In the developed world the banking and wider financial industry is very mature with limited avenues for rapid growth and the focus from an investment perspective is typically on the income they pay out – subject to regulators’ approval.

Financial stocks in emerging markets are, on the whole, quite different. While technology firms have increased in importance in recent years, financial stocks remain a key component of the emerging markets story with the MSCI Emerging Markets index having a 17.5% weighting to this sector.

In contrast the MSCI World developed markets index has a weighting of 13.6% to the financial sector.

According to a 2017 report from the World Bank about 1.7 billion adults globally and 58% of people in developing nations remained ‘unbanked’ – although there is considerable diversity across different geographic regions.

Capturing these customers should allow emerging market financial firms to grow more rapidly than their counterparts in the West. It explains why Prudential (PRU) has pivoted away from markets in Europe and the US to focus more on Asia.

The question of how these unbanked customers are reached is an interesting one with financial technology and mobile payments, in particular, likely to play an increasing role.

The same 2017 World Bank report commented: ‘The benefits from financial inclusion can be wide ranging. For example, studies have shown that mobile money services — which allow users to store and transfer funds through a mobile phone — can help improve people’s income earning potential and thus reduce poverty.’

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