This report examines how partnerships between mainstream financial institutions (e.g., banks, insurers, and payment companies) and fintechs are addressing financial inclusion challenges and expanding access to the formal financial economy for underserved segments of the global population, particularly in emerging markets. It incorporates insights from 24 in-depth interviews with people at the frontlines of this innovation and highlights 14 partnerships focused on financial inclusion that we think exemplify best-case scenarios and good practice. Contrary to the popular narrative, financial institutions view fintechs as partners in innovation, not threats to their core business. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institutions with help from fintech partnerships.
Major Findings
Mainstream financial institutions partner with fintechs to improve product offerings, increase efficiency, and lower costs – goals with special relevance to low-income customers. By partnering with mainstream financial institutions, fintechs get to scale their technology and can access capital to grow. As a result of these partnerships, low-income customers who are left out of – or poorly served by – the financial sector have greater access to higher quality, more convenient, and less expensive financial products and services.
To facilitate productive fintech partnerships, mainstream financial institutions are organizing internally for innovation, strategically integrating systems and staff, and developing contractual agreements to ensure stability and success. Fintech partnerships enable legacy institutions to engage with and learn from new technology in low-risk, low-cost ways. They are also key to allowing incumbents to compete in a world where alternative players, like Facebook and Amazon, are threatening the central role of financial institutions in the lives of customers. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institution.
One encouraging and somewhat unexpected finding is that the partnerships between financial institutions and fintechs represent a slow but pervasive financial industry shift toward customer-centricity. Better data management and use, new digital banking products, and greater customer engagement all enable better service for underserved customer segments.
The Value of Partnerships
AXA is partnering with MicroEnsure to extend insurance to new customer segments in emerging markets. Diamond Trust Bank and Kopo Kopo are partnering in Kenya and Uganda to serve retail merchants. Mastercard, Gridnod Bank and Net1 are partnering to reach unbanked social grant recipients in South Africa. Société Générale is partnering with TagPay to attract new customers with mobile-enabled banking products in Ivory Coast and Senegal.
ICICI Bank is partnering with Stellar to build a blockchain-enabled payments network for its customers in India and abroad. Stanbic Bank is partnering with DreamOval to offer a mobile payments platform for underbanked merchants in Ghana. Santander is partnering with PayKey on a peer-to-peer payments platform integrated into messaging applications such as WhatsApp and Facebook Messenger.
MicroBank is working with Entrepreneurial Finance Lab (EFL) to extend credit access to thin-file entrepreneurs in Spain. A major bank in the Philippines is partnering with DemystData to expand credit products to thin-file customers. Ujjivan is partnering with Artoo to reach underserved micro, small, and medium enterprises in India.
BBVA Bancomer in Mexico and Bancolombia in Colombia are partnering (separately) with Juntos, utilizing its automated SMS conversation service to increase customer engagement. PNB MetLife is partnering with Imaginate to provide a virtual branch experience for insurance policy holders in India.
Zia Zaman, Chief Innovation Officer, MetLife Asia and CEO, LumenLabInclusion is not just about new products and new distribution. It’s about reimagining, with the help of partners, new ways to deliver value for the two billion financially underserved people of the world. And the best way to unlock value for these customers is through partnerships.
Who Should Read This Report
The primary audiences for this report are those in mainstream financial institutions who want to know how their contemporaries are engaging with innovators to pursue financial inclusion, and those in fintech companies who want to understand the way banks are likely to approach them. In addition, venture capital firms, multilaterals, and industry associations have much to learn from this research about what drives banks to partner, what gets in the way, and what comes next.
This report is part of a two-year initiative, Mainstreaming Financial Inclusion: Best Practices, to help advance efforts of financial institutions to reach customers at the base of the economic pyramid. The initiative and this report were made possible with support from MetLife Foundation.
Michael Schlein, CEO, AccionThe best partnerships between financial institutions and fintechs are a win-win for both partners, as well as for financial inclusion. As a result of these partnerships, low-income customers who are left out of – or poorly served by – the financial sector have greater access to higher quality, more convenient, and less expensive financial products and services.
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