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Kate McKee, Senior Advisor at CGAP, reflects on key issues raised during the FI2020 Global Forum’s panel discussion on ‘Why Financial Inclusion is More Important Than We Ever Knew,’ ending with an exciting prediction market from the panelists. 

Kate McKee moderating the panel “Why Financial Inclusion is More Important Than We Ever Knew,” alongside panelist Bill Gajda

In this panel, which began with an emphasis on behavioral economics opened by Sendhil Mullainathan, co-author of the recently-published book Scarcity (reviewed on this blog by CFI’s Sonja Kelly here), who focused on how the reality of scarcity translates into a “bandwidth tax” on people who constantly live in poverty. Research by Sendhil and others has documented how the constant worry and distraction of living with too little – what Sendhil and his co-author Eldar Shafir refer to as “tunneling,” with its intense focus on making ends meet day-to-day – ultimately, affects poor people’s ability to make good decisions. Basically, this growing body of research shows that when people are in a situation of scarcity, they are not as smart, not as able to resist temptation, and are less likely to be able to make and stick to a plan, as compared to themselves in a time of less scarcity.

This scarcity framework and evidence has potentially powerful consequences for financial inclusion. The panel that followed focused on how scarcity, the bandwidth tax, and tunneling affect the relevance, uptake, and usage of financial services by lower-income people. Tine Wollebekk (Vice President of Telenor Financial Services and Board Chair of Tameer Microfinance Bank, the sponsor of Easypaisa in Pakistan) and Kamal Quadir (Managing Director of bKash in Bangladesh) reflected on the experience of these two fast-growing mobile money service deployments, including insights about customers’ underlying demands and how the mobile wallets and other services are designed to meet them, how to make the offerings intuitive and simple, and how to earn trust from customers new to formal finance. Bill Gajda (Global Head of Strategic Partnerships, Visa) rounded out the panel by bringing in findings from deep consumer research that Visa has supported in additional developing countries, as well as experience with different business models and customer interfaces including cards.

Entry products need to be ‘in the tunnel’

One of the key insights was that the entry product needs to meet a really immediate need. It needs to be ‘in the tunnel’ of what the customer is focused on to meet their day-to-day needs. Obviously mobile telephony is firmly in the tunnel virtually everywhere in the developing world. Person-to-person money transfer has also passed the “tunnel test” of rapid uptake in an increasing number of markets – Kamal noted that he felt the company had reached an important tipping point when “bKash” had become a verb commonly used across Bangladesh. Tine made the point of needing excellent execution and recruiting the right kind of agents that customers will trust, in order for customers not to have extraneous worries that would prevent them from really being able to make decisions.

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