financial services, banks can help underserved communities save for the future, invest in education and business opportunities, and build financial resilience. This, in turn, can help drive economic development and improve the overall quality of life in underserved communities.
Banks are also working to help underserved communities become more financially literate and responsible. This includes providing financial education and training programs via their mobile apps, as well as designing financial products and services that are easy to understand and use. By helping underserved communities to better understand their financial options and make informed decisions about how to manage their money, banks can help to increase financial inclusion and build stronger, more resilient communities.
To advance these efforts, banks are increasingly turning to data, data analytics, and machine learning (ML) and artificial intelligence (AI) to better understand and serve the financial needs of underserved communities. One way that banks are using these technologies is by leveraging non-traditional sources of data, such as payment history for things like utility bills, to better determine credit worthiness for individuals who may not have a traditional FICO or credit score. This can help banks to more accurately assess the creditworthiness of underserved individuals, enabling them to offer financial products and services that meet their needs, while at the same time managing their own risk.
Cloudera Data Platform (CDP) has also been instrumental in helping banks solve the issue of financial inclusion in underserved communities. CDP is a comprehensive hybrid data platform that enables banks to store, process, and analyze large volumes of data, including both structured and unstructured data, in a single, integrated platform. CDP allows banks to quickly and easily access the data they need to better understand the financial needs and behaviors of underserved communities, and design financial products and services that meet their unique needs. An example of this is PT Bank Rakyat Indonesia, who are leveraging CDP to help them focus on micro financial services initiatives.
Mobile banking apps are critical for banks looking to advance financial inclusion in underserved communities. With the widespread adoption of smartphones, mobile banking apps provide a convenient and accessible way for underserved individuals to access financial services, even in areas where traditional brick-and-mortar banks may not be present.
Finally, it’s worth noting that the cost of acquiring new clients has never been lower, making financial inclusion efforts more profitable for banks. With the increasing use of data analytics and ML/AI, banks are able to more effectively target underserved communities and design financial products and services that meet their unique needs. These technologies not only help to increase financial inclusion, but it can also drive revenue and profitability for banks as they expand their customer base.
Learn more about how Cloudera is helping the Financial Services industry here.