Financial exclusion isn’t a problem limited to the developing world says MasterCard, which claims that at least 138m individuals across Europe are outside the formal banking sector.
The global card payments and financial services group adds that its study contradicts common perceptions, as a third of those without a bank account or payment card in Europe are employed, while 35% are in the technology-savvy millennial age bracket.
“For many people the concept of exclusion is often seen as a developing markets problem but the report shows clearly that this is as much of a problem in the perceived developed markets of Europe as it is around the world,” said Ann Cairns, president international for MasterCard.
“That the tools and technology are readily available to those who are in need of inclusion demonstrates that this is a solvable problem and one that partnership, education and innovation can easily solve.
Although European Union (EU) and national legislation focuses on mandates for banks to provide basic bank accounts, Cairns believes that the road to financial inclusion is a digital one.
“Together with innovation and education, digital prepaid solutions and electronic payments can help to bridge gap between technology and financial services. By tapping into the rapid rise in technology, we can develop new solutions to ensure everyone in Europe has access to the financial system.”
The study suggests the main reasons behind the absence of a full bank account or banking services are a lack of knowledge, and mistrust of the banking sector. One in five of those currently unbanked do not want a bank account at all and a further 10% say they do not trust banks with their money.
Alix Murphy, director of mobile partnership at cross-border payment services group WorldRemit commented: “While it may come as a surprise to most, exclusion from basic financial services is one of the biggest challenges facing the developed world today and we’ve known about its threat for years.
“Millions of people across Europe – including 12% of the UK population categorised as “underbanked”- and North America lack access to even the most basic financial utility – a savings account – while tens of millions more live precariously from pay cheque to pay cheque without access to credit. It’s arguably the greatest potential cause for future social and economic instability.
“The leaders in financial inclusion policy are nowhere to be found in Europe, but rather in countries like Peru, India, and the Philippines, whose financial inclusion strategies have moved to encompass digital and mobile technology at the forefront of inclusive finance.
“European leaders need to rethink their strategies and recognise the key role that non-bank services such as mobile money can play in increasing formal financial activity among the unbanked to ensure that this doesn’t become the norm across Europe.”
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