Around the world, emerging financial technology companies (FinTechs) are disrupting the finance industry. Fintech can be the unbanked best hope for financial inclusion. It is now some of the most effective ways to expand financial inclusion, especially for the world is 2 billion “unbanked”. This impressive success of FinTechs also holds promise for financial inclusion in developing and emerging economies.
Fintech as an incubator for innovation
Fintech, for its part, can be thought of as an incubator for innovation that also is extending opportunities to those without access to finance or capital, and people in developing countries can often benefit most from the advances in innovative technologies.
Fintech advancements that impacts:
Microfinance, an often people – and paper-intensive industry that requires loan officers to make numerous trips – sometimes to far-flung rural locations – to provide a single client with a loan. Electronic loan applications and banking services could allow for speedy credit decisions and loan disbursal, allowing loan officers to serve more clients in more places than ever before.
Money Transfers (Remittances) traditionally required a trip to your nearest MoneyGram or Western Union, which can be expensive and potentially far away.
New companies are simplifying this process by allowing people to send money around the world via a mobile phone for a fraction of what traditional vendors charge.
Credit History can be a huge roadblock for people that have never dealt with a financial institution before. Without one, many traditional institutions will not offer products, such as credit, to entrepreneurs that need support to start or expand their business. Fintech makes it possible to harness data from other sources, such as mobile phone payment history (First Access), or online accounts and social media activity to create an alternative credit history and help a financial institution to make a loan decision.
Cashless Payments – present a big opportunity for merchants in the developing world who do not currently enjoy the simplicity and security of digital payments. Dealing with cash is risky, and as more consumers move to digital financing, merchants will need to keep pace. Deferred Payment – Plans allow consumers to purchase big tickets items slowly over time, eliminating the need for large sums of cash. Developing technology that connects devices to wireless networks, transmits data, and controls device functionality remotely – allowing service providers to turn a device on or off depending on a customers’ account status.
Use case of improving access to financial services with Fintech
The Pakistani Fintech start up, Credit Fix, which aims to assist low-income consumers build credit scores and secure loans for revenue generating assets. Innovative mobile payment technologies allow users to transfer money in a way that is relatively cheap and timesaving. Another example is Malako, a start up in Uganda that is working to provide flexible and affordable credit lines that low-income consumers can manage through mobile devices. It will allow consumers to pay off their loans when they have enough funds and pay only a minimum when they do not.