Home Finance Digitalisation helps values-based banks to address financial exclusion and improve their communities

Digitalisation helps values-based banks to address financial exclusion and improve their communities

by wrich
  • A survey among 52 CEOs of mission-driven banks highlights how digitalization can help them to deliver social and environmental impact
  • Digital loans and digital investment apps are the main priorities for values-based banks in the next year
  • The banks from the Global Alliance for Banking on Values use technology to serve responsible and unbanked customers 

(Amsterdam, 26 January 2022). According to a recent survey by the Global Alliance for Banking on Values (GABV) among its member banks’ CEOs, values-based banks are moving from basic digital services to more sophisticated digital offerings, in part due to the pandemic. The main drivers for digitalisation are customer convenience, ability to scale up and operational efficiency. The survey was held in the last quarter of 2021 among the CEOs of the 66 member banks, with 52 CEOs responding.

Values-based banks are independent financial organisations that use money to deliver positive social and environmental impact. They are private banks, credit cooperatives, microfinance institutions, credit unions, and community banks, serving more than 60 million customers in 44 countries and holding over USD 200 billion. Digitalisation allows them to be closer to their customers and meet their needs, one of the key principles of these types of banks.

There is a high penetration of basic digital products and services among values-based banks. Internet banking, credit or debit cards, and mobile wallets are the primary three services and solutions in play among the banks. A 50% have implemented digital customer onboarding, and 33% have implemented digital loan processing.

The main products and services they expect to focus on in the future are related to loans and investments: including digital loan applications, digital loan processing and approval, and digital investment apps. Nevertheless, there are differences in the priorities between regions. For African members, for example, the priority in the coming months is electronic banking, while in the Asia-Pacific region, the focus is to implement digital onboarding of their clients. European and Latin American banks highlight the need to introduce digital loan applications and processing, while North American banks are focusing on data mining and digital loan processing. 

IT solutions for financial inclusion

Technology plays a great role to make a financial product different and special to the customers. The GABV welcomed two new members in 2021 that are clear examples of financial institutions using digitalisation to create inclusive banking:  FINCA DRC, in the Democratic Republic of Congo, and Credo Bank, in Georgia.

FINCA DRC started its activities in 2003, when the war in the country was not officially over. Since then, its dedication to low-income people has transformed the lives of thousands of Congolese. FINCA DRC has 21 branches located in nine out of 26 provinces, headquartered in Kinshasa. To date, the foundation has over 1,600 FINCA Express Full Option Points scattered throughout rural and semi-urban areas to serve the most remote populations. Currently FINCA DRC reaches total assets of USD 60,000,000 (USD 60 million) and serves over 350,000 clients.

Credo Bank provides sustainable financial services to micro, small and medium entrepreneurs in Georgia, with a focus on businesses providing agricultural and employment opportunities. The bank operates in 11 regions and serves more than 350,000 customers. It is a market leader in innovative product delivery to its clients, with over half of the country’s market share. The bank has partnered with different platform and payment services to allow its customers to pay loans digitally, benefiting borrowers in rural areas of Georgia. 

Other examples worldwide

Worldwide, there are reference examples of values-based banks using technology to build and serve more inclusive communities. 

  • Lead Bank, a community bank based in Kansas (USA) has partnered with the fintech Finzly and the payments platform PointChain to offer sophisticated payment services for technology-focused businesses and fintech companies via APIs (Application Programming Interfaces). The result is payments processing services for a wider client base and the foundations for instant payments services in the future.
  • Nepalese NMB Bank, awarded as 2021’s Best Bank of Asia, has prioritised sustainable banking, digital transformation, and corporate governance since 2015. It was the first bank in the country to launch an ‘Omnichannel‘ system under which customer service can be processed through video and certain operations can be performed using a messenger service. With Omnichannel, any customer can apply for a loan online, and it will be issued (if the documents are correct) without printing any paper.
  • Integral, a microfinance bank in El Salvador, has developed Flexipago, a new financial product for micro and small businesses that adapts the payment of fees in loans to the business seasonality. The new loan product has an inclusive profile and is intended for those seeking financing for working capital, fixed assets and business debt consolidation.
  • Teachers Mutual Bank, one of Australia’s largest mutual banks, launched Hiver at the end of 2021, a new digital bank for essential workers. Hiver is the first Australian mutual and ethical digital bank that matches global benchmarks for social responsibility and meets Australians’ banking expectations. Customers will be able to set up direct debits or make direct payments straight from online or mobile banking. Further products including home loans via the broker channel will be made available in the coming months. 

Values-based banks resilience

Apart from digitalisation, the GABV survey explored the confidence and growth expectations that values-based banks had at the end of 2021 in comparison with the same period of 2020.

Although recovery from Covid-19 is at different stages across values-based banks, they were more confident than regarding profitability, asset quality and general business. In terms of profitability, 61.5% were optimistic about the future compared to 13.6% in 2020. Less than 2% were pessimistic compared to 29.5% in the same period in 2020, and 36.5% remained neutral (2020: 56.8%). 

About the GABV

The Global Alliance for Banking on Values (GABV) is a network of independent banks using finance to deliver sustainable economic, social and environmental development. The GABV has 66 members and operates in 44 countries across Asia, Africa, Asia-Pacific, Latin America, North America and Europe. Collectively they serve more than 60 million customers and hold over USD 210 billion of combined assets under management. Learn more at gabv.org 

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