Partnership brings bank accounts to emerging markets

Brazil is proving increasing financial inclusion and giving underserved populations bank account access is a smartphone away.

PayU Global Payments CEO Mario Shiliashki said it will take a full-scale, joint effort between traditional and non-traditional financial services players and regulators to bring financial services to the underserved populations and help them move beyond cash-based transactions.

For 1.7 billion unbanked and underbanked consumers and 200 million unbanked and underbanked small businesses, financial inclusion requires more than just technology.

“It takes an ecosystem,” Shiliashki told Karen Webster.

And that ecosystem can only take shape when regulators flex a bit and expand the framework for data collection and use. He explained that it is not only FinTechs that are innovating new products and services to meet their needs.

“Banks are not just trying to catch up, but to partner with FinTechs to offer better services,” he said.

This joint effort makes it easier for consumers and businesses to adopt new accounts that are supported by banks, but not necessarily “powered” by banks, he said. The transaction accounts then become the springboard for new experiences and services.

“Standards need to catch up to also increase the use of these services and the ability for FinTech to scale,” he said, which then paves the way for mass adoption of new offerings.

From no bank to mobile banking

There are already several examples of how cooperation between banks, FinTechs and regulators can strengthen financial inclusion, he said. PayU, which enables cross-border commerce and payment functionality through a single integration, has seen growth in Brazil. And in that market, Pix, the instant payment system implemented by the Central Bank of Brazil in 2020, is now used by 70% of Brazilians over billions of transactions.

“Adoption has been phenomenal because adoption has been pushed by the government, by established institutions” and by FinTechs in what has been an “undershorted market,” he said.

People who might otherwise have cash – but not cards in their (literal) pockets – and don’t have steady access to bank accounts now, can buy goods and services online.

“This has been a lifesaver not only for consumers but also for businesses,” he said, noting that even the smallest of small businesses are seeing increased sales as a result. “Sellers like you never thought are joining the digital economy [and] do so by accepting Pix.”

Finding new financial stepping stones

Instant payment system also acts as a springboard for financial institutions (FIs) and FinTechs to add more offerings and value-added capabilities to improve financial inclusion. He pointed to peer-to-peer (P2P) payments, buy now pay later (BNPL) and other financing options (including small business financing) as examples that ultimately lead to opportunities to provide financial education and credit guarantees.

PayU, he said, has invested in payment innovation for small and medium-sized enterprises (SMEs) and for new consumer-oriented credit solutions.

Regardless of the service or product offered, he said, the user experience is key.

“As an industry, we’ve made huge strides in making the experience better, but we’re still not where we need to be, especially in emerging markets,” Shiliashki said.

Despite the important progress, fraud detection and protection still needs to improve, as does identity verification, which in turn reduces friction at checkout and can improve conversion rates, perhaps by as much as 30% to 40%.

Looking ahead to 2023, PayU’s focus will be on offering more payment methods at checkout for the merchant community and improving access to credit. And while 2023 may well be a year of uncertainty at the macro level, Shiliashki warned that regulators and financial institutions should not fall back on financial exclusion (rather than inclusion).

“Even through the rough macro waters,” he told Webster, regulators and FIs need to help innovate — and to partner with the FinTech community. FinTechs are nimble and they find solutions.”

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