Across the globe, many different populations have distinct reasons for being unbanked. To reach these audiences, mainstream financial companies are discovering approaches that wouldn't be possible in the U.S.
The methods that companies like Visa and Fair Isaac (FICO) deploy in other markets are designed to take into account the differences in how those markets are regulated. For example, in other markets FICO can make use of more sources of alternative credit scoring data.
"Outside the U.S. … we don't call it alternative data, we just call it data," said David Shellenberger, FICO's senior director of scoring and advanced analytics, in a presentation at SourceMedia's Card Forum this week in Miami. "There is a wide array of data sources, and when we're not under the same type of regulatory constraints, we can start looking at other ways to assess consumers that have very limited credit profiles."
In India and other parts of Asia, FICO uses digital footprint information, he said. In Russia, FICO uses psychometrics, leveraging a survey approach to help measure credit risk.
Visa's approach to financial inclusion relies on its innovation centers to reach local partners.
In Mexico, this developed into a partnership with OXXO, the country's largest convenience store chain with about 15,000 locations, said Jorge Ortega, Visa's senior director of global financial inclusion, at Card Forum.
Four years ago, Visa and OXXO teamed up with Banamex to launch a simplified payment account, "which is basically a prepaid account that you can access with very low know-your-customer," which is performed at the OXXO store, Ortega said.
Since the product's launch, it has opened 8 million accounts, 44% of which belong to people who are new to the banking system, Ortega said. Of the remaining 56%, half of those who had a banking product didn't use it but they do use the OXXO card.
"We developed the product without knowing exactly what type of results we were expecting," Ortega said. But one thing was clear: The card had a bigger audience than just consumers.
In surveying users of the OXXO account, Visa found that 25% of use cases were related to operating a small business. "The next step for us was very natural," Ortega said.
To get a just the payment account, any consumer and business owner can pay $2 and spend 7 minutes in an OXXO store and walk out with a card. But extend that to $30 and 20 minutes, and the user also gets a mobile point of sale device. "You are included in the payment system and you are ready to accept payments," he said.