financial literacy-1592817341567
There are no more excuses when it comes to ways to reduce financial literacy. Digital options provide the most cost-effective way to get it done. Image Credit: Gulf News

The use of cash has faced a dramatic decline over the past couple of years. Digital payments are on the rise when it comes to financial inclusion.

And yet there are concerns that some of society’s most vulnerable groups are, and will, continue to be excluded.

The lack of access to essential financial services can be attributed to various factors, including the lack of financial literacy or a general distrust in the financial system, high bank costs, and/or the inconvenience in accessing services located far away from consumers.

Financial inclusion is the pursuit of making such services accessible at affordable prices to individuals, irrespective of their net worth. According to the World Bank, financial inclusion is a key enabler to help reduce poverty and boost prosperity as it aids inclusive growth, economic development, and financial deepening.

More importantly, financial access connects people to the formal financial system, allowing access to build assets, mitigate shocks related to emergencies, illness, or injury while making productive investments.

Cashless opportunities

A country’s young population is a significant factor when it comes to embracing the latest technologies. According to a report by Mastercard, the UAE has a mobile penetration rate of 173 per cent, the highest in the world. The government pushing for digital transformation in financial services and an increase in cashless transactions are indicators of the rapid adoption of digital banking.

It also puts the spotlight on cashless transactions as the future of payments. Digital transactions in the UAE are witnessing a growth of up to 30 per cent year-on-year.

The mobile wallet market is projected to surpass $2.3 billion by 2022 in the UAE, according to a report by ResearchAndMarkets.com, which cites government initiatives towards a cashless and digitalised economy, and the huge number of people without bank accounts, as factors expected to provide opportunities to mobile wallet providers.

Go e-walleting

Also, with the outbreak of Covid-19, usage of banknotes has been shunned by governments and a growing number of businesses, forcing individuals to switch to digital payments. Free from any physical interaction, it is fair to mention the spread of Covid-19 has acted as a catalyst in the growth of digital payment platforms.

Financial inclusion is more than providing the unbanked population with a bank account. It is more to do with levelling the playing field in the market by offering them tools to manage their income streams and plan for their future. Access to services such as a bank account, credit cards, saving solutions, new-age investment options, insurance services, and other digital financial tools is a critical element of financial inclusion.

Get working on the trust

Nearly 90 per cent of the global population have access to mobile and internet services today, making digital financial services more demand-worthy. But providing access is meaningless unless people are trained on financial literacy.

According to a whitepaper by Mastercard’s Global Prepaid team, knowledge and trust are major hurdles in any financial transaction. Access to mobile accounts is nearly universal in the Middle East, yet the use of mobile financial services is still rare, mainly because of a lack of trust.

To overcome this, financial service providers are leveraging technology to open a dialogue and answer key questions about finances and financial pain points. Growing knowledge and trust is expected to lead to a 5-8 per cent rise in monthly transactions.

This pandemic has presented a fantastic opportunity for fintech companies to step up and cater to a segment of individuals who remain largely under-served, mostly owing to their profession, and also provide them with digital literacy tools to learn about banking services.

A matter of well-being

Despite recent trends in organisational change, a considerable amount of time and effort is spent on payroll processing, which is not error-free. Any mismatch or delay in payroll processing is the quickest way to make employees unhappy and disengaged. Low engagement levels can cause a spiral of negative effects in the workplace.

Payroll directly impacts the employee experience every single payday, because when cheques are accurate and delivered on time, employee satisfaction increases.

According to a survey, employees stressed by their personal finances report more than 56 per cent more absences than their co-workers.

Millennials and even modest-income worker groups require 24/7 online access to their finances to be able to deal with their responsibilities efficiently. Implementing initiatives that keep employee financial wellness in mind will help employers.

Fine-tuning payroll practices will make it easier for employees to interact with the system. And employers will land up with considerable benefits, including greater productivity. There will be more support for them when it comes to bringing on changes at the company. It will also end up saving organisations time and money.

Considering financial wellness as an employee engagement strategy will not only help bolster engagement, but it will be a boost to bottom-line.

— Anouar Bourakkadi Idrissi is CEO at Edenred UAE.