Inclusion Financial 01 02 Towards full banking penetration?
INFOGRAFA Financial inclusion 2011/2014 03 04 INTERVIEW Gema
Sacristn 05 Banking penetration in Africa driven by mobile devices
FINTECH SERIE BY innovation edge BANKING PENETRATION, AN INSTRUMENT
TO PROMOTE DEVELOPMENT The gaps of banking penetration
Slide 2
01 Towards full banking penetration? Between 2011 and 2014, 700
million people opened a bank account. The number of people outside
the banking system fell by 20% worldwide.20% worldwide FINTECH
SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Slide 3
Between 2011 and 2014, 700 million people opened a bank
account. In the same period, the number of people outside the
banking system fell by 20%, or 2 billion adults. In 2014, 62% of
adults held an account, well above the 54% registered in 2011. The
World Bank's 2014 Global Findex study, funded by the Bill and
Melinda Gates Foundation in partnership with Gallup, Inc.,
highlights the importance of banking penetration for a country's
development: It is a critical factor in reducing poverty and is the
result of economic growth. It is not an end in itself, but it leads
us towards an end since it offers substantial benefits for
individuals.study The year 2020 is one of the dates set by the
World Bank for many countries in Latin America to achieve full
banking penetration. Meanwhile, governments are implementing
programs to put an end to the so-called financial illiteracy of the
population. This report stresses that to the extent that people
participate in the financial system, they are better prepared to
run their businesses, invest in education or face risks. financiero
est ms capacitada para desarrollar sus negocios, invertir en
educacin o enfrentarse a los riesgos. Pedro Ramiro, coordinator of
the Latin American Multinational Company Observatory (OMAL), points
out in this article published in El Pas the possibilities that
banking penetration offers to financial institutions: Workers are
paid in an envelope, families do not use standing orders, or
mortgages there is a huge potentiality for customers.article
Turning to the report, Global Findex shows that Latin America and
the Caribbean have made significant progress in banking
penetration. 51% of adults (over the age of 15) in Latin America
and the Caribbean hold an account, compared with 39% in 2011, but
even though this progress is significant, there are still 210
million adults outside the banking system. These account for 10% of
the total 2 billion people who are still not using financial
services worldwide. FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 4
Today, 40 million adults receive government payments in
accounts. In Brazil, 88% of the beneficiaries of government
transfers received them in an account. In Argentina, the number of
account holders among the poorest 40% of households doubled to 44%
between 2011 and 2014. In Mexico, the percentage of the adult
population with an account increased from 27.4% in 2011 to 31.1% in
2014, a level well below countries like Brazil (68.1% of adults
with an account), Chile (63.3%), Venezuela (57%), Ecuador (46.2%),
Uruguay (45.6%), Panama (43.7%), Bolivia (41.8%) and Guatemala
(41.3%). The most notable change in access to financial services in
the region comes from Central America: in El Salvador, Guatemala,
Panama and Honduras the number of account holders increased by more
than 50% between 2011 and 2014. Lagging behind are Peru (with only
29% of adults with an account), Nicaragua (19%) and Haiti (18%). In
the region as a whole, 28% of adults make payments directly against
their accounts using a debit card, compared with 14% in developing
countries on average. Central America the number of account holders
increased by more than 50 % FINTECH SERIE JULY 2015
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Slide 5
The role of governments and private institutions in banking
penetration banking penetration These figures show that there is
still a long way to go in promoting the use of banking: 135 million
adults hold an account, but they pay for their utility bills in
cash. The report says: By paying wages in the public sector and
government wages and transfers in digital format (instead of in
cash), governments and the private sector can play a key role in
accelerating the opening of accounts and boosting financial
inclusion. Worldwide, payment of government wages and transfers
through accounts could increase to 160 million the number of adults
holding an account. The report also addresses another important
part of banking penetration: saving. However, holding a checking
account does not guarantee that people will save money at a
financial institution.financial institution Of the 41% of people
who claimed to have saved in 2014, more than half did not to so
through financial and similar institutions, although compared with
2011 there was a 13% increase in those who saved using bank
branches. When asked why they do not hold an account, their answer
is that they are very expensive and they believe that they have no
need to hold an account. The report highlights that the moment
costs go down, many people will be willing to hold an account. Full
banking penetration is one of the most effective instruments in
fighting poverty. FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 6
The gaps of banking penetration 02 More than one billion women
have no access to the financial system ( ) ; 58% are bank account
holders compared with 65% of men.financial system More than one
billion women --40% of women worldwide-- have no access to the
financial system. According to the Global Findex 2014 report, the
gender gap is obvious: 58% are bank account holders compared with
65% of men.Global Findex 2014 report FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 7
Poor women bear the brunt: because of their low income they are
still being denied access to financial tools. As pointed out in
this article by Sri Mulyani Indrawati, Managing Director and Chief
Operating Officer of the World Bank: Women in particular are in a
situation of disadvantage as regards access to financial services.
