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?
In 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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View the full schedule of webinars in this series via this link.
This webinar series will provide topical and practical updates and discussion on the latest thinking and innovations in mortality and longevity, and is designed to be very accessible to a broad range of experience.
Part of the Mortality and Longevity webinar series. As an industry, it has been important to be able to look to the future to identify the next quantifiable risk. In this session, I will explore some of the less tangible, but none-the-less concerning risks to future health, such as the health risks associated with exposure to pesticides, ingestion of plastic in the food chain, and the hazards of indoor air pollution through exposure to volatile organic compounds.
Part of the Mortality and Longevity webinar series. The working party will help the industry to update and enhance how potential risk from diabetes and excess mortality is considered, including the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes.
A Trusted Profession
This free 1 hour CPD webinar is designed to meet the IFoA’s Stage 3 Professional Skills Training under the IFoA’s CPD Scheme 2019/2020 and 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.
Modelling the structure and trends of cancer morbidity risk is important for pricing and reserving in related health insurance fields such as critical illness insurance and care provision. We model the dynamics of cancer incidence over time in different regions in England, using 1981-2016 ONS data. The modelling allows estimation of cancer rates at various age, year, gender and region levels, following a Bayesian setting to account for statistical uncertainty. Our analysis indicates significant regional variation in cancer incidence rates.
In this talk we will outline the steps Aviva took in pulling together our first large-scale disclosures on the exposure of our business to climate change published in March 2019; in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. After touching on why insurers have such an important role in climate change, we'll cover a brief “how-to” guide for those who have not yet embarked on thinking about these topics before giving a case study of how the learnings from a TCFD disclosure exercise can be applied to investment portfolios.
The insurance industry currently underwrites customers with diabetes based on a range of factors, medical expertise and various medical studies. The work undertaken by the Diabetes Working Party would help the industry to approach this using current research findings to update and enhance how potential risk from diabetes is considered. This includes the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes. This webinar will present our latest findings in the management of this important chronic condition which will include research in collaboration with the ARC.
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Get ready for the new CPD Scheme launching on 1 September. Join us for a discussion on what the new Scheme will look like in practice. There will be an opportunity to field questions to the IFoA Executive on how the Scheme’s requirements will affect you.
There will be a prestigious line-up of international speakers discussing the insurance and financial industry’s innovation and change in Asia. The conference will take place throughout September via an online platform. The webinars consist of plenary speaking sessions and a series of workshop sessions including Life, GI, Data Science, Sustainability, Risk Management and Investment.
This will be the perfect opportunity for you to discover,ask questions and be at the forefront of current and developing actuarial/financial topics and trends in Asia.
In this webinar we will provide an insight into enterprise-wide risk management in banking, showing similarities to the world of insurance as well as identifying differences. Just as insurance companies have to submit an ORSA, so bank’s have to submit their own equivalent, the Internal Capital Adequacy Assessment Process or ICAAP.
This free 90 minute webinar is designed to support the IFoA CPD Co-ordinators, and others, involved in supporting our members to achieve their CPD requirements.
The programme will include an overview of the new CPD Scheme; specifically sharing with you key messages to support you implement and embrace the new CPD Scheme for our members within your organisation and regional community; how to arrange a reflective practice discussion; and an interactive reflective practice discussion learning exercise. In addition, delegates will gain information about accessing, and making the most of the IFoA event Toolkits which you can make use of to run your own in-house events and events for regional communities.