China has the greatest potential revenues estimated at US$63.4b.
Asia Pacific bank revenues could grow by US$88b by 2020 if banks maximise the growth opportunities of financial inclusion, EY reports. Potential bank revenue could reach as high as US$200b through increased servicing of financially excluded consumers and micro, small and medium enterprises (MSMEs) in 60 emerging countries.
The financial inclusion heat map from EY shows that China has the greatest revenue potential, estimated at US$63.4b. Thailand (US$8.5b) and Vietnam (US$5b) are also amongst the top 10 countries to gain the most from financial inclusion.
Here’s more from EY:
More than 40% of MSMEs in the least developed countries globally reported challenges in obtaining financing, compared with just 15% in high-income regions. The report states that driving greater financial inclusion will generate sizeable economic benefits, boosting gross domestic product by up to 14% in developing economies such as the Philippines and 30% in frontier markets like Vietnam.
EY’s global emerging markets leader Jan Bellens says, “Financial inclusion isn't merely a corporate responsibility goal, it's a strategic growth opportunity for financial institutions across emerging markets in Asia-Pacific. Not only does financial inclusiveness have a positive impact on financial institutions’ bottom line, but it is also good for local economies and individuals as inclusiveness tends to smooth income trends, grow local businesses, protect against natural and man-made disasters and help individuals to save for important life events. If banks do not capture this profitable growth opportunity, the gap will be filled by innovative nonbank institutions.”
Current retail bank account penetration across Asia-Pacific is at 65 per cent, which EY estimates could increase to 74 per cent by 2020. “Banks’ financial inclusion growth opportunities will be the greatest in markets that embrace technology-led innovation and have a clear and supportive policy framework for financial stability,” said Bellens.
Mobile adoption and e-payments, national digital identity systems, open access to digital data and currency digitization are all crucial technology considerations for banks in these markets. A range of policy and systemic drivers in these markets will provide necessary safeguards and incentives that enable banks, telcos, FinTechs and other partners to innovate together and provide greater opportunities for unserved and underserved customers.
The report states that banks focusing on the following three actions will be most successful in enabling financial inclusiveness: customize offerings to raise relevance and deepen account adoption (to drive financial inclusion, banks must flexibly structure highly relevant and simplified financial solutions that meet the specific needs of their customers at affordable cost); innovate channels to reach more customers at lower cost (financial institutions likely require a distribution model that combines a mobile offering with some low-cost human interaction); and creatively manage risk to address absence of credit histories (nonbanks are pioneering in this space, developing new underwriting and credit scoring analytics for individuals and businesses).
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