In developing economies they are 20% less likely than men to hold a
bank account and 17% less likely to apply formally for a loan.
Moreover, they have less access to secure saving mechanisms and are
more likely to use informal, and therefore, probably riskier and
more expensive methods.expensive methods. of wome are bank account
holders compared with 65% of men 58 % of women worldwide, have no
access to the financial system 40 % This represents an 11% increase
for both sexes if we take the initial 2011 survey as a reference,
although the inequality between men and women stands at 7%
(globally) and increases to 9% in developing economies. In
Southeast Asia only 35% of women have access to an account, while
the percentage for men increases to 55%. The gap is particularly
significant in the Middle East, where women are half as likely to
hold an account compared with men. In Latin America, inequality has
decreased and tends to level off: 47% of women hold an account,
compared with 54% of men. FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 8
According to Ursula Heimann, managing partner of Solliv: Women
usually manage their money in the short term better than men, but
they have less financial expertise and confidence in their
abilities, which leads to less access to formal financial
products.Solliv And what happens when a woman applies for a loan?
This report by Chile's Bank and Financial Institution Association
(ABIF) points out that women are better payers than men. Despite
facing a more complex financial situation at home, women make a
relatively bigger effort to pay off their debts (...) and tend to
assess in a more critical way the financial situation of their
households, which leads to better financial planning and,ABIF in
turn, to better payment behavior. The benefits of giving women
access to finance extends to their children and goes much further,
since women spend money on health and education. In South Africa or
Brazil, for example, granddaughters are more likely to enroll in
school when the grandmothers receive a pension. A woman who has
access to a bank account looks after her family and after herself
and can change the future. This is illustrated by a Huffington Post
article, Bank on Her: 5 Women Prove Why They Belong in the Formal
Financial System, that shows how access to the financial system
changes the lives of women and of their families completely.
article FINTECH SERIE JULY 2015
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Slide 9
The obstacles Women face many barriers when it comes to having
access to financial services and sometimes are not aware of the
services available or are prevented from having access to them. In
less developed economies, women cannot have access to banks because
they live in remote areas and even on some occasions, as stated in
this report by the World Bank, are regarded as second-class clients
by financial institutions. report Another problem they face is that
200 million women, according to this study by GSMA, have no cell
phones, which excludes them from all digital banking
opportunities,.study that very vigorous in countries with less
banking penetration.banking penetration. To achieve gender equity
in access to financial products and services the institutions need
to recognize the key aspects of the financial lives of women and
their motivations. As Sri Mulyani Indrawati concludes: Financial
inclusion matters not only because it promotes growth, but also
because it helps to ensure that prosperity is widely shared. Access
to financial services plays a key role in the task of lifting
people out of poverty, in empowering women and helping governments
deliver services to the population. It is decisive in the fight
against poverty. FINTECH SERIE JULY 2015
Slide 10
INFOGRAPHIC Financia l inclusion In 2011 the World Bank set up
the Global Findex databases in order to study the financial
transactions people use to save, ask for loans, make payments and
manage risks. Share on Pinterest FINTECH SERIE JULY 2015
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Slide 11
Growth of financial inclusion Between 2011 and 2014 there has
been a significant growth in financial inclusin worldwide. Growth
in developing countries Adults in the world with a bank account
2014 2011 51% 62% FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 12
Opportunities Gender In devoloping countries there is still a
gender gap in terms of financial inclusion. By residence With a
formal account in low-income economies: Less likely to have an
account. Less likely to have saved formally. Urban residence Rural
residence Men Women Formal bank account FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en By age People aged between 15 and
24 are
Slide 13
Cellphone account While only 2% of adults around the world have
their money account on their cellphone, 12% in sub-Saharan African
countries have an account of this kind, and of this number, half
have only this account. Cash payments In developing countries over
