Remote Banking Will Add $3.7 Trillion to the GDP of Emerging Economies
According to McKinsey Global Institute report, 2 billion individuals and 200 million micro, small, and midsize businesses in emerging economies today lack access to savings and credit. Remote banking could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025. This growth includes benefits from the use of digital finance instead of traditional, and investments in business development in this area that in its turn will create up to 95 million new jobs across all sectors of the economy.
The report states that 61% of adults in Africa and the Middle East don’t have access to financial services. This parameter is equal to 59% for South-East Asia, 53% for South Asia, 48% for Latin America, 39% for Eastern Europe and Central Asia and 21% for China. People in emerging economies use cash in 90% of cases, while, for example, in US electronic payments are used in 49% of cases. The inhabitants of India are losing more than US $2 billion per year on the time spent on the way to the bank and back.
The authors of the study suggest to use mobile phones for remote banking. But to provide this kind of service it is necessary to create a new infrastructure and financial products. The positive impact has the fact that almost 90 percent of people in emerging economies have access to a network, and the share of those with 3G or 4G coverage is growing.
As we noticed remote banking set of services depends much on local legal situation and readiness of population to consider a bank as a possible financial helper in domestic affairs. Customization of current so called “off the shelf” products for the specifics of the new regions will be controversial. For the most part it will be a new development, and likely performed locally.
In assessing the prospects for the rate of penetration of new services, it is important to assess the impact of stop-factors. The development of remote banking in developed countries showed a nonlinear increase of financial losses. Banks have invested significant resources in the remote banking security system; however, it is, for the most part, was a "patchwork" in consequence of already implemented attacks. Time passes and hackers find a new way to steal money from customers. This confrontation of attacks and defense was the main driver of growth for the market of information security for the last 10-12 years.
However, vendors of information security solutions will be disappointed because they can’t use traditional selling tricks offering “end-to-end cybersecurity concept” that consists of overbuild security means. There is no chance to sell "glass beads" to natives. Specialists who work in banking industry in emerging economies have a very strong competence. Many of them educated in the best universities of China, Israel, the United States, and have experience in the largest banks of the world rankings.
We entered this market several years ago and found out that large state organizations and financial institutions in Middle East and Asia prefer another approach for the creation of financial online services: protection of special applications is performed at the stage of development and security technologies become a core element of the system. That provides both safe operation and support of new services introduction. And it gives a clear advantage to the operator: clearly predictable in terms of security implementation of new services the system can have intensive development without barriers connected with security adaptation to new services.
The popularity of this approach is growing and as a result we can see raising interest to start-ups which offer licensed technologies. It will transform the offer of vendors because technologies and source code are demanded instead of traditional products. The prospect of almost guaranteed return on investment with a market valued at $3.7 trillion will definitely attract technology developers and investors and has the potential to transform the IT industry in its modern presentation.