Toward A New Paradigm: From Financial Inclusion To Financial Wellness

Nadeem Shaikh: Toward A New Paradigm: From Financial Inclusion To Financial Wellness

Community Voice Forbes  Finance Council 

Nadeem Shaikh: For the last two decades, many organizations — from financial institutions and philanthropic organizations to think tanks — have embraced the concept of financial inclusion. They’ve reckoned that the billions of people who exist outside the formal banking sector worldwide would benefit from new services, solutions and investments to stimulate productivity, raise living standards, unleash entrepreneurial energy and reduce economic inequality.

While the aims of financial inclusion remain relevant today, the current solution set is outdated. The framework for building financial solutions must evolve from one of inclusion — siloed point solutions that provide access to checking accounts, payments solutions, pensions, IRAs, etc. — toward one of wellness. Financial wellness addresses a consumer’s holistic needs: physical, digital and emotional.

Addressing A Convergence Of Consumer Needs

Consumers are increasingly looking for products and services that do not just cater to discrete need but to their overall financial wellness. This includes not only what we think of traditional financial services, but also insurance, health, education and, in some cases, energy. This convergence of needs applies to all consumers in the developed and developing world alike, whether they are affluent or under/unbanked.

A paradigm shift toward financial wellness is now possible thanks to the emergence of new business and technology models. While the traditional approach to financial inclusion has involved bringing low-cost financial products to the market, a new generation of startups is creating solutions that embed themselves in consumers’ lives instead of treating finance as a pure utility, embracing a 21st-century approach to digital financial services.

What these business models have in common is that they are essentially customer-centric rather than product-centric. They are using technology, behavior science and new business models to improve customers’ well-being instead of seeking a fresh market for tried-and-true products. And they are doing so with the goal of profitable growth, ensuring an incentive to serve the customer while finding new ways to remain relevant and compelling. For them, every customer is a profitable one. regardless of where they are on the financial spectrum.

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A New Framework

The challenge before us is to build a scalable framework for investment that doesn’t center around the old paradigm of financial inclusion. Instead, we must take advantage of both technology and a new mindset to do some blue-sky thinking.

This requires looking at the challenge from multiple perspectives. At an investment level, we must move away from pushing recognizable products with unsustainable business models toward seeding innovative startups and providing ongoing support to them while they are in growth mode. The goal here is not quick returns — instead, investors must build ventures that lead to sustainable commercial solutions over the next 5, 10 and 50 years.

No one company, or even segment of the industry, holds the solution to financial wellness. Success will only come from a systemic and collaborative approach to a diverse ecosystem. Regulators, for instance, have a part to play in ensuring fair and practical rules that promote the growth and cross-fertilization of the industry. Once that thesis has been developed, it can be implemented through concrete measures such as regulatory sandboxes and revised forms of financial literacy. Existing financial institutions have to figure out how to partner with these new startups to incorporate their solution sets into their overall offerings to expand the horizons of existing businesses. Taken together, this ecosystem can have a substantial and measurable impact on the lives of individuals and entire communities.

Innovative financial services can raise the standard of living — and improve the overall well-being — of people. But a copy-and-paste approach will not succeed. Entrepreneurs and investors need to think beyond financial inclusion and rise to this challenge, building their companies and products on a new model of financial wellness.

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