Mikhail Miro, CEO at Wallet Factory & FinTech visionary with extensive background experience in banking and payment industry verticals.
Improving financial inclusion has become a top priority within environmental, social and governance (ESG) frameworks. I see how isolated communities around the globe lack technology-enabled infrastructure and suffer from economic discrepancies due in large part to poor financial inclusion. Especially in these unprecedented times, which include a pandemic and war, societal development is more important than ever.
The World Bank indicates that nearly 2 billion people lack access to financial services. Even developed countries like the U.S. still have vast unbanked and underbanked populations, according to the FDIC’s reports. This is to say nothing of the emerging countries in regions like the Middle East and North Africa (MENA), Latin America and Southeast Asia. This is why both governments and socially responsible organizations are placing a heightened focus on the improvement of financial inclusion. As surveys from Deloitte and Forrester reveal, the fintech industry is gaining momentum now to help financial organizations bridge the digital gap and address financial inequality.
Given all this, connecting the unbanked to the financial system via digital mobile wallets seems to be the right choice. As someone who has helped provide wallet-as-a-service models to countless companies, I understand how the solution can seem simple on its surface, but further exploration is needed to identify some hitches to adoption and accessibility.
First Digital Wallets: What Went Wrong
The global mobile penetration rate is huge and still counting. Statista unveiled that the number of smartphone users surpassed 6 billion in 2021 and is projected to grow to nearly 8 billion by 2027. This continued growth opens up vast opportunities for the financial industry. Simply put, people can install mobile finance apps on their smartphones to get easy access to digital financial services. But switching to a cashless society is not an easy feat.
Early on, many fintech providers entered untapped markets like some areas of Africa where financial inclusion was a real issue. The first eWallets were quite simple, but they managed to drive a lot of value to the unbanked. Customers got easy-to-use financial services in areas where there was often no brick-and-mortar banking infrastructure. Digital wallet providers benefited as well, as they could reach new audiences and maximize their profit margins.
But here is the catch. As business users and customers are getting more mature in their expectations of digital financial services, legacy software can hardly satisfy their ever-growing demands. Once efficient and profitable, earlier eWallet solutions can now meet only the basic financial needs and fail to be on par with the latest technology and business advancements. Here are the two main issues:
• Legacy technology. Emerging technologies like QR codes and NFC have entered the market to help customers streamline their online payments. And while new digital wallets enjoy these tech-enabled features from the outset, such innovation is a great stumbling block to older mobile payments apps.
• Competitive pressure. With more budding fintech startups appearing on the global market, financial incumbents might find it nearly impossible to stay ahead of the pack. The reason is pure and simple: The denser the competition, the narrower your profit margins will be.
Both technological and business-driven challenges throw operating businesses into a very hit-and-miss situation. They have to plunk down more money on software redevelopment to create added value for their customers; otherwise, they just end up scraping the bottom of the opportunity barrel. New market players can gain a competitive edge from the very start by making sure their eWallet mobile apps provide every single feature end users might need. Today’s tech-savvy users know more and demand more.
eWallet: More Than Just A Mere Mobile Payment App
Running a successful digital wallet business is not just about old hands or new faces coming into the industry. More importantly, it is about becoming a customer-first company as you provide financial software solutions like mobile wallet apps in the market. Also, sticking to the ESG principles is great for your business strategy in the long run. Improving financial inclusion with eWallets also helps make a tangible social impact.
One thing leads to another. When catered to real customer needs, wallet apps gain more traction. Increased app download times result in better financial inclusion. The latter leads to improved revenue growth of your digital wallet business via added revenue streams. So, making your eWallet services more tech-enabled and diversified helps reach both social and business targets.
Reshaping the very idea of digital wallet services helps enable all-in-one software solutions. At the same time, these resilient eWallets bring more value and profit. Unlike earlier poor-feature mobile payment solutions, today’s digital wallets should include the following features:
• Convenience. Ease of use along with customer-friendly interfaces add value to improve user experience across platforms.
• Security. Measures like finger and voice prints, card tokenization and facial recognition ensure rock-solid encryption of every money transaction.
• Inclusiveness. With QR code and NFC technologies on board, new eWallet apps can cover the needs of physically impaired audiences.
• Interoperability. Next-gen digital wallets enjoy seamless integration with the world’s leading payment systems so users have a choice of the most convenient payment options.
• Scalability. Be it a retail chain, digital wallet operator, bank or telecom, businesses and consumers can easily pick the best wallet service option for their needs. Depending on the current business vision, there are closed-loop and open-loop wallet solutions.
Digital Wallets: Final Thoughts
Stability in the digital wallet business is great but only when it’s backed by tech innovations and focused on customer needs. Secure and inclusive by design, new eWallet solutions can help drive revenue, improve customer experience and boost financial inclusion. All of this leads to stronger economic growth in the underbanked region.