The unbanked: how social networks could succeed where banks have failed

In the developed world, sending money domestically is as simple as logging onto online banking. If you want to transfer funds in or to the developing world, however, you'll often come up against a fairly fundamental block: the 'unbanked' phenomenon. But could the growing numbers of online platforms, from Gmail to Facebook, stepping into the payment industry be the solution to the unbanked barrier? 

Who are the unbanked?

Simply put, they're individuals who don't have a bank account. The Federal Deposit Insurance Corporation (FDIC) estimates that around 10 million Americans are unbanked or underbanked, but as you'd expect that number is far higher in the developing world. Last year, the World Bank suggested that 2.5bn people don't have an account with a formal bank.

In contrast, more than three quarters of the world's population own a mobile phone. In Kenya, there are more active mobile money accounts than adults in the country's population. The popularity of this service is spreading across Africa, bringing financial services to millions of unbanked people. And if mobile can gain access where banks can't, that opens out a major opportunity for social networks.

Sending money over social networks

In the West, social networks are already growing as a way of transferring cash. Facebook recently launched a peer-to-peer transfer facility, making sending money as easy as sending a photo. Google's Wallet feature lets users attach money to their emails, again, just like you'd attach a photo. For now, transfers must be within a country, but the scheme's expansion into the UK this year could hint at a more international outlook in the future.  

That said, the most intriguing application for this technology is, of course, when it could cater to the unbanked. India's Axis Bank's new Ping Pay app lets users send money via Twitter, Facebook or WhatsApp – the only hitch is that you need a bank account. However, if this social payment service could be integrated with something more like M-Pesa, which is cash-based, there's huge scope for providing financial services to an under-serviced audience. 

That potential reaches across the world. In Indonesia, for example, under 10% of the 247m population have access to a bank account – but according to the CIA, the country has more mobile phones than people. Social networks have a similar hold, with over 112m Indians on Facebook, and 30m on Twitter. It could make international money transfer to these areas much easier, at the same time as changing the game for domestic transfers. 

Comparison tool

Andy Ferguson

Format is very organized and incredibly informative. All the information is right there and it is all pertinent to what I need to know. Great work.

R.H

I am extremely impressed with the Investec currency exchange team service levels, they are fast and efficient. Excellent trading rates and straight talking, what more do you need.
Repatriating funds - sending money back home

REPATRIATING FUNDS – TRANSFERRING MONEY HOME

When returning funds, profits or receipts from overseas back to your home country, the process can seem daunting. It is just a question of understanding the relevant regulations and tax rules. At The Money Cloud, we show you how to get it right first time and how to maximise your money.

Paying for overseas holidays

PAYING FOR YOUR OVERSEAS HOLIDAYS IN LOCAL CURRENCY

When paying for your dream holiday in the local currency of your destination country, you want to make the most of superior exchange rates and low fees offered by the foreign exchange brokers listed on our site. This will ensure that you save money and your funds are protected.

Market Insights

Sign up for our newsletter.

Thank You for subscribing to our Newsletter

You have successfully signed up to our Newsletter