The number of unbanked people has created trends and solutions that break down barriers to their inclusion with regard to financial services.
For various reasons, 1.7 billion people around the world do not have a bank account. The main reasons are related to the high fees charged, the physical distance between their home and the bank branch, outstanding debts, mistrust of banks, informal employment situations, etc.
In Brazil, the unbanked population corresponds to around one-fourth of the total population (55 million) and many of these people are in the labor force and have high consumption potential.
Until a few years ago, competition among banks in Brazil was low, with just a few institutions dominating the largest share of hundreds of millions of Brazilians. However, this situation has changed with the growth of fintechs, which now offer various services that before were limited to banks, but with no need for a permanent bond or of a series of procedures that posed bureaucratic barriers to many Brazilians.
Hundreds of fintechs have changed the scenario for offering financial services
Today, there are some 600 fintechs in Brazil that offers a variety of financial services, such as loans, payments, investments, transfers, asset management, etc. Around 35% of them operate in the payment and credit services segments. Fintechs arrived with the concept of social inclusion and have facilitated the financial life of many Brazilians, while helping to drive economic growth. These companies identified this gap in the market and created solutions to serve this niche public.
The payment means preferred by the unbanked is the boleto bank payment slip, since it requires no banking relationship or credit line, and can be paid at any bank branch or lottery house, as well as via apps and desktops. Most credit and debit cards are linked to bank accounts and require approval for issuance and limits based on the person’s financial history.
Youth account for large share of unbanked population
One noteworthy data point is that the unbanked is predominately younger, with 40% between 18 and 24 years old. Therefore, for a company whose target public falls in this niche, it is critical to give proper attention to adequate payment means to ensure the success of their sales strategy and to prevent obstacles involving an inability to pay for the goods and services after having sparked the interest and motivation of this public.
These people continue to consume products and services despite the limitation of not having a bank account, which means that to reach them in mass you must offer the payment means that meet their needs.
The current scenario of combatting the COVID-19 pandemic has created a more propitious environment for new payment and credit services to be offered to unbanked people. Brazil’s government at various level has encountered difficulties in effecting transfers to this strata of the population with no formal relationships with financial institutions.
Brazil is a strategic destination for fintech from around the world
International companies that sell goods and services via digital channels can integrate with a local payment processor, which can offer the preferred payment means to local consumers.