Data-Driven Financial Inclusion: How Analytics is Expanding Access to Financial Services

A version of this article first appeared in Express Computer.

Transformation and new technologies in the financial sector have enhanced the accessibility of financial products and services, empowering inclusion across a variety of customer segments. Improved data analysis and visibility help CFOs and company leaders at financial institutions interpret market trends, hone strategies, and predict unfavorable consequences. Through data, financial services organizations can reach and retain customers with targeted services, eliminate risks, and make informed decisions driving profitability, efficiency, and growth.

The role of data analytics in driving financial inclusion

Data analytics has been a critical enabler in fostering a comprehensive transformation of the financial services sector. It is being used by financial institutions to identify and facilitate underserved populations—driving innovation and expanding customer-centric possibilities beyond the limits of traditional banking and financial services. Data-driven technology adoption enables financial institutions to optimize their products and services, offering personalized solutions for underreached markets.

Understanding the barriers to financial inclusion

Savvy leaders understand that there are several data-related challenges that can restrict the ability to meet customers’ needs for financial products and services. Geographical limitations hinder data collection in rural areas due to a lack of digital infrastructure. Socioeconomic factors like low income and limited financial literacy contribute to inaccurate data. Technological barriers such as device costs and poor internet access limit financial empowerment. Regulatory hurdles like know-your-customer (KYC) requirements and other compliance burdens also restrict access to financial services. Data privacy and security risks further erode trust in digital financial platforms.

Why financial inclusion is better for business

In the financial services sector, data-driven financial inclusion can offer numerous benefits for CFOs and company leaders, including:

• Operational efficiency: Data analytics can streamline operations by identifying inefficiencies and optimizing processes. For example, by analyzing customer interactions, organizations can identify areas where automation can be implemented to reduce costs and improve customer service, especially in traditionally underreached markets.   Platforms like Snowflake, AWS, and Azure provide scalable data storage and powerful machine-learning services for descriptive and predictive analytics, enabling efficient data processing and insightful forecasting from historical data.
• Risk management: As a best practice, CFOs and company leaders should regularly conduct a data-driven risk assessment. This can help financial services organizations proactively identify and mitigate risks, such as fraud and credit defaults. A key focus of the risk assessment can include market segments where financial accessibility is a critical strategic element, and the findings can inform decisions that lead to improved profitability and reduced losses.
• Customer acquisition and retention: By analyzing customer data, organizations can identify high-value customers and develop targeted marketing campaigns, tailored with accessibility and inclusion in mind. This will help financial services organizations to tap into underserved markets, acquiring new customers and retaining existing ones. These efforts can establish loyal customer relationships, improve customer lifetime value, and drive revenue growth.
• Product innovation: Data analytics can help financial services organizations develop innovative products and services that meet the evolving needs of their customers. By analyzing market trends and customer preferences, organizations can identify new opportunities for growth and differentiation in untapped and underserved markets.

By leveraging data analytics, financial services organizations can foster financial inclusion and improve their operations and profitability. This positively impacts underserved communities and the financial services industry.

How financial services companies can use data to better serve their customers

Through the effective use of data, financial organizations are finding unbanked groups and segments (by demographics, location, and behavior) to offer solutions catered to those customers’ needs. Alternative data such as bills, mobile data, and predictive models for accurate credit assessments are playing a comprehensive role in enhancing credit scoring. These holistic measures are helping financial institutions analyze customers’ spending habits and develop personalized financial products such as microloans, different account types, and online payment methods. These extensive efforts not only facilitate the stakeholders but also spur ongoing innovations in the sector.

Furthermore, through analytics, more companies are adopting initiatives to improve financial literacy in targeted regions. Relevant stakeholders (including financial institutions, governmental partners, and educational organizations) are designing targeted education programs based on data that monitors the effectiveness of learning. These initiatives empower underserved communities by facilitating digital payments, optimizing digital/mobile banking, and preventing fraudulent activities through real-time transaction monitoring. This integrated ecosystem is helping to measure the impact of financial inclusion by tracking key metrics and constantly refining strategies through data analysis.

Examples of global financial inclusion initiatives

One of the most significant, recent use cases can be observed in Kenya, where a digital payments initiative by a globally renowned telecom provider has gained traction. This initiative has revolutionized financial inclusion in the country by emphasizing the usage of smartphones for money transfers and bill payments. The initiative has empowered a large, rural, unbanked population and made financial services accessible outside of conventional banks. The success of this service has been replicated in similar initiatives in several other nations globally, fostering financial inclusion through mobile technology.

New digital financial tools have transformed transactions in India. Aadhaar, a unique identification number, has simplified banking access through remote identity verification, enabling millions of unbanked populations to access financial services. It allows tracking financial history for individuals, making leading efficient, faster, and more reliable. UPI has revolutionized real-time digital payments between bank accounts using mobile devices, irrespective of time and location.

Similar success has been replicated in Africa by prominent blockchain-based platforms that offer cost-effective cross-border payments, especially in targeted areas with limited banking access. These services have established a faster and more affordable solution to facilitate financial transactions, bolstering accessibility without requiring bank accounts.

An accessible future outlook for transforming financial services

Data-driven financial inclusion is crucial for the growth of global financial services. By overcoming challenges like regulatory barriers and technological limitations, financial institutions (including governmental and industry stakeholders) can meet the needs of underserved populations through innovative initiatives and technologies. This expansion will not only benefit customers but also drive profitability and growth for financial services providers.