8 minute read
Leaving no one behind
Financial inclusion isn’t just a matter of providing easy access to services. Rather, it’s about delivering affordable, transparent products when people need them, say Matt Williamson, VP of Global Financial Services at Mobiquity, and Andy Mielczarek, CEO of Chetwood
A recent report by the UK’s Financial Conduct Authority (FCA) makes for sobering reading. In its annual Financial Lives survey, it found that more than half of the adult population were showing signs of vulnerability as a result of the COVID-19 pandemic.
While that takes into account a number of factors, those at risk due to economic weakness, including indebtedness or diminished savings, had grown from 10.7 million to 14.2 million over the course of 2020. The brunt of the impact was felt by younger working adults and the self-employed, who suffered a 40 per cent rise in indicators pointing to vulnerability.
The headline findings were a reversal of the trend before COVID-19, but for a significant minority things hadn’t been improving even before the crisis hit. In fact, in a prescient report in 2019, the Resolution Foundation warned the government that financially vulnerable households would be less able to weather an economic downturn than they had been before the global financial crash of 2008. And this in one of the richest countries in the world.
Globally, the World Bank estimated that the pandemic will have pushed as many as 150 million people into extreme poverty by 2021. The majority of those will have no or
The world needs many more such solutions if everyone is to benefit, says Williamson. But they have to be consciously designed to reflect the communities they target, if they are to be ultimately successful, he adds.
“Financial inclusion is an incredibly important and emotive topic, and access to financial services isn’t necessarily guaranteed for all,” he says. “But what Ila Bank did was recognise that there was quite a lot of debt among young adults in Bahrain, and the best way to access that group in order to do something about this, was via digital services.
“Most people in Bahrain have access to some sort of smart device, at a low-cost entry point, and the same with data plans. But we have to recognise, that may not work for everyone, so it’s imperative that we understand how we help people through this. Digital is excellent, but we need to make sure, no one is left behind and work out how we can do it securely and safely for everyone.”
Chetwood, meanwhile, uses open banking data to provide finance to those who may have been previously denied it by cruder metrics and uses a Cloud-based digital infrastructure to keep costs low. The combination of insight and operational efficiency are realised in savings to consumers.
only limited access to financial services – one of the key ways of building resilience.
For all those reasons, Matt Williamson, VP of Global Financial Services at full-service digital design enabler Mobiquity, and Andy Mielczarek, CEO of UK digital bank Chetwood, believe improving financial inclusion will be high on the agenda this year – although Mielczarek takes issue with how that’s sometimes framed in the UK.
“There’s a lot of noise surrounding financial inclusion, which can no longer be thought of as just expanding reach.
“For us, the biggest thing is helping with price transparency in order to support financial wellness.”
Both companies already have a track record in helping build financial inclusion. Mobiquity, for example, worked with Bank ABC in Bahrain to create its digital offspring, Ila Bank, the first Cloud-based bank in the Middle East, which consciously aims to help younger generations better manage their finances.
Since its launch in November 2019, Ila has become Bahrain’s fastest-growing mobile-only bank and is developing more products to encourage financial responsibility. In 2020, it launched a tool called Hassala – the Arabic word for a traditional clay savings pot – which nudges customers to save towards their goals and aspirations.
To that end, the Wrexham-based digital bank, founded in 2016, developed the world’s first dynamic loan called LiveLend in which the borrower is rewarded by a rates decrease whenever their credit score improves.
Mielczarek says the success of LiveLend’s innovative approach lies in its price transparency – a core value of Chetwood’s business model. LiveLend and its two other products, SmartSave and BetterBorrow, are marketed as brands in their own right, directly to consumers and through partners. Collectively, they won the bank Best Use Of Data at the UK Business Tech Awards in 2020.
Matt Williamson, Mobiquity
Mielczarek says: “We’ve been running LiveLend for about 18 months now and 25 per cent of customers are seeing reductions already – we’ve got customers whose rates have gone down by eight per cent. We’re probably the top-rated bank on Trustpilot for that reason.
“The way that the market works traditionally, is you advertise a teaser rate, you get consumers in the door, then you tell them ‘you can’t have the 2.8 per cent, because we’ve looked at your credit file. But great news, we can give you 30 per cent!’.
“I think a lot of the digital businesses, like ClearScore, or MoneySuperMarket [both of which are partnered with Chetwood], are democratising information around credit in a really important way. So rather than just applying repeatedly for loans and getting beaten down, you can find out, with no impact on your credit file, who’s going to lend to you, what are they going to charge, and – what’s really exciting – also get coaching on how to improve the management of your finances.”
As a business, Chetwood isn’t exposed any more than any other lender.
“Banks will realise that they’re better off collaborating even more than they already are, not just with fintechs disrupting their space, but also with each other, to make sure they stay relevant, understand the market and adapt to the times.”
Mielczarek, whose banking career has seen him run HSBC’s UK network of branches, understands why, from the perspective of financial inclusion, a physical presence is important. But he wouldn’t open a branch today. “My own view is, if you’ve got it, double down on it, and if you don’t have it, don’t try to build it,” he says.
Digital technology is clearly key to extending the financial franchise.
“But we need to make sure no one is left behind,” says Williamson. “And work out how we do it securely and safely for everyone.”
“If the market says you’re a 35 per cent risk, you probably are today, but what we want to do is to help people get the incentive to improve their behaviour over time. And what we find is that people on those products put more effort into paying us, because they’re getting that ongoing reinforcement in the product.
“Even though we deliver a net interest margin of about 20 per cent, for 95 per cent of customers who take our loan, that’s the best possible rate for them in the market. So by participating very carefully, we’re able to do a great job for a segment of customers, while still getting paid to do it.”
The Chetwood business model reflects much of what Mobiquity champions: the importance of understanding individual customer needs and responding to them. With huge numbers of people across the globe now facing an income squeeze, there will inevitably be pressure for just these kinds of digitally-enabled services as consumers go in search of personalised financial offers and tools.
Indeed, a new survey by Mobiquity in the US found that 46 per cent of under-55s would switch banks precisely because they offered better digital features. And those aged 25-39 – the ones most likely to be looking for ways to improve their financial resilience after the coronavirus pandemic – were the most likely to consider switching banks over the next 12 months. To Williamson the survey’s message to banks is loud and clear.
“You really need to make sure you understand your market, your customer, and what they need, not just today, but in the months and years to come,” he says.
“To do that, you need a flexible, digital architecture, that enables you to run with the punches and the challenges, and make sure your customers have access to what they require, when they need it. When changes come along – if we continue to be in and out of lockdowns over the next 12 to 24 months, for instance – you don’t then have to rip up and replace everything you’ve built, to service the next need or the next requirement.”
Ensuring as ready access as possible to services will, for some institutions, require an omni-channel strategy.
“You might consider additional access through an app, or additional access via the internet, or both. And perhaps also factoring in the ability to physically go and see someone, and have a discussion about your financial needs,” says Williamson.
That last option was a critical consideration when HSBC launched a current account for people with no fixed address in 2019. Being able to visit a branch to prove their identity in the absence of the usual checks was clearly important. Willliamson applauds the initiative but says, given that major banks, including HSBC and Santander, have since announced they will be making wholesale branch closures in the UK, they should perhaps rethink their high street presence as an alternative to withdrawing from the UK high street completely.
“It may well be that the branches do close, but it’s the brand that’s important,” he says. “You don’t necessarily need a single location per brand; what about a community hub, or a coffee shop, that hosts multiple brands, who may be in competition but get the benefit of sharing services, or site costs?
Andy Mielczarek, Chetwood