400 million non-bankarized adults receive their wages or government
support payments in cash. Account uses Having an account is the
first step towards financial inclusion. In developing countries,
account holders use their accounts for a range of functions.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en Millions
of adults with money account on their cellphones: Agricultural
payments in cash
Slide 14
Gema Sacristn heads the Financial Markets Division at the
Structured and Corporate Finance Department at the IDB, the area
responsible for development and capital markets, financing foreign
trade, and relations with financial intermediaries mainly banks and
mutual funds.mutual funds. 04 /INTERVIEW Financial literacy plays a
key role in responsible decision-making GEMA SACRISTN 227 million
adults in Latin America and the Caribbean do not have access to
formal financial services How can we fight to achieve financial
inclusion? We are currently seeing a redoubling of the efforts to
increase access to financial services worldwide through a range of
public and private initiatives and community FINTECH SERIE JULY
2015 www.centrodeinnovacionbbva.com/en
Slide 15
support schemes, such as opening accounts for depositing
payroll checks or for transferring funds to the beneficiaries of
public programs; financing guarantee systems for targeted loans;
creating financial intermediaries; their funding and
capitalization; subsidies for acquiring physical and technological
infrastructure; providing technical assistance; and in terms of the
legal framework the creation and adaptation of specific laws to
regulate the activity of non- banking financial intermediaries. In
addition large-scale financial services with a business focus are
being provided by the banks (downscaling) and other companies and
financial intermediaries. the Caribbean (LAC). These include
regulatory reforms for the supply of electronic money, increased
coverage of physical access points by financial intermediaries, and
the use of systems for making government payments. What are the
IDB's proposals? Recent years have seen a number of public and
private initiatives aimed at generating major changes in the
financial systems of Latin America and FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 16
The IDB works in several areas to improve financial inclusion
in the region. Transactions and product knowledge focus on
expanding the financing frontier for the productive sector,
developing capital markets and risk management instruments, and
implementing and reinforcing the rules and institutions for the
effective management of macro-financial risks. The aim of our
beyond Banking program is to promote practices of social and
environmental sustainability and corporate governance among the
financial intermediaries in the region. What should the involvement
of governments be? In spite of the advances in recent years, the
governments in the region need to reinforce public policies aimed
at increasing financial inclusion, and this requires more work in
the areas of service supply and demand and in the institutional
framework. For example, even in countries with greater regulatory
advances, there is still a need for reforms to simplify the basic
accounts and reduce the regulatory cost of accessing the system, to
facilitate the expansion and financial viability of non- banking
correspondents to lower transaction costs for users and providers,
and to put in place sensible frameworks to back the regulations
governing electronic money. This will ensure they are proportional
to the risk assumed by the providers, and grant the necessary legal
security while guaranteeing the financial stability of the system.
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Slide 17
And how should the private sector be involved? Financial
literacy plays a key role in responsible decision-making. It offers
considerable benefits both for individuals and for the economy as a
whole, as it helps develop the necessary skills to assess the risks
and consider the potential gains of a financial transaction; in
short, it teaches people how to weigh up the positive and negative
aspects of a financial alternative and reach a responsible
decision. Financial literacy also benefits individuals in all
stages of their lives: children, by teaching them the value of
money and saving; young people, by preparing them to exercise
responsible citizenship; adults, by helping them to plan crucial
economic decisions throughout their lives such as buying a home or
preparing for retirement. It also helps
Slide 18
families to adapt their savings and investment decisions to
their risk profile and to their needs, which builds confidence and
confers stability on the financial system. Equally, it promotes the
development of new quality products and services, competition and
financial innovation.financial innovation. of Latin American Women
still do not have a bank account % 52 What is the position of women
in terms of financial inclusion in Latin America and the Caribbean?
