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Digital solutions for access to financial services in a ‘less cash’ world

The IFoA’s Cashless Society Working Party’s (CSWP) analysis suggests that as the use of cash in our society decreases, it poses a risk to financial inclusion and threatens to widen inequalities rather than reduce them

UN Sustainable Development Goal (SDG) ‘Reduced inequalities’ includes targets and indicators to reduce economic inequalities, both within and between countries by 2030. One of the targets is ‘to empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other statuses’. The IFoA’s Cashless Society Working Party’s (CSWP) analysis suggests that as the use of cash in our society decreases, it poses a risk to financial inclusion and threatens to widen inequalities rather than reduce them. Therefore, ensuring that individuals and businesses have access to useful and affordable financial products and services that meet their needs as we make this transition to a less-cash society will be essential to promoting progress against SDG 10.  

A Cashless Society?

MoneyIn 2008, six out of every ten transactions were cash. By 2018 it had reduced to three in ten; and the 2018 UK Payment Market Report suggests it could be as low as one in ten within the next fifteen years.

The ‘Access to Cash Review’ (the Review), published in March 2019, found that failing to manage the transition to a less-cash society would create significant risks for individuals and society. The review identified risks such as the loss of personal independence and increased risk of financial abuse and debt, as well as identifying that rural communities were particularly at risk. As well as those living in rural areas, according to the Review over 8 million adults in the UK would struggle to cope in a cashless society. Many of these people are vulnerable in one or more ways, for example living in poverty, or with physical or mental health issues.

The IFoA’s CSWP is calling for the active management of this transition. It is particularly concerned about how a lack of planning could negatively impact financial inclusion. The CSWP states that as cash reduces, a digitally-based financial inclusion program will be vital to ensure that no one is left behind. This program should include improving access to digital financial services for these groups so that they can manage their money online, including through the use of mobile money. Further elements of a digitally-based financial inclusion program proposed by the CSWP are discussed on the coping in a cashless society news page.

There are international examples of increased digitalisation revolutionising financial inclusion. The following case study explores how the mobile based financial service M-Pesa has extended access to financial services and products to previously excluded segments of the population in Kenya.

The growth of mobile money in Africa

Traditional banking services, including ATMs and commercial banking branches, are not widely accessible to all in sub-Saharan Africa. Previously, this left a large proportion of the population, particularly those who fall into the low and middle income category, without access to the formal economy. It also exposed society to crimes which are more likely to occur within a largely cash-based society including tax evasion and money laundering. However, the availability of mobile phones has enabled widespread adoption of mobile money services, such as M-PESA, and has gone some way in addressing these issues.

M-Pesa, the first mobile money service in Africa, was launched in 2007 by Kenya’s largest mobile network operator, Safaricom. For a small fee, the service allows users to send money, from an account stored on their phone, to others and to pay for bills such as rent or utilities. Users can also exchange cash for virtual currency or vice versa at participating agents, such as Safaricom outlets, petrol stations, supermarkets and selected banks and micro-finance institutions.

Since its launch, mobile money has seen significant growth in the region. As of December 2018, mobile money registered accounts in sub-Saharan Africa had reached nearly 400 million (GSM Association, 2019). In 2018, users of these accounts performed 1.7bn transactions, worth $US 26.8bn in value. Accessibility of mobile money agents has played a key role in driving customer adoption. According to the International Monetary Fund (2018), there are 1.4 million active mobile money agents in the region. This is significantly more than the 19k bank branches.

The use of mobile money has deepened financial inclusion and has benefited large proportions of the population that are still unable to access traditional banking services including those on a lower income, young adults and women. Research has found that by using the service women are able to improve their ability to save (Jack, 2016). It is estimated that this ability has lifted 2% of Kenyan households out of poverty. It has also been found that, since its launch, mobile money has increased access to essential government services in Kenya from 20% to 90% (GSM Association, 2017). This promotes further progress across a range of the SDGs including goal 1 – no poverty and goal 5 – gender equality.

The growth of M-PESA has extended beyond Africa and it now has 30 million users in 10 countries. M-Pesa services are now offered in Albania, D.R. Congo, Egypt, Ghana, India, Kenya, Lesotho, Mozambique, Romania, and Tanzania. Mobile money has proven itself to be a useful tool in developing countries for promoting financial inclusion and, ultimately, sustainable development.

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Events calendar

  • ARC Sessional Research Event: Drivers of Mortality - Risk Factors and Inequality

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    6 January 2020

    Spaces available

    The authors will focus on a large dataset obtained from the UK’s Office for National Statistics (ONS) and related sources. Data are available at the level of Lower Super Output Areas (LSOAs) – small geographical areas with, typically, 1000-2000 residents and include death counts, exposures and a significant number of socio-economic variables including the index of multiple deprivation (IMD).

  • SIAS Event: My Journey to Data Science, Big Data and AI

    Staple Inn Hall, High Holborn, London, WC1V 7QJ
    7 January 2020

    Spaces available

    Patrick Lee is an actuary who has made the transition to working in software architecture and artificial intelligence (AI). He holds Microsoft Professional qualifications in Data Science, Big Data and AI and is currently working towards a DevOps (the automation of software testing and deployment) qualification. He is a member of the IFoA Council and is also President of the Wessex Actuarial Society. He is also a member of the IFoA and the RSS's joint Data Science Focus Group and will talk on the ethical use of AI. 

