M-Pesa/Microsoft Pact Underscores Tech’s Role in Small Business Financial Inclusion

The recent announcement of joint efforts by Microsoft to build new financial services for businesses hints at a multipronged effort to boost financial inclusion …

… Including financial inclusion for smaller businesses, leveraging the M-Pesa platform.

As reported, the two firms will “offer digital services to the underserved SME market.”

The January news follows the October announcement from Microsoft that through its Africa Transformation Office and Microsoft Philanthropies program, it had partnered with M-Pesa to support micro, small and medium-sized enterprises, in part by helping them access bank accounts, loans and insurance digitally. The platform itself processes tens of millions of transactions and more than $1 billion in value daily.

Separately, and as detailed here, in November, Visa and Visa Foundation announced initiatives to support small and micro businesses across the Asia-Pacific Economic Cooperation (APEC) economies and the world. The Visa Foundation has pledged $100 million over five years to advance digital financial inclusion in APEC economies. Of the 67 million businesses tapping into Visa’s offerings, 29.6 million are from APEC economies.

One byproduct of the great digital shift, especially in emerging markets, has been financial inclusion.

As reported here, Mario Shiliashki, CEO of PayU Global Payments, told PYMNTS’ Karen Webster in a recent interview that Latin America presents a significant opportunity for financial inclusion for smaller firms.

“More than 60% of these 5 million small businesses in Colombia have inadequate or no real access to financial services,” Shiliashki said. PayU announced in 2022 that it acquired electronic deposits and payments platform Ding from CredibanCo, expanding PayU’s reach across Colombia. In providing financial services to SMBs, he said, PayU can help give those client firms the ability to manage their businesses more seamlessly, and gain access to capital.

Rise in Account Ownership

The World Bank has estimated that financial innovation has bolstered financial inclusion. The World Bank noted that digital conduits have made it possible to receive payments for wages and remittances. It estimated that global account ownership increased from about half of adults across several emerging economies, spanning Asia, Latin America and Africa to about 71% in 2021.

The lure of modernized banking services and a wider net across which to offer those services is not lost here in the states. PYMNTS Intelligence noted in research done in collaboration with NCR, detailed in “Digital Banking Rises To Meet SMB Needs” that 75% of small to medium-sized businesses (SMBs) experiencing financial stress are the most likely to use a digital-only bank as their primary financial institution.

In the meantime, embedded finance — where payments functionalities are part of interactions not specifically confined to banking — could represent 26% of global SMB banking revenue by 2025.