Inclusion and diversity – the key to more profitable financial systems for all
Inclusive access to financial services for every individual enables the development of financial resilience and brings increased profitability for all the stakeholders.
A non resilient client transformed into a resilient one can generate up to 167 EUR per year.
We have the technology that enables banks to offer their clients customized services and to extend these services and to make them available to everybody, no matter the social or financial status.
An inclusive access to financial services for every individual is a major enabler to building one's financial resilience but it also translates into higher economic profits for banks and general prosperity for the society. Extending the real option to have a bank account, and furthermore to access a loan, to have an insurance or to save money to vulnerable communities will drive change in the banking system and can represent an innovative, yet very profitable way of reshaping the new realities while recovering from the Covid-crisis.
IN FINANCE, INEQUALITIES LEAD TO MORE … INEQUALITIES
The International Monetary Fund identified the strong association between inequality in access to financial services and income inequality, with a significant share of that inequality being driven by systematic differences across genders in financial access.
Certainly, when envisaging financial sustainability and the general wealth of the population, we cannot ignore one of the most important categories and pillars that our society is built on – women. According to a report by Better Than Cash Alliance, Women’s World Banking, and the World Bank Group, 56% of the unbanked individuals are women. Moreover, the same document shows that the access to financial services is less available for women who are part of minority groups – in the US, 93% of white women had a bank account, compared to 84% for Hispanic women and 80% for Afro-American women.
The absence of any relationship with a bank is caused by a myriad of factors, including policies that are restrictive and restrain the access of individuals to the financial services they need. Therefore, people who do not check all the eligibility criteria are forced to look for alternatives that are not always as secure as banks.
Take the example of a credit. If individuals do not qualify to take a loan at regular banking institutions, they will find non-banking institutions or even less reputable options and will borrow the money they need. In these cases, the interest rates can easily double or in some cases be outrageously higher than banks. For example, in Romania interest rates are not legally caped and interest rate >100% a year are a common occurrence. How is this a problem and why should we all act towards changing that? Higher interest rates imply reduced borrowed amounts or/and increased pressure on disposable income due to higher repayments. This leads to lower financial resilience and susceptibilities for poverty. And of course, if you do not have a bank account then you will not qualify for a credit. It’s a vicious spiral, pressing vulnerable people to access more risky and more expensive financing options, thus, increasing substantially the economic gap and inequalities in our society.
HOW LARGE ARE THE INEQUALITIES
Already, in the EU and UK, more than 50% of the adult population is NOT financially resilient – none or less than 3 months revenues in savings; low ability to save, borrow and pay-back debts; poor capability to handle spending(source: link, link). In the Europe alone, lack of financial wellbeing cost Business 139 EURbn per year (source: link). This is a serious issue that needs to be addressed, especially now, when the Covid-crisis has considerably widened the social and gender financial gaps all over the world, including in the developed countries.
22TrustVenture sees a tremendous amount of business value in building financial resilience for all. The company estimates that for the financial industry, alone, transitioning one single customer in Romania to financial resilience can drive an annual value of 167 EUR. If the customer qualifies for a consumer loan, the annual value climbs to 376 EUR.
Nowadays, when technology is breaking down traditional walls globally, when the pandemic has shown us how codependent we are one on another, regardless our social and wealth status, the solutions to precarious financial resilience and financial inequalities are at our reach. A more inclusive banking system, that is centered on the needs of the individuals and that provides services adapted to the unique situation of each client can bring a lot of advantages for all stakeholders, including banks, private individuals, and the state. Everyone creates a significant economic value through its everyday financial decisions. That value can be maximized and shared between banks and customers, bringing the two stakeholders in a mutually beneficial, trustworthy, and more fair relationship.
Financial services must be adapted and available for anyone at any moment. We have the technology and the know-how to do so. It is time to act on it because change is coming our way and the smart and humane thing to do is to be prepared to support a more resilient, inclusive, and prosperous society for all.
22TRUST VENTURE IS CHANGING THE SYSTEM
22Trust Venture is leading a real-world experiment – named the Early Access Program – to prove to the banks, the benefits for all of a new inclusive and mutually beneficial way of doing banking. In Romania 72% of all the personal savings are in the saving accounts of only 5% of such account holders. 22Trust Venture is changing that (see how in our post) by driving positive financial behaviors in our everyday life.
If you demand a 21st Century financial system that is fair, inclusive, sustainable: a system which enables every citizen to benefit from their actions then join us in the Early Access Program.