The proportion of women in this area who have a bank account in a
formal institution rose from 35% in 2011 to 48.5% in 2014, which
narrows the gap with men from 9.3 points to 5.5 points. In spite of
these advances, there is still work to be done to include the
region's women, as more than half (52%) still do not have a bank
account. This figure continues to be higher than the average for
women excluded worldwide (43%), in middle-income countries (47%),
and significantly higher than in OECD countries (6%). In addition,
the improvements in the regional average are largely due to
specific advances in particular countries such as Brazil, Costa
Rica, Jamaica, Mexico and the Dominican Republic, which saw
increases in the number of women included and a narrowing of the
gap. Countries like Chile, El Salvador and Uruguay considerably
improved the proportion of women included, but at the same time
show an FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 19
increase in the gender gap, which suggests that the intensive
processes of inclusion are not always equitable. However only 11.4%
of women in LAC save in a financial institution; that is, less than
half the world average (25%) for middle-income countries (22%), and
far below the average for OECD countries (50.4%). Are there any
countries that are doing particularly well in terms of female
inclusion and which could serve as an example for the rest? Brazil,
Costa Rica, Jamaica, Mexico and the Dominican Republic, which saw
advances in both the number of women included and a narrowing of
the gap. According to the report What can be done to reduce the
financial gap for women-owned SMEs in Latin America and the
Caribbean? In the future, both public programs and policies and
products should be designed to adapt to women, by taking into
account their specific preferences and restrictions. However, there
is a systematic lack of gender- disaggregated data in the public
and private sector on both the demand side (data from users of
household or special surveys) and on the supply side (data from
banks). This dearth of information makes it difficult to reach a
satisfactory diagnosis, and to design policies and assess public
interventions.public interventions WEVentureScope by the FOMIN and
Economist Intelligence Unit, Chile ranks first in the region for
its support for women's entrepreneurial initiatives, followed by
Peru, Colombia and Mexico. Chile heads the general ranking with low
macroeconomic risk, particularly strong initiatives for diversity
of providers and solid social services. Peru comes just below Chile
thanks to its strong business networks, technical support programs
for SMEs and its stable macroeconomic environment. Colombia comes
in third: it has well-developed training programs for SMEs and
offers ample access to university education for women. FINTECH
SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Slide 20
In the private sector, the business case for investing in
women-owned SMEs should be promoted more intensively. Organizations
such as the IDB, FOMIN and Global Banking Alliance for Women (GBA)
are spearheading this effort. Academic studies have shown that
providing women with access to capital, savings accounts, training
in business management, professional training and employment
receipts helps raise the productivity and income of self-employed
women workers. The private sector will certainly play an important
role in narrowing the gap, and the IDB helps banks in Latin America
and the Caribbean through its women entrepreneurship Banking
initiative (weB) to implement funding models that support the
growth of businesses owned by women. The aim is to incentivize
banks and other financial institutions to testdrive innovative and
inclusive funding products and services. Until June 2015, the IDB
through weB has approved 14 projects, which are expected to benefit
approximately 100,000 micro, small and medium- sized enterprises
through to 2019.FOMIN FINTECH SERIE JULY 2015
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Slide 21
What are the main problems facing the population in Latin
America? The slowdown in economic growth and the diminished hope of
a substantial upturn pose a challenge for the LAC region,
exemplified by a "new normality" featuring stagnant growth rates
and less room to maneuver to bring the situation to an end. Experts
and policy designers are concerned that these more limited outlooks
may jeopardize the social advances of the last decade and push the
Latin American economies towards the so- called middle-income trap
a situation where a country's development prospects become bogged
down. The economic growth of LAC could recover slightly to 2.2% in
2015, compared to 1.3% in 2014, the lowest rate since the global
financial crisis. In the words of Luis Alberto Moreno, chairman of
the IDB, Latin American and Caribbean countries should prioritize
reforms that ensure sustained and inclusive growth in the medium
and long term. The answer today, more than ever before, lies in
internal order growth sources, he says. Here the overriding
challenge is to increase productivity". This is the factor that
explains our relative backwardness compared to other parts of the
world. In the last ten years, Latin America has succeeded in
lifting over 70 million people out of poverty; meanwhile its middle
classes have expanded until they now represent over 50% of the
population. Education, infrastructure, security and better quality
healthcare services now form the core demands of the region's
growing middle classes. While it works to meet these new
expectations, the region is in turn facing the challenge of having
a large part of its population living in a situation of chronic
poverty 130 million people, according to a recent study.study
FINTECH SERIE JULY 2015 www.centrodeinnovacionbbva.com/en
Slide 22
64 million people hold mobile money accounts in Sub-Saharan
Africa. Beyond the M-Pesa app, which has been such a huge success
in Kenya, here we examine some of the other startups that are