  • Spaces available

    This IFoA event for NEDs explores what skills and experience are required to undertake non-executive roles, e.g. as independent NEDs on fund boards or members of IGCs. The event will be chaired by Brandon Horwitz, an actuary who is a consultant and who has held various investment governance roles and who specialises in investment governance as well as being an iNED.

  • Spaces available

    This presentation covers the detail for how the matching adjustment is calculated. A small simple example spreadsheet is provided and discussed in detail.

    For actuaries wanting to get more involved with the matching adjustment, this is the opportunity to get a detailed description of the mechanics involved. This includes cashflows derisking, PRA tests as well as hypothecation.

    The presentation is provided by James Sharpe who has worked on a number of matching adjustment calculations with several firms.

  • IFoA Volunteer Recognition Reception

    Staple Inn, 4 High Holborn, Holborn, London WC1V 6DR, UK
    15 January 2020

    Spaces available

    As a thank you to all our Institute and Faculty of Actuaries (IFoA) volunteers, you are invited to join us at Staple Inn Hall, for an evening of drinks, canapes and networking, in London.

    IFoA President, John Taylor, will be attending and will make a speech

    If you support the IFoA as a volunteer (member or non-member), or in any other role, and you are going to be in London on 15 January, please book your place and join us at this reception.

     

  • Sessional Meeting - Operational Risk Dependencies

    Royal College of Physicians of Edinburgh 9 Queen St Edinburgh EH2 1JQ
    20 January 2020

    Spaces available

    The Operational Risk Working Party aims to assist actuaries and others in the modelling and management of operational risk. One of the key challenges in modelling operational risk is the modelling of dependencies between operational risks, and between operational and non-operational risks such as market, credit and insurance risk.

  • KSS event in Glasgow: Public Sector Pensions

    Hymans Robertson, Glasgow 20 Waterloo St, Glasgow
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • KSS event in Stirling: Public Sector Pensions

    M&G Prudential, Stirling Craigforth Campus, Stirling
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • KSS event in Edinburgh: Public Sector Pensions

    Hymans Robertson 1, Exchange Place, Semple St, Edinburgh
    30 January 2020

    Spaces available

    – the unappreciated key assumption, the resulting unsustainable promises, the unmanaged risk and the unrecognised debt? 

    Speaker: Allan Martin will present this talk on 30 January in Glasgow, Stirling and Edinburgh. If you wish to register for another location please return to the Events Calendar.

  • The Great Risk Transfer – Breakfast briefing and launch event

    Staple Inn Hall, High Holborn London WC1V 7QJ
    31 January 2020

    Spaces available

    Launch of the IFoA’s 2020 thought leadership campaign The Great Risk Transfer. The campaign will examine the trend of the transfer of risk from institutions to individuals, and how people can be better equipped to manage the financial risks they now face. At this breakfast event the IFoA will launch a call for evidence on this topic.

  • Professional Skills Training - London (11 February 2020)

    Staple Inn, High Holborn, London WC1V 7QJ         
    11 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • Sessional: Impact of E-cigarettes Working Party

    Royal College of Physicians, 9 Queen St, Edinburgh EH2 1JQ
    24 February 2020

    Spaces available

    This sessional meeting will be of direct interest to actuaries and others working in the in the Health and Care, Life or Pensions sectors or indeed actuaries with an interest in morbidity or mortality. Note: Registration is from 17.30 in time for the sessional to begin at 18.00.

  • Professional Skills Training - Edinburgh (25 February 2020)

    IFoA (Edinburgh), Level 2, Exchange Crescent 7 Conference Square Edinburgh EH3 8RA
    25 February 2020

    Spaces available

    A Trusted Profession

    A 2 hour CPD event designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020This session is suitable for actuaries working in any area (i.e. it is not specifically aimed at Pensions, GI or any other technical discipline) and is interactive, so you should come along prepared to take part in the discussions.

  • What does this mean for Actuaries serving as NEDs and Trustees? These areas are likely to provide ne

    Staple Inn, 4 High Holborn, Holborn, London. WC1V 6DR, UK
    19 March 2020

    Spaces available

    Recent years have seen ESG, Climate Change, and Responsible Investing thrust onto the corporate agenda in every boardroom. The same also be said for pension funds. Expectations of how companies should respond are high and NEDs on Boards are expected to adapt and adjust their guidance to companies accordingly. What does this mean for Actuaries serving as NEDs and Trustees?

  • Spring Lecture 2020, Edinburgh - Vicky Pryce

    Assembly Rooms, 54 George St, Edinburgh EH2 2LR
    25 March 2020

    Spaces available

    What next in Economic Policy?

    Please join us on 25 March 2020 for our annual Spring Lecture presented by Vicky Pryce in Edinburgh. 

  • IFoA Asia Conference 2020, Kuala Lumpur

    CCEC Nexus, 7, Jalan Kerinchi, Bangsar South, 59200 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia
    24-25 June 2020
    Spaces available

    The sixth annual Asia Conference once again offers a prestigious line-up of home and international speakers discussing the insurance and financial industry’s innovation and change in Asia. This year's conference in Kuala Lumpur will be hosted by Tan Suee Chieh, IFoA’s first Asian President. He will also make his Presidential address at this conference and will expand on the important elements of IFoA’s new strategy. 

    Additionally, this landmark conference will showcase how the IFoA is reinventing itself to support its members to succeed and thrive in a digital age, within traditional businesses and beyond, as a global organisation. 

    Not to be missed by international industry players, opinion formers, academic and industry leaders, actuaries and non-actuaries.