by Neha Mehta, Founder | FemTech Partners, Singapore
Neha is a globally recognised FinTech leader with over 19 years of experience spanning ASEAN, Europe, Hawaii, the Fiji Islands and the Pacific. As a pioneer in FinTech, sustainability and climate technology, she is dedicated to driving innovation with impact. Neha is the Founder and CEO of FemTech Partners, a firm committed to bridging the financial divide in developing economies, with a strong focus on women’s empowerment.
Breaking Barriers in Financial Inclusion
Financial inclusion is still among the most pressing issues of today, with billions of people being excluded from basic financial services. The exclusion from mainstream financial services creates great obstacles to economic growth, stability, and empowerment for the unbanked and underserved populations. Here, however, are transformative tools in fintech emerging for bridging this gap-through innovative, accessible, and affordable financial services to those who most need them.
The Impact of Financial Exclusion
Financial exclusion disproportionately affects low-income, rural, and marginalized communities. As reported by the ‘World Bank’s Global Findex Database’, 1.4 billion adults worldwide are left unbanked, unable to access a traditional bank account. The implications of financial exclusion are far-reaching:
- Limited Economic Participation: They cannot save securely, access credit, or participate formally in the economy.
- Inability to Move Out of Poverty: The inability to access microloans and insurance leaves families susceptible to economic shocks.
- Dependency on Informal Systems: Most people depend on cash-based, unregulated systems with the attendant high fees, risk of theft, and exploitative lending practices.
Financial exclusion contributes to inequality and denies people a way out of poverty; however, fintech innovations are rewriting this narrative.
The Role of Fintech in Bridging the Gap
Fintech or financial technology is changing access to financial services through digital innovation. It reaches populations that traditional banks cannot through mobile platforms, internet connectivity, and data analytics.
Key Fintech Innovations Addressing Financial Exclusion:
- Mobile Banking: Through mobile platforms, users can open and manage their bank accounts using their smartphones. This is highly effective in regions with a low number of physical banking infrastructures.
- Digital Wallets: Digital wallets have safe and convenient ways to hold and transfer money without requiring a bank account. Examples like ‘M-Pesa’ have transformed financial access in Africa.
- Microfinance Platforms: Fintech-powered microloans enable small entrepreneurs to access credit with minimal paperwork, empowering them to start or grow businesses.
- Peer-to-Peer (P2P) Lending: P2P platforms connect borrowers and lenders directly, offering affordable credit to underserved individuals.
Not only are these bridges filling gaps, but they’re also paving for financial independence so that savings and investments can protect the wealth of users.
Case Studies and Insights
- M-Pesa (Kenya): The introduction of M-Pesa by Safaricom in Kenya is now a game-changer where more than 80% of the population uses mobile money. By allowing its customers to send, receive, and even store money, M-Pesa has enabled the rural community, improved remittances, and less reliance on cash.
- Tala (Global): Tala uses smartphone data in assessing creditworthiness to unbanked individuals. Through an app, Tala was able to provide financing instantaneously to millions of people who live in emerging markets such as the Philippines, Kenya, and Mexico.
- Paytm (India): In India, Paytm’s digital wallet has transformed financial inclusion by making it seamless to make payments, transfer money, and access digital banking in the most remote areas. Paytm has brought millions of underserved users into the formal economy.
These examples illustrate how fintech is changing the face of financial inclusion through addressing local needs and harnessing technology to deliver impactful solutions.
Creating Accessible Financial Ecosystems
To build inclusive financial systems, fintech companies must prioritize the following strategies:
- User-Friendly Interfaces: Digital tools must be easy to navigate, even for individuals with limited digital literacy.
- Affordable Fees: Keeping transaction costs low ensures accessibility for low-income users.
- Partnerships with Traditional Banks: Collaborating with established financial institutions helps expand reach and credibility.
- Regulatory Support: Governments must create policies that encourage fintech innovation while protecting users.
For example, India’s ‘Unified Payments Interface (UPI)’ is an example of public-private partnership in scaling financial inclusion.
The Future of Financial Inclusion
The future of financial inclusion will be shaped by emerging technologies like ‘blockchain’ and ‘artificial intelligence (AI)’:
- Blockchain Technology: Blockchain technology can create secure, transparent, and cost-effective financial systems, reducing fraud and enabling cross-border payments. Cryptocurrencies also provide financial alternatives in regions with unstable banking systems.
- AI and Big Data: AI-based credit scoring models evaluate alternative data such as mobile usage and spending patterns to judge the creditworthiness of the underserved. This allows lenders to lend with a minimal risk factor.
As these technologies continue to advance, fintech is poised to bring financial empowerment in a sustainable manner to the most remote parts of the globe.
Conclusion
Financial inclusion requires the concerted effort of innovators in fintech, policymakers, and traditional financial institutions. Fintech solutions have not only given financial services to people but are empowering them to take charge of their own financial futures. From the mobile money platforms of M-Pesa to AI-driven credit scoring tools, fintech proves that inclusion is not only an objective but a reality close at hand.
Stakeholders must continue to invest in user-friendly, affordable, and innovative solutions to create a truly inclusive financial ecosystem. Together, we can ensure that no one is left behind in the journey toward financial empowerment.
This article was facilitated by Seamless Xtra’s Paula Hallentuch.
