Banking The Unbanked: Taking Financial Services To The Last Mile

 February 25, 2022

 By user

The world today is aiming for financial inclusion; that is, bringing everyone under the
formal financial system. Financial inclusion gives all businesses and individuals equal
access to financial services and products. The main aim of this initiative is to make
financial services and products affordable and available to unserved and underserved
areas.
In an attempt to reach unbanked areas of the country, financial institutions today are
opting for correspondent banking. They are partnering with fintechs and their business
correspondents to reach inaccessible areas and onboard new customers, while ensuring
there is value addition for everyone involved.
Benefits of Correspondent Banking
This banking approach has received a positive response because it has been successful
in serving the unbanked while reducing the bank’s cost to serve these areas. Many
stakeholders are benefited from correspondent banking:
 The unbanked poor gain access to affordable financial services
 Banks and financial institutions reach a vast new customer base
 Fintechs and business correspondents are able to maximize on sales volumes
Communities that are unbanked or underbanked are usually in very remote areas. Such
regions are inaccessible, lack bank branches, and are difficult as well as expensive to
serve. To reach these communities, fintech business correspondents are setting up basic
kiosks or using existing outlets like post offices.
This approach has a personal touch as the physical presence of business correspondents
establishes a better connect with customers. It’s proven to be very effective. This
method is also highly cost-effective as it eliminates the need for building new branches
and increases customer base at a lower cost. It also benefits the end-user as these
services have lower transaction costs when compared to traditional branches.
The Future of Banking
Organizations around the world are realizing the value of business correspondents and
correspondent banking in their journey towards financial inclusion. As decision-makers
continue to take efforts to scale financial inclusion, this form of banking is becoming
increasingly important as it offers an array of benefits:
 Effective alternative to building bank branches
 Cost-effective banking outlets
 Promotion of social and economic benefits
 Helps a vast population of low-income workers and families improve their lives
While traditional banks and institutions are important, these alone cannot ensure that
financial services reach the last mile, or guarantee that those excluded from the formal
financial system will get equal access to all services. The model of correspondent
banking will, therefore, play a crucial role in advancing the cause of financial inclusion.