“Since the unbanked are not entrenched in the old-fashioned banking routines of branches, ATMs and credit cards, they are more likely to embrace digital banking on their phones.”
Banks Need To Focus On A New Customer: The Unbanked
Banks measure their efficiency by their cost-to-income ratio (expenses as a percentage of income). Banks with lower ratios are viewed as more efficient. In the U.S., retail and commercial banks typically have cost-to-income ratios in the 55-65% range, however, digital banks can enjoy ratios as low as 25-35%. It’s startling to think that banks in Egypt, where digital is the norm, are more efficient than American banks with an average cost-to-income ratio of 28% compared to 59% in the U.S.
This creates a huge opportunity. Banks could add $380 billion annually in revenue in emerging markets alone by reaching out to the un/underbanked, according to Accenture estimates. The biggest opportunities in emerging markets are in Brazil, India, Mexico, Nigeria, Vietnam and South Africa. And serving the unbanked has benefits beyond profits. By giving people access to savings accounts, credit and loans, banks can help build and strengthen emerging middle class populations that in turn drive growth in the broader economy.
Read the full article at Forbes.com