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Financial Inclusion in the 21st Century

One of the top reads of 2014, Thomas Piketty’s “Capital in the Twenty-First Century”, examines the inexorable concentration of wealth that accompanies historic periods of low growth. In it, he cites social upheaval (including two world wars) and rapid technological advancement as two major offsetting factors that serve to redress this imbalance, though he also notes that current trends show a sharp return to pre-World-War-1 levels of capital and wealth inequity. (Recently, the wealth of the top 1% of Americans overtook that of the bottom 90%, and estimates are that the world’s richest 85 people own as much as fully
half of humanity
). Certainly, if it can be agreed that a better balance of wealth and capital best represents a healthy world economic system, one approach, as the Economist summarized Piketty earlier this year, is to consider government intervention, and tax-based redistribution. However, another approach may be far more positive, and promising:

Two years ago, SAP supplied technology to South Africa’s Standard Bank in order to support their efforts to bring banking and other financial services to the unbanked. This past year, SAP worked with India’s Credit Society Adarsh to bring similar products to over a million people in need—even in the remotest of
. Even more recently, with a grant from the Bill and Melinda Gates Foundation, Mastercard, set up a Financial Inclusion lab in Africa to develop practical and cost-effective financial tools for low-income individuals.

The common thread to these initiatives is leveraging technology (one of Piketty’s observed antidotes to capital over-concentration) to bring the life-changing power of financial products to those best able to benefit from them. From micro-lending to payments to insurance products, the benefits to customers are clear. (For one prominent and recent example, with tools from SAP and others, Mobile Money Global Awards winner, UBank, was able to build and launch a mobile money platform in record time). But what’s less well understood is how delivering banking services to the world’s poorest can be a profitable and high-growth new area for traditional banking and insurance businesses. While laying out your strategy for 2015 and beyond, it pays to consider all your opportunities!

Want to learn more? SAP’s White Paper on Financial Inclusion is a great place to start.

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