The rise of digital banking in the developing world with Platforms like Black Banx
In recent years, the financial technology sector has shifted its focus from developed to developing countries. With industry leaders like Revolut making consistent gains in Europe, others such as Black Banx aspire to make global banking accessible to the underserved. Digital banking has revolutionised financial access in the developing world.
Financial exclusion in developing economies accounts for the majority of unbanked populations worldwide. Individuals and groups in these areas lack access to a monetary system, resulting in a lack of bank account, no credit history, no savings and higher cases of social exclusion. Economic mobility is also impeded as it’s difficult for individuals to improve their financial status when it isn’t monitored.
Digital banking service Black Banx aims to unlock a borderless financial system for everyone, regardless of status or place in the world. As Black Banx offers account opening via a smartphone app, multi-currency checking, and savings accounts for private and business customers, it looks to be a key figure in fuelling developing countries’ economies. With revenue of close to $1bn last year, and 3,000 employees, the company’s high revenue-to-employee ratio, along with its effort to remain a global fintech force, offers a lifeline to developing parts of the world seeking to close the gap between banked and unbanked populations.
What causes financial exclusion?
The causes of financial exclusion vary depending on what area of the world data is gathered from. In developing nations, the main culprits are traditional banking not being built for the poor (poor range of products and services), low income, cultural and geographical reasons, and high fees.
Traditional banks have a record of not catering to the poor. This is especially evident in hard-to-reach areas such as rural developing areas. Banks don’t believe opening branches in these areas to be financially viable and have limited financial access to billions of people by doing so. In summary, the traditional banking system was not made for poor people in emerging countries.
Financial institutions often reject individuals due to their socioeconomic status. For example, banks label low-income earners high risk, and if there is a high number of unemployed or poor residents within an area, it’s no surprise that a bank hasn’t provided its services there.
Cultural and geographic reasons
Although traditional banks have a significant role to play in the case of financial exclusion, they’re not the only component. Many areas of the world don’t trust banks and other financial services. These groups have a dependency on cash. Geographically, those in rural areas with low vehicle ownership levels cannot physically access a financial institution.
What problems do financially excluded populations face?
Financially excluded individuals and populations historically face lower incomes, cannot bounce back from shock hardships, are reluctant to plan general expenses, including food around income and have little to no savings.
What is the solution?
To put it simply, smartphones. Financial technology offers users easy access, security, lower costs, and economic empowerment through a digital bank. In Nigeria, – described as a lower middle-income country by the World Bank – only 40% of the population have a bank account, yet there is a mobile-penetration statistic in the country of 117%
Currently facing a cash crisis, the country has witnessed a sudden growing market for mobile-money startups. Given the opportunity, well-established digital banking platforms such as Black Banx can help administer the country’s economic growth. In a similar move to India, Nigeria has started removing high-value notes. According to the Nigeria Inter-Bank Settlement System Plc., the value of mobile-money transactions has jumped by a quarter to $5.4bn. Authorities in Africa’s most populous country are encouraging citizens to go digital. The central bank limited cash withdrawal to 1085 USD for individuals and imposed a 3% fee for anyone trying to withdraw above the limit. Nigeria, as a developing country, is a crucial indicator of the growth and power of digital banking.
Companies like Revolut, Wise and Black Banx are making headway in developing nations due to the easy access, minimal identification, no-fuss sign-up and lack of transaction fees. Customers require global transactions in real-time with low fees – and established banks can’t provide what they need.
Kenya is a crucial example of how mobile payments can positively impact a developing country. Created by Vodafone’s Kenyan counterpart Safaricom, M-PESA is Africa’s most successful mobile money transfer service. Its convenience and security have made it a trusted platform throughout the continent. Moreover, providing services to 51 million customers across seven African countries – and a necessity for small businesses in rural areas – has provided stability to people who have mobile phones but lack access to a traditional bank account.
As people access digital banking platforms such as Black Banx, further understanding of financial services occurs. India is home to 17.5 per cent of the world’s population, but nearly 76 per cent of its adult population does not understand basic financial concepts. With greater understanding comes greater skills, and with more knowledge, developing populations will branch out into further economic opportunities such as credit and insurance and use them to start businesses. This will improve the vitality of digital banking platforms such as Blank Banx and the local economies in these regions.
Digital banking service Black Banx is witnessing evidential growth in developing parts of the world due to its easy access, simple sign-up, mobile app, crypto access and flat rate cross-border payment fees.