Low Cost to No Cost Banking: rethinking the purchasing power of the unbanked

The traditional banking model is not just facing a few changes; it’s looking into a fundamental paradigm shift. In the next ten years everything we know about our financial services experience will change. What we will find instead will be a host of new providers and innovative new services. Those banks who seriously engage with these changes will be tactically preparing for the future. There may also be those who simply wait to buy out the newcomers – but calculated assessment and timing will be crucial.

Seismic change for banking

The fact of the matter is that millions of potential customers may have already turned to non-bank technology for their banking needs. Financial technology is enabling people with easier payment solutions across a range of engagements such as in-store payments, international money transfers, lending, wealth management, property investment, etc. Financial technology will open services on an individual’s mobile that will allow any transaction, anywhere, using only a transactional code generated by a technology provider and a personal pin. These services will be viewed as equal as or better than a bank.

Reasons why financial technology is capturing minds

  • Loss of trust in banking since the global crisis of 2008
  • Expectations of a better experience – faster, cheaper and more convenient anytime/anywhere payments
  • The demand from millennials for banks to think about financial services differently and the move towards e-wallets
  • The rise of the mobile internet has created fresh perspective regarding the use of the phone in our pocket, and we expect greater personal service and customer attention.

Why banks need to be aware

  • The new truly ‘digital’ banks will carve out a powerful niche for themselves, presenting open and integrated ecosystems with several solutions outside banking such as non-bank Payment Service Providers (PSP) offering mobile banking.
  • Traditional banks will need to embrace partnerships or generate their own ideas.
  • Consumers will be able to make their choices from a variety of products from a multitude of providers, creating a more fragmented form of banking.
  • Banks will be forced to scale down as alternative low-cost marketplaces and platforms arise to serve specific customer needs with speed and cost-efficiency.
  • Banks, generally disliked for tedious processes of account opening, lending and payments, may become no more than the ‘go to’ place for more complex advice and problem resolution.
  • Traditional branch-based banking is not a viable option for rural populations who find it expensive, not to mention time-consuming to travel to the nearest branch – and yet these people present a vast and as yet untouched customer base.
  • The year 2016/2017 will see partnerships and mergers between banks and financial technology – and as many as 80% expect mobile to be a major focus.

Unlocking the potential of the ‘unbanked’ through mobile

Mobile phones are everywhere – even in the poorest communities and across developing countries – and access to financial services through mobile phones will transform the way those services are provided. Reaching the vast number of people shut out of traditional banking services has several important effects. It will inevitably seed momentum for improved economic and business opportunities, and bring about change at a truly humanitarian level to ordinary people hitherto shut out of economic freedom because of banking restrictions.

In addition, tapping into the purchasing power of the unbanked has the potential to transform whole communities and empower individuals on an almost unimaginable scale. So much so, that it could affect the entire global economy. By providing alternative platforms for payments and savings without traditional banking limits – and in any area of the globe – the current financial fortunes of masses of people will revolutionised. The vast and positive ramifications of this are simply mind-boggling.

Mobile banking apps will be the next big trend

Just consider the numbers. Literally billions of people are ‘unbanked’. This means they rely on cash or less than savory informal services that are unsafe and expensive. Africa has one of the largest unbanked populations on the planet. This is mainly due to geographical inaccessibility, poor infrastructure, lack of financial education, and large numbers of people living in remote areas.

However, at present, over one billion have access to a mobile phone – the new medium for financial services such as payments, transfers, insurance, savings, and credit. Mobile money is the key to transforming the way people access financial services and take up business. It’s the key to changing lives.

If wishing to access the potential new market of the unbanked, banks will have to move from their comfort zones rather fast. Granted it’s not practical, nor cost effective for the bank to set up branches in areas with low population density. But the value of the unbanked is so vast, the potential so huge, banks must speedily open their minds to the new technology which is allowing access to these areas.

Welcome to the Kineto Mobile Banking platform

Situated in Cape Town, South Africa, Kineto Mobile Banking offers a secure and innovative private cloud payment platform. It enables emerging banking and e-wallets, making low cost to no cost mobile payments and banking services a reality for your entire customer base. High on integrity and professionalism, and using technology not previously available, we are a solutions company dedicated to empowering people and communities through easy, fingertip access to business, finance and healthcare – anywhere, anytime.

Find out more about us at: www.kineto.co

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