The APAC is home to some of the world’s most populated countries. Yet, it still faces significant challenges when it comes to financial inclusion. Fortunately, mobile wallets in APAC offer a viable solution to this problem. By leveraging new tech such as AI and blockchain, mobile wallets can provide secure and reliable access to financial services to those in need, helping to bridge the gap between those with and without access to banking services.
In this blog post, we will explore the challenges to financial inclusion in Asia Pacific, how mobile wallets can help to overcome them, and the technical issues to consider.
The current state of financial inclusion in APAC
Financial inclusion is a critical challenge in the Asia Pacific region. It is estimated that over one billion adults, representing more than 50 percent of the population in the region, are still unbanked, meaning they lack access to formal financial services. This lack of financial inclusion has severe consequences for economic growth and development in the region, particularly in rural areas where access to credit and savings products is severely limited.
In addition, traditional banking infrastructure is often too expensive and time-consuming for those living in remote locations. As a result, many people have limited or no access to even basic financial services such as depositing money or making payments. This can lead to a cycle of poverty and social exclusion. The challenges to financial inclusion in APAC are numerous, but the good news is that tech can play an important role in overcoming them.
Mobile wallets offer a promising solution to increase financial inclusion. By providing people with access to banking services via their mobile phones, they can make it easier for people to access financial services, especially in rural areas. Mobile wallets can provide a secure, convenient and cost-effective way to transfer money, pay bills and make payments. All of these benefits have the potential to help drive greater financial inclusion in the APAC.
The challenges to financial inclusion in APAC
Widening Income Gap
A key challenge to financial inclusion in the APAC is the income gap between those who have the resources to access banking and other financial services and those who do not. This can widen the gap between the ‘haves’ and ‘have-nots’ and further exacerbate the problem.
Another challenge to financial inclusion in the APAC region is the aging population. This can lead to an increased burden on pension and other social security systems, which may not be able to adequately provide for all members of society, leaving some financially excluded.
Lack of access to Technology and infrastructure
Tech can also be a significant barrier to financial inclusion in the region. For example, a lack of access to reliable internet connections and digital infrastructure can limit access to digital banking and other online payment solutions. Moreover, those in rural and remote areas may not have access to branches or ATMs, making it harder for them to access banking services.
Low financial literacy
Finally, many people in the Asia Pacific (APAC) region lack financial knowledge and access to accounting and bookkeeping services. Without the ability to track and manage their finances, many people, including those in the unbanked sector, may not be able to take advantage of financial services, potentially leading to greater financial exclusion.
How can mobile wallets help overcome the challenges?
The APAC is home to billions of people, many of whom are unbanked and lack access to financial services. Financial inclusion initiatives have been deployed to bridge this gap. But challenges still remain in bringing financial services to the unbanked. Mobile wallets offer an innovative solution that can help overcome the challenges to financial inclusion in the region.
Flexible technology with flexible terms
One key challenge to financial inclusion is the lack of flexibility with existing tech. Traditional banking methods are difficult to scale, making it difficult for banks to reach the unbanked population efficiently. Mobile wallets provide a more flexible approach, allowing for greater scalability and a more comprehensive range of services. The tech also offers more flexible terms, with customizable features that cater to the needs of the unbanked population.
Mobile wallets ease KYC
Mobile wallets make it easier to undertake KYC (Know Your Customer) procedures. This is done through digital customer identification processes that allow banks to securely identify clients without requiring any physical documentation. With the rise of digital identity solutions, mobile wallets are helping to make KYC processes quicker and easier than ever before.
Enable last-mile delivery of financial services
Mobile wallets also enable last-mile delivery of financial services, providing a direct connection between banks and their unbanked clients. This connection is critical to reducing the cost of financial inclusion, as it eliminates the need for expensive infrastructure. All that’s needed to use a mobile wallet is a smartphone, which is already widely available in the region.
Mobile wallets reduce the risk of fraud
In addition, mobile wallets are helping to reduce fraud risk by leveraging embedded data analytics. This technology can quickly identify suspicious transactions or behavior and alert banks in real time, allowing them to take action and prevent any losses. This helps to ensure a secure platform for customers and reduces the risks associated with financial transactions.
Mobile wallets provide peer-to-peer financing alternatives
Mobile wallets enable low-cost savings and peer-to-peer credit options, providing another avenue for financial inclusion. These services are beneficial for low-income populations, who can use these options to increase their savings or gain access to much-needed capital.
Overall, mobile wallets offer an effective solution to the challenges of financial inclusion in the Asia Pacific region. By leveraging innovative technologies such as digital customer identification, embedded data analytics, and low-cost savings options, mobile wallets are helping to bring financial services to the unbanked population securely and cost-effectively.
Are mobile wallets the solution to the problem?
Mobile wallets are an increasingly popular solution to the challenge of financial inclusion in the Asia Pacific region. The spread of mobile phones has made them accessible to people who may not have had access to traditional banking systems. Mobile wallets can be used to make payments and transfer money, making them an ideal tool for the unbanked.
With a forecast of 98.6% mobile wallet penetration in Japan by 2025 and an expected growth in transaction volume and value throughout the region, it appears that mobile wallets are indeed the answer to the issue of financial inclusion in Asia Pacific. Yet, many challenges remain to the widespread use of mobile wallets in the Asia Pacific region. The unbanked population is still large, with over 500 million adults lacking bank accounts in India alone.
This creates difficulty in onboarding new users due to the requirement for KYC (Know Your Customer) processes and other compliance regulations, preventing many from being able to use mobile wallets as payment tools. However, before we jump for joy at a problem solved, some issues need to be addressed if mobile wallets in APAC are to achieve their full potential.
Technology issues to take into consideration
Several tech-related issues in the APAC need to be considered when looking at mobile wallets as a driver of financial inclusion. First, access to the internet is a limiting factor for many in the unbanked population, meaning that mobile wallets might not be able to reach all those who could benefit from them. For mobile wallets to be used on a large scale, govts must create and implement regulatory changes that would allow for the adoption of these services.
These regulatory reforms will give potential investors and entrepreneurs the confidence they need to grow the mobile wallet industry in APAC. Also, the additional regulatory protections will safeguard the population from scammers and fraudsters trying to exploit the unbanked.
New mobile-based infrastructure must be developed to accommodate the digital payment methods. For example, cellphone towers need to go up in rural areas, and rural electrification needs to be prioritized. The govt could also facilitate the proliferation of mobile wallet ‘on and off-ramps’ through rural areas where the majority of the unbanked reside. These factors must be considered when looking at how mobile wallets can help to drive financial inclusion.
The Asia Pacific region is home to a large number of unbanked individuals, making financial inclusion an increasingly pressing issue. The rise of mobile wallets has presented a potential solution to this issue, providing access to the financial system to those who have previously been unable to access it. While several technical issues still need to be addressed, the potential for mobile wallets to drive financial inclusion in the Asia Pacific region is evident.
By offering an affordable and secure alternative to traditional banking, mobile wallets can help bridge the gap between those who are financially included and those who are not.
Gerald Ainomugisha is a freelance Content Solutions Provider (CSP) offering both content and copy writing services for businesses of all kinds, especially in the niches of management, marketing and technology.