thriving in Africa.thriving in Africa 05 Banking penetration in
Africa driven by mobile devices FINTECH SERIE JULY 2015
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Slide 23
In the year 2030 two billion people will use their cell phones
to save, lend and make payments, according to Bill Gates. But you
don't need to peer that far into the future to recognize the
potential that mobile banking offers as a driver of financial
inclusion. Figures from the World Bank demonstrate just how vital
mobile devices are for the unbanked population: in Sub-Saharan
Africa 12% of adults (64 million people) have mobile money
accounts, 10% more than in the rest of the world (2%).World Bank
the rest of the world (2%) Kenya leads the way, with mobile money
account ownership at 58%, while Tanzania and Uganda have rates of
close to 35%. In Kenya more than half of adults who pay utility
bills use a cell phone to do so. One success story that
corroborates this trend is that of the M-Pesa app.M-Pesa app In
Ivory Coast, Somalia, Tanzania, Uganda and Zimbabwe more adults
have mobile money accounts than bank accounts. In Tanzania nearly a
quarter of individuals who collect payments for agricultural
products do so with their cell phones in hand. More figures: 48% of
adults in Sub-Saharan Africa send or receive remittances. In the
wake of M-Pesa's success in Kenya, plenty of startups are emerging
with the intent to provide financial services to the 75% of the
African population that is excluded from traditional
banking.traditional banking FINTECH SERIE
Slide 24
In March of 2013 the Moroccan entrepreneur Rania Belkahia
partnered with Jrmy Stoss and Franois Sevaistre to launch this
startup, which aims to compete with the giant names dominating the
remittance business. Every year emigrants send 60 billion dollars
to Africa. However, just 5% of Africans hold bank accounts, which
means this money is either moved by "informal" means or via the two
major players in money transfers: Western Union and MoneyGram,
which together account for 75% of the market. As Belkahia explained
to La Tribune, on average a fee of 12.5% of each transfer amount is
charged, plus a commission on the exchange rate. We provide a
cheaper alternative that also guarantees that the funds will be put
to good use."La Tribune Afrimarket puts the person making the
transfer in control of how the money is spent. They can specify
whether it can be used to buy food, make payments on a home,
education, domestic appliances, etc. An SMS is sent to the
beneficiary detailing how much they have to spend on items via a
catalog or at any of the 300 partner establishments, which are
equipped with Afrimarket mobile payment terminals. "Beneficiaries
simply waive their cell phone close to the terminal to authenticate
the transaction: we use encrypted sound technology that works with
all operators and devices. Including the 10 euro Chinese cell
phones that are so widely used in Africa," says Belkahia. Orange
has invested in the business, which operates in Abidjan, Dakar,
Lom, Cotonou and Bamako. Afrimarket: a cash-to-goods transfer
service that is breaking Western Union's monopoly. FINTECH SERIE
JULY 2015 www.centrodeinnovacionbbva.com/en
Slide 25
Bouquet Pass Sant in Senegal: paying medical bills from abroad.
Bouquet Pass Sant is a startup from Senegalese entrepreneur Moussa
Traor, which allows money to be made available to cover medical
emergencies and healthcare bills. The process is simple: if, for
example, someone falls ill in Dakar, a relative living in Spain
could use the Bouquet Pass Sant website to select a doctor for
them. The relative makes the payment online and the patient is sent
a message with a code detailing their appointment. In Senegal
around 80% of remittances are used to buy food, while just 4% is
spent on health. Nigeria: Simple Pay. Uber and the travel agency
Jovago have created an app that supports secure and instant direct
payments, competing with PayPal. FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 26
SnapScan: South Africa's Apple Pay SnapScan provides contract-
free payment services in Cape Town, Durban and Pretoria, just as
Apple Pay does in the United States. The process is as follows:
once the SnapScan app has been downloaded, the user takes a photo
of a product's QR code and enters a 4 digit code to confirm the
purchase. SnapScan provides contract- free payment services in Cape
Town, Durban and Pretoria, just as Apple Pay does in the United
States. The process is as follows: once the SnapScan app has been
downloaded, the user takes a photo of a product's QR code and
enters a 4 digit code to confirm the purchase. By 2017 350 million
Africans will own cell phones. These startups have a huge market
open to them.product's QR code Bitcoin in Ghana. The Bean app is
designed to do away with commissions. It therefore uses bitcoins
instead of the local currency. Nikunj Handa says in this report
carried by Le Monde, the aim is to attract a significant share of
remittance flows. We are focusing on Ghana and Nigeria. By using
bitcoins, transfer costs are reduced from the 12% charged by
traditional operators to 3% with Beam. We are far more competitive.
Of the 60 billion dollars that are sent to Africa, 7 billion goes
toward transfer costs.report Beam converts its customers' money
into bitcoins, which can then be changed into Ghanaian cedis via
the recipient's mobile device. FINTECH SERIE JULY 2015
www.centrodeinnovacionbbva.com/en
Slide 27
BBVA Innovation Center creates the Fintech Serie By Innovation
Edge to keep informed about the financial innovation trends with
its milestones, analysis, cases studie, interviews with experts and
infographics to display the data that describe each of these
trends. FINTECH SERIE BY innovation edge share LATEST ISSUES
Financial alternative for investors and entrepreneurs All the
details of alternative financial ecosystem The transformation
towards digital banking generates new business models Retain and
attract customers on social networks
Slide 28
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