What does NFC mean to the unbanked and the remittance economy?

The World of the Unbanked, Underbanked, and the Remittance Economy

If you think that the world of the unbanked, underbanked, and remittance transactions are a fringe segment of the world’s economy, then you might want to pay attention. A grand total of 2.5 billion people in the world do not have a bank account of any kind, or as they are formally referred to in studies – the unbanked. That’s 36% of the adult global population who do not rely on formal financial banking institutions to hold and distribute their money. This is an eye opening figure, and being the speculators that we are, we have to consider what NFC can mean to the unbanked and also what the unbanked can mean to NFC.

A Closer Look at What it Means to be Unbanked

The unbanked population is not surprisingly saturated in the regions of developing countries, where the banking infrastructure may not be as pervasive and where the cultural influence may not encourage storing your money in the hands of a business, but the unbanked are everywhere. AFI Global reports the following unbanked numbers, some of the highest in the world:

Don’t think of the unbanked as being exclusive to smaller economies, because it’s not just developing countries where the unbanked reside. The Federal Deposit Insurance Corporation reports in a survey that 1 in 13 households in the United States do not use a savings or checking account. More than this, the survey also shares that 25.6% of all households are unbanked or have a bank account but prefer to use “alternative financial services”. So, rather than seeing the world’s unbanked population as something that needs to be fixed or that the unbanked need to have their own bank accounts like the rest of us, instead consider the possibility that perhaps there could be an alternative financial service that could support the entire world’s population. We can think of one – NFC anyone?

The Unbanked and NFC Adoption

Okay, now that you see where we are going, consider this – 77% of the world’s citizens are subscribed to a mobile service of some type. You saw correctly – there are more people in the world who have mobile communication capabilities than have formal banking accounts. Also consider that there is 90% mobile network accessibility in the world (rural areas at about 80%), so this means that the 77% today is going to grow substantially in the next few years. So, make no mistake – the unbanked are not disconnected from the modern world but are, in fact, a prime target for NFC adoption.

There are already supported NFC-based applications that allow people to utilize pre-paid cards that debit payment transactions and credit deposit transactions. This provides the unbanked with the ability to perform mobile purchases and receive payments, essentially acting as a bank account where money can be managed on their phones.

The Remittance Economy, Unbanked’s Cousin

In our global economy, people emigrate and immigrate each and every day for the purpose of expanding their financial horizons and gaining new earning opportunities. As economic migrants spread throughout the globe, they often bring with them the commitment of sharing their earnings with the family back home. What they may not realize is that it is not just their family members relying on their remittance payments, but their home countries are depending on them, too. The unbanked are not alone in the world of alternative financial services, and, in fact, remittance money is the second largest financial inflow for many of these countries, and often exceed the inflow of international aid. Remittance economy is currently a $414 billion per year economy, and contributes to over one third of some countries’ GDP. That’s right, remittance is holding up many developing economies and it will continue to grow as more and more people emigrate to compensate for the world’s economic disasters.

Imagine how NFC can equalize the financial field for those who either don’t have access to financial institutions or rely on the remittance payments from a loved one abroad. There is an opportunity here for NFC to influence the world, not just make it easier for people to buy stuff or provide analytics for sales and marketing campaigns. The impact could be great, it could be the “grand equalizer” as we like to call it – you know, the thing that brings people together and make us part of a global community. NFC could be the revelation to unifying the masses into a single format that is not exclusive to an infrastructure or that requires a massive shift in technology that could take years and millions to deploy. It’s already on the way, and it’s working off technology that is largely already being used. With the financial meltdown still melting, consumers are weary of banks and the pressures on the banks are increasing with each day. Perhaps NFC could make us realize that there are far simpler ways to “bank” and that those financial institutions may become antiquated and cumbersome, as so many of our traditional ways of management already have.

The unbanked and remittance payers and receivers are, of course, not the only ones who stand to benefit from an NFC-based ecosystem. We may have to consider that perhaps, just perhaps, one day we may all go the way of the unbanked and hold our hard earned money where it belongs – in our very own virtual pockets.