The Road To Financial Inclusion: Building New User Behaviour Through FMIs

Commonly referred to as the plumbing of the financial system, financial market infrastructure (FMI) is composed of payment and settlement systems which enable transactions to take place. When FMIs are coupled with the curation of new user behaviour in emerging markets, it can ensure the smooth functioning of a financial system.  

However, financial market infrastructure is scant in various parts of the world, namely in less developed countries where there is a higher concentration of unbanked and underbanked individuals residing within the population. As a term itself, unbanked categorically refers to adults who do not use banks or banking institutions in any capacity, including savings accounts or credit cards.  

Global Findex data from the World Bank estimates that there are more than one billion unbanked adults globally. Why is close to one-fourth of the world’s population lacking access to traditional financial services? Partly, the cost of setting up viable financial market infrastructure in such regions is high, making these unbanked individuals the hardest to reach. 

The essential role of FMIs 

A lack of FMI creates a paralysing state for unbanked individuals, from being unable to make card payments to the inability to get cash out of ATMs. Payment systems also make it possible for users and businesses to buy and sell things.   

For perspective, the United Kingdom has an established FMI with payment systems that are recognised by HM Treasury and regulated by the Bank of England, while over 96% of residents have a current account from a bank or building a society according to the Financial Conduct Authority (FCA). Infrastructure development is what lies at the nexus of the country’s economic growth. 

A key aspect of setting up FMIs in regions where they are most needed is ingraining new user behaviour that will see people on low incomes – who tend to be users of informal financial products such as local moneylenders and unlicensed remittance services – switching to financial products that are more fitting for the modern age.  

If users are empowered to join formal financial systems, they are more inclined to become vested in the products and services, which can subsequently shift social behaviour and norms that act as an obstacle in integrating such individuals into the global economy.  

For instance, BABB is committed to financial inclusion with products that appeal directly to users all over the world. An example of this lies in the upcoming Inclusive Hybrid Money Account that keeps fiat, cryptocurrencies, and stablecoins safe and secure in one regulated app with affordable conversions of fiat currencies. BABB offers free-of-charge account registration and users can even send funds globally to other users inside the app for free, making it more accessible to all individuals, including the financially excluded.  

Graph Merchant Machine

Demographic characteristics 

Establishing an FMI and supplementing it with the creation of suitable ‘payment behaviour’, as it has come to be known, will bring affordable and useful financial products and services to individuals and households, facilitate day-to-day living, improve economic well-being, and help individuals and households plan and regulate their financial affairs. Certain studies on US consumers even show that fully banked adults are more likely to be married and have a higher income.  

Take credit-risk profiles, for instance, individuals who build savings can improve this in order to lower their cost of payment services, which in turn makes it easier for them to access lower-cost sources of credit.  

Ingraining new user behaviour will also allow unbanked individuals to accumulate savings and become accustomed to tools to manage their personal finances. Over time, such reforms have wide-reaching effects on unbanked individuals and underserved populations, who require broader financial inclusion to gain access to vital payment systems.

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