Digitization helps values-based banks fight financial exclusion and improve their communities
According to a recent survey by the Global Alliance for Banking on Values (GABV) among the CEOs of its member banks, values-based banks are shifting from basic digital services to more sophisticated digital offerings, in part due to the pandemic. The main drivers of digitization are customer convenience, the ability to scale, and operational efficiency. The survey was conducted in the last quarter of 2021 among the CEOs of the 66 member banks, with 52 CEOs responding.
Values-based banks are independent financial organizations that use money to have a positive social and environmental impact. They are private banks, credit unions, microfinance institutions, credit unions and community banks, serving over 60 million customers in 44 countries and holding over $200 billion. Digitization allows them to be closer to their customers and to meet their needs, one of the key principles of this type of bank.
There is high penetration of digital core products and services among value-based banks. Internet banking, credit or debit cards, and mobile wallets are the top three services and solutions in play among banks. 50% have implemented digital customer onboarding and 33% have implemented digital loan processing.
The main products and services they plan to focus on in the future are related to loans and investments: including digital loan applications, digital loan processing and approvals, and digital investment apps. Nevertheless, there are differences in priorities between regions. For African members, for example, the priority in the coming months is e-banking, while in the Asia-Pacific region the focus is on implementing the digital onboarding of their customers. European and Latin American banks are emphasizing the need to introduce digital loan applications and processing, while North American banks are focusing on data mining and digital loan processing.
IT Solutions for Financial Inclusion
Technology plays a big role in making a financial product different and special for customers. The GABV welcomed two new members in 2021 which are clear examples of financial institutions using digitalization to create an inclusive bank: FINCA RDC, in the Democratic Republic of Congo, and Credo Bank, in Georgia.
FINCA DRC began its activities in 2003, when the war in the country was not officially over. Since then his dedication to low-income people has transformed the lives of thousands of Congolese. FINCA RDC has 21 branches located in nine of the 26 provinces, with headquarters in Kinshasa. To date, the foundation has more than 1,600 FINCA Express Full Option points distributed in rural and semi-urban areas to serve the most remote populations. Currently, FINCA RDC reaches total assets of $60,000,000 ($60 million) and serves over 350,000 clients.
Credo Bank provides sustainable financial services to micro, small, and medium entrepreneurs in Georgia, with a focus on businesses providing agricultural and employment opportunities. The bank operates in 11 regions and serves more than 350,000 customers. It is a market leader in delivering innovative products to its customers, with more than half of the country’s market share. The bank has partnered with different payment platforms and services to enable its customers to pay loans digitally, benefiting borrowers in rural Georgia.
Other examples around the world
Around the world, there are leading examples of values-based banks using technology to create and serve more inclusive communities.
- Main Banka community bank based in Kansas (USA) has partnered with fintech Finzly and payment platform PointChain to offer payment services for technology-focused businesses and fintech companies through APIs (Application Programming Interfaces). The result is payment processing services for a wider customer base and the foundation for instant payment services in the future.
- Nepalese NMB Bankawarded as Asia’s Best Bank in 2021, has prioritized sustainable banking, digital transformation and corporate governance since 2015. It was the first bank in the country to launch a ‘Omnichannel‘system in which customer service can be handled by video and certain operations can be carried out using a messaging service. With Omnichannel, any customer can apply for a loan online, and it will be issued (if the documents are correct) without printing any paper.
- Integrala microfinance bank in El Salvador, has developed Flexipago, a new financial product for micro and small businesses that adapts the payment of credit charges to the seasonality of the activity. The new loan product has an inclusive profile and is aimed at those seeking financing for working capital, fixed assets and business debt consolidation.
- Teachers’ Mutual Bankone of Australia’s largest mutual banks, has launched Winter End 2021, a new digital bank for essential workers. Winter is Australia’s first mutual and ethical digital bank that matches global benchmarks for social responsibility and meets the banking expectations of Australians. Customers will be able to set up direct debits or make direct payments directly from online or mobile banking. Other products, including home loans through the broker channel, will be made available in the coming months.
Values-Based Banking Resilience
In addition to digitization, the GABV survey explored banks’ confidence and growth expectations based on values at the end of 2021 compared to the same period of 2020.
Although the post-Covid-19 recovery is at different stages in values-based banks, they were more confident than when it comes to profitability, asset quality and general business. In terms of profitability, 61.5% were optimistic about the future compared to 13.6% in 2020. Less than 2% were pessimistic compared to 29.5% in the same period in 2020, and 36.5% remained neutral ( 2020: 56.8%).
About the GABV
The Global Alliance for Banking on Values (GABV) is a network of independent banks using finance to deliver sustainable economic, social and environmental development. The GABV has 66 members and operates in 44 countries across Asia, Africa, Asia-Pacific, Latin America, North America and Europe. Together, they serve over 60 million customers and have over $210 billion in combined assets under management. Learn more about gabv.org