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Digital finance could create 95 million new jobs in emerging economies - McKinsey

22 September 2016  |  8715 views  |  1 African flags

Delivering financial services by mobile phone could raise the GDP of all emerging economies by six percent to $3.7 trillion over the next ten years and create 95 million new jobs, according to research by McKinsey Global Institute.

Mckinsey says that two billion individuals and 200 million micro, small, and midsize businesses in emerging economies today lack access to savings and credit, stunting economic growth.

The company believes that digital finance — payments and financial services delivered via mobile phones and the Internet — could transform the lives and economic prospects of individuals, businesses, and governments across the developing world.

McKinsey conducted a range of economic modelling, interviews and field visits to quantify its forecasts. The research estimates that digital finance could provide access to 1.6 billion unbanked people, more than half of them women. An additional $2.1 trillion of loans to individuals and small businesses could be made sustainably, as providers gain newfound ability to assess credit risk for a wider pool of borrowers. Governments could gain $110 billion per year by reducing leakage in public spending and tax collection.

Providers of financial services also stand to save $400 billion annually in direct costs by shifting from traditional to digital accounts, which can be 80 to 90 percent less expensive to service. By expanding their customer base, providers increase revenue opportunities and could sustainably increase their balance sheets by as much as $4.2 trillion, says McKinsey.

The report describes mobile phones as the 'game-changer' that could make all this happen, pointing out that in 2014, nearly 80% of adults in emerging economies had a mobile phone, while only 55% had financial accounts.

"To capture the opportunity, businesses and government leaders will need to make a concerted and coordinated effort," states the report. "Rather than waiting a generation for incomes to rise and traditional banks to extend their reach, emerging economies have an opportunity to use mobile technologies to provide digital financial services for all, rapidly unlocking economic opportunity and accelerating social development."

Comments: (1)

Edward Leong
Edward Leong - DistruptiveHut - Singapore | 22 September, 2016, 16:28

The HCE based digital wallet opened the way for in-store and in-app payment, if the technology populated correctly it could even able to converge the internet and physical payment by using single on-device digital wallet (with holding multiple payment scheme). In this on-device era, user can do commerce anyway and anytime, and at the same time able to connect to internet to get latest information before their commercing decision. Now, what i think the backend processing really need to catch up to allow faster or near to real time transaction to allow money movement more efficent yet secure and conply to AML. Since mobile payment allow user to transact fast at the front end, but backend yet still too complicated, slow, too many layer or  channel processing before the online authorization approval,  then it will not favour the digital finance evolvement. It will be very cool, if once the online authorization approved, the money shall 'transferred' to payee account in subsequence 5 minutes rather than per day clearing process. Increase speed of transact at frontend and backend  could open up tremendous business models... WM2C, B2C C2C and etc.

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