Day 4 at Davos -- Banking the Unbanked

The unbanked, or underbanked, represents a huge -- but risky -- opportunity for financial institutions. And one needs not travel to Asia or South America to find a large underbanked market: There are 50 million unbanked people right here in the world's most developed economy.As Davos 2007 heads into the final straight, there are fresh issues popping up every minute that are provoking fierce debates. Yesterday, I attended a session on 'banking the unbanked' which generated some interesting discussions about the huge population out there who are currently unbanked -- not just in the developing world but in regions where we'd never expect this to be a problem.

Reasons for the lack of credit available in the less developed part of the world are pretty self explanatory. Poorer people represent a higher risk and lower return on investment for banks and financial institutions and as a result they're reluctant to get involved in these regions. Different regions are responding in different ways however many are reliant on non-government organisations to help with funding.

What amazed me, however, was to hear that some 50 million people in the United States are also unbanked. This is a startling fact for a country with such a developed economy however it boils down to the same reason -- some individuals just represent too high a credit risk.

A number of financial executives I spoke to agreed that technology could be a great enabler in giving banks a return on their investment and making it a risk worth taking. An effective use of technology can reduce the cost of transactions and there is a great opportunity for large financial institutions to participate in the development of these financial economies creating a tailored range of products and services. Time will tell as to what degree this opportunity is embraced.

Today's discussions, however, have turned to the main concerns of business leaders in Asia. Contrary to expectation, the top two worries among Asian business executives were water availability and energy availability...and the impact of these factors on individual's quality of life.

This is clearly a reflection of how rapidly these economies are developing, perhaps too rapidly. Indian and Chinese businesses and US companies with operations in these countries are all faced with the fact that the environment cannot keep up with their amazing growth and development creating a situation where climate change is becoming a huge issue. And it's the globe, not just their local environment, which is impacted. After another frantic day at Davos, it was great to relax at the McKinsey party last night. The music, company and general ambience made it the standout cocktail reception of the World Economic Forum so far.

Sadly, Davos for this year is drawing to a close but there have been a fascinating range of topics covered in the conversations I've had with other delegates. With the Infosys cocktail reception this evening and tomorrows Addressing Global Risks session, I've no doubt that there's plenty more to come.

Ashok Vemuri, SVP and head of banking and capital markets for Infosys Technologies, is attending his first World Economic Forum. He will be blogging about his experiences and the role of technology in the financial markets throughout his stay in Davos. Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio