Most of us take it for granted that we can open a bank account or a credit card. But the truth is, according to the World Bank, close to one-third of adults – 1.7 billion – are still unbanked and have no access to a transaction account. About half of unbanked people include women who live in poor households in rural areas or are out of the workforce. What can companies do and what more can they do to promote more financial inclusion? To address this, Authority Magazine started a new series called Companies Helping to Promote Financial Inclusion. As part of this series, Orlando Zayas interviewed our own BK Kalra, global business leader for banking and capital markets.
Authority Magazine: Let's start with a basic definition so that all of our readers are on the same page. What exactly is financial inclusion?
BK Kalra: First, let me say that the drive toward greater financial inclusion is just one part of a broader trend, which we call 'ethical impact.' This is one of three global macrotrends, which Genpact identifies in its Banking in the Age of Instinct report. Societies around the world are demanding that enterprises take an active and ethics-driven role within communities and a stand on the issues that matter most to them.
Put simply, 'financial inclusion' is the effort to make useful, appropriate, and affordable financial products and services available to individuals and businesses in a sustainable way. There are many underserved communities where individuals simply do not have access to the forms of payment and financing that we often take for granted. So, there is a need to drive greater financial inclusion for everyone.
There is also a greater opportunity to achieve this, especially as traditional banks form partnerships with a growing number of fintechs, and big tech companies continue to move steadily into the payments space. For example, US fintech Esusu supports immigrant and minority groups by using the power of data to bridge the racial wealth gap. Esusu uses its platform to record and report on-time rental payments to the largest, most established credit bureaus – Experian, TransUnion, and Equifax – on behalf of landlords to boost credit scores for tenants to help them get on the property ladder. Meanwhile, in the big tech space, Facebook is working to eliminate the long waits and high costs that people face when sending money to their families internationally. With its Novi digital wallet, Facebook is piloting a fee-free money transfer service that allows users in the US and Guatemala to send money to each other. These types of efforts will drive us toward greater financial inclusion.
Authority Magazine: What does 'unbanked' mean?
BK Kalra: Individuals or families who do not have a demand deposit or checking account are 'unbanked'. Often, these people must rely on check-cashing services and money orders, rather than on traditional loans and credit cards to manage their finances. In addition, even more people are 'underbanked', meaning they do not have access to the full range of financial services they need. To address this problem, financial institutions must shift from being authoritative and functional to supportive and emotional. They need to focus on and provide specific solutions for vulnerable populations, such as the unbanked and the underbanked, minorities, immigrants, and marginalized communities.
Authority Magazine: For the benefit of our readers, can you explain some of the typical reasons why a person might be unbanked? Why can't they just walk into the local bank and open an account? Why can't they simply open an account online?
BK Kalra: One of the primary reasons a person might be unbanked is cost. For many people, financial services are just too expensive. After all, financial institutions often have minimum deposit requirements, fees, and other upfront costs. While alternative services may cost more over time, the costs of traditional financing create steep barriers to entry for people without much disposable cash. In addition, those considered unbanked may be employed by businesses on an hourly basis and either do not have the financial knowledge to open their own accounts or are not able to do so, such as with those who are not legal citizens and therefore wish to keep their finances private.
Authority Magazine: Can you tell our readers a bit about your work to promote financial inclusion? Without saying names, can you share a story about a person your initiative helped?
BK Kalra: Absolutely. At Genpact, our purpose is the relentless pursuit of a world that works better for people. An inclusive world, including one that is financially inclusive, is by definition a world that works better for people. At Genpact, we promote financial inclusion in two primary ways: 1) directly as a company and 2) through our work with our financial and big tech clients.
As a company, we directly promote financial inclusion through our diversity, equity, and inclusion efforts. For example, Genpact runs a project called the Livelihoods Project, which skills women in rural, Indian communities – most of whom have never had a job, never handled money, never seen a profit-and-loss statement – and teaches them to become entrepreneurs. Similarly, we run a program called Rise Together, which provides financial and career help and education to job seekers from families who have lost their primary breadwinners to COVID-19. These programs provide us with opportunities to live out our purpose.
Secondly, we promote financial inclusion through our clients in the financial services and big tech industries. We enable these clients to use the power of data and advanced digital technologies to help promote, and maintain, financial inclusion. For example, during the pandemic, Genpact worked with a US regional bank to analyze the notes customer-service representatives took during routine customer calls to find those who might need financial assistance. We identified about 20 keywords and phrases, ran them through our artificial intelligence engines, and then created models to proactively offer hardship programs to customers that had loans they were struggling to pay back.
Authority Magazine: You may find this obvious, but it will be helpful to spell this out. Can you articulate to our readers a few reasons why it is so important for businesses to promote financial inclusion?
BK Kalra: Financial inclusion is a key enabler to reducing poverty and boosting prosperity. It helps in the overall economic development of the underprivileged. It can empower people and communities to meet basic needs, such as food, clean water, housing, education, and healthcare. Financial inclusion also plays a critical role in the efforts to help people prepare for, respond to, and recover from global health and economic crises, such as COVID-19. Regardless of where you live, everyone should have equal access to basic financial services, such as banking.
Authority Magazine: OK. Here is the main question of our discussion. You are an influential business leader. Can you please share your "5 Steps Businesses Should Take to Promote Financial Inclusion"? Kindly share a story or example for each.
BK Kalra: That's a great question. You may have heard about the five As of financial inclusion: Availability, Accessibility, Affordability, Awareness, and Adequacy. This means that companies need to make all types of financial products and services available, at an affordable cost, to all types of people, irrespective of their income level, credit history, or physical location, in ways that adequately meet their needs. Beyond that, it's important for companies to:
- Democratize financial education: There is so much businesses can do to democratize financial education. For example, early on in the pandemic, Genpact opened portions of its highly successful, internal, online, continuous learning platform, Genome, to the public. And last year, we added essential learning resources for startup owners to help under-resourced entrepreneurs develop critical skills for success. Financial institutions could do the same, which would have a massive impact on raising financial literacy levels. And some are already undertaking similar endeavors. For example, US Challenger bank, SoFi, has an educational financial learning webpage called SoFi Learn where customers can choose to learn anything from student loans and homeownership to budgeting, investing, and paying off their debt.
- Put data and advanced digital technologies to work: Data and advanced digital technologies, such as artificial intelligence (AI), advanced analytics, and AI-led automation, play a critical role in helping companies drive a focus on financial inclusion. For example, a company called Petal has deployed machine learning to analyze underbanked people's raw, digital financial records, providing credit lines of up to $10,000. Similarly, automating aspects of digital financial services, such as customer support through AI-led chatbots, for example, reduces the cost to financial institutions of extending tailored support to a wider range of consumers.
- Partner to make it happen: Partnerships are key to expanding the reach and uptake of financial products among underserved people. For example, partnerships with fintechs and digital transformation firms enable banks and other companies to expand their offerings with innovative financial tools. These types of partnerships also help companies achieve financial inclusion at speed and scale. Government partnerships can help to develop regulation that supports financial service providers and new delivery channels. And partnerships between public, private, and philanthropic sectors support financial service providers in assisting the world's most marginalized populations and building a more inclusive economy.
Authority Magazine: This was very meaningful, thank you so much. We wish you only continued success in your great work!
BK Kalra: I've enjoyed this thoroughly, Orlando. Thanks for taking the time to interview me on this important topic.
The full version of this interview first appeared in Authority Magazine.