Fourth generation banking: helping to the unbanked rise into the mainstream

The rapid growth of sophisticated telco networks in Africa is one of the great communications success stories of our time.

Fourth generation banking: helping to the unbanked rise into the mainstream

Mobile devices are as common in South Africa and Nigeria as they are in the U.S., according to a study by the Pew Research Centre. Sub-Saharan African GDP growth is pegged at over 4%, while six out of the world’s ten fastest growing economies for the past decade are in this region.

But, Africa also represents a substantial proportion of the world’s 2.5 billion unbanked and underbanked. This is too big an anomaly – as well as too big an opportunity – for global financial institutions to ignore.



New ideas and technologies have emerged, particularly with the rise of smart phones, forming 4th generation solutions that address low income banking. These 4th generation banking models are not just reinventing banking, they are transforming lives.

Typically, 4th generation banking business models have five distinctive elements:

  1. They start with a deep understanding of behaviour – critical for the financially excluded who have a unique set of needs.
  2. Services are designed for extreme customer centricity – the philosophy is “help people build their dreams and they will come’’.
  3. Components are sourced from a wide spectrum of providers.
  4. Models revolve around a ‘convenor’ that brings the local ecosystem together.
  5. Trust becomes the currency of choice.

While some mainstream banks have been successful with their offerings for the unbanked in Africa, the majority are experimenting with low cost services based on high cost business models-.



Instead, commercial banks need to engage in new ecosystems, collaborating with Social Enterprises and others, to deliver real solutions for banking the unbanked. There are several important drivers of positive change:

  • New operating models can be exported back to the mainstream of a bank’s business to strengthen and lighten heavyweight operating models.
  • The risk of pioneering new solutions is already being taken by non-banks; mainstream banks don’t have to experiment – they can free-ride.
  • The pathway to profitability in the unbanked sector is now faster and more certain, thanks to the rising income of the lowest 40 percent earners.
  • The accelerator effect of mainstream banks proactively participating in new ecosystems will contribute to the social and economic aspirations of the unbanked and make them more attractive customers.

To find out more about this approach to banking the unbanked, download Capco’s white papers, co-written with Ashoka, a worldwide network of Social Entrepreneurs:

Financial Inclusion – From Margins to Mainstream (executive summary)

Financial Inclusion – 4th Generation Solutions for Low Income Banking (extended version)