It starts with understanding how the world's poor behave and making products they need—not the products banks want to make. If everyone had a bank account, the global economy could expand by $3.7 trillion by 2025, a recent report showed. New digital tools, like mobile money accounts and peer-to-peer lending, can bring millions of people into the formal financial system, opening up their ability to save, borrow, and live better lives. Already, 700 million individuals gained bank accounts between 2011 and 2014.
Still, a leading figure in the financial inclusion community says we're only at the beginning of efforts to innovate in the underbanked space (2 billion people lack access). Tilman Ehrbeck, partner at the Omidyar Network, a social impact fund that's invested in a string of fintech startups, says there's a need to match services to real-world financial behavior (as opposed to what providers think people want), integrate saving, borrowing, and cashflow management products, and to bring down regulatory barriers, allowing new entrants to flourish. He builds on these ideas below.