There is a lot of talk about financial inclusion. Wanting to contribute to access to quality financial products and services is a good start. Yet access is only one aspect; we must not forget others such as usage, health, and quality. If products are made available but left unused, then there is no inclusion per see.
We have to remember that inclusion, in addition to having a positive impact on people, helps reduce the use of cash. In turn, less cash usage contributes to inclusion: it creates a feedback loop, which, if managed properly, can lead to positive results for both individuals and companies.
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Financial invisibility: the predominance of cash as an exclusionary factor
In regions like Latin America, with large informal economies, it is hardly surprising that the use of financial products is low. A clear and striking example of this is shown in a 2020 study by  the Inter-American Development Bank (IDB). It found that 80% of Argentina’s adult population had a bank account, yet when its people were surveyed, only 48% claimed to have one. In other words, 32% have a bank account and don’t know it!
The use of cash makes all data, and consequently the information those data might reveal, invisible to financial service providers. Absent people’s financial background, how can companies offer them products that will improve their quality of life?
For example, something as sought-after as a mortgage for people to buy their own home becomes unfeasible in the face of financial invisibility, which leads to exclusion. This is why it is so important to reduce the use of cash. By reducing the use of cash and digitalizing payments, people become visible to the system. This then means they are able to, for example, borrow the means to achieve something as basic, though not always feasible, as buying their own home.
How do we make financial inclusion profitable?
Perhaps it is time for us to rethink a few things. For financial inclusion to be cost-effective, from the demand side it requires including people, and from the supply side it requires generating profitability.
What would happen if instead of businesses “solving a problem,” they were to look deeper, by trying to solve “the conjunction of problems between the sides”?
If we were to combine each side’s problem, we might see greater profitability in financial inclusion, with a focus on reducing the use of cash. Open banking and open finance are without a doubt the means to achieving that end.
Usage cases where less cash resulted in more billing
We only have to look at the efforts made by financial entities to reduce cash to see examples of how, without necessarily having this goal in mind, they generated new sources of income:
- The implementation of the interoperable payment “QR Simple” in Bolivia, running on APIs, led to a twelvefold increase in transaction volume and a thirteenfold increase in the amount of transactions between 2020 and 2021, by working on a combination of the needs (of users) for contactless payment/collection, and (of the financial institutions) to encourage a reduction in cash usage.
- The use of neobanking entities to perform the cash-in service in virtual wallets, where APIs play a fundamental role: In 2021, Ualá reported the digitalization of USD 394.3 million in Argentina alone, for example, to be able to make subscription payments abroad to services like Netflix, Spotify, etc. Bearing in mind that international payments in Argentina are highly restricted, the solution to this combination of problems is not only profitable, but also actually includes people who might not have access to these kinds of services, while also reducing the use of cash.
- The creation of 3.75 million investment accounts in Argentina between 2018 and 2021 by Mercado Pago, in conjunction with BIND and Poincenot, where, thanks to open banking and open finance, the number of investment accounts in the country saw a ninefold increase, solving the need for users to remunerate liquidity in a high-inflation environment, while collaborating in the reduction of cash. Securities accounts in Argentina went from 450,000 to 4.2 million, thereby bringing people into the capital market.
Initiatives like these have contributed to a surprising reduction in cash usage, from more than 75% of face-to-face retail in 2020, to 46% in 2022. However, there is still much to be done, especially in markets like Argentina, Colombia, Mexico, and Peru, as the following graph shows:
In conclusion, we can say that by working to solve not just one problem, but instead going further and focusing on a combination of problems on both sides (supply and demand), it will make the profitability of financial inclusion more viable, which may fuel its growth in the context of the economic crisis we are currently experiencing worldwide.
Reducing the use of cash is a crucial kick-starter for this aim, as it might not only make it profitable and sustainable, but also generate a positive impact that feeds back on itself by making previously unknown data visible.
The opportunities and scalability of monetizing financial inclusion via open banking and open finance, contributing to a reduction in cash usage, are enormous given the infinite combinations we might find in the conjunctions of problems for businesses and users.
The challenge will be to identify and prioritize these converging needs in the best possible way so that proposals will result in successful, impactful products that really begin to gain ground over cash.
 IBD; Deloitte. 2020. Estudio Fintech 2020 – Ecosistema Argentino
 Bolivia Central Bank