The emerging Fintech industry continues to improve and enhance every day financial activities across the modern world. From plain old internet banking through to ‘robo-advice’ and from online challenger banks through to money transfer and digital payments, Fintech has become such a large part of our lives that most of us take it for granted. Outside of our little bubble however, it has huge potential to have a profound global impact in improving the economic conditions and access for individuals in the developing World.
31% of the world's adult population do not have a bank account, locking them out of the core conditions for economic empowerment and denying them access to borrowing, saving or investing money. Shanu Hinduya, Chair of Hinduya Bank, points out that denying those in developing countries access to financial services could be helping to maintain a cycle of poverty, writing, “financial inclusion is a fundamental step towards escaping poverty.” Fintech could be a key proponent in solving these issues but yet for many it’s not quite there yet.
The challenge in developing countries is not necessarily that the basic infrastructure isn’t there but rather that it doesn’t fit the needs of its consumers. Two thirds of unbanked adults across the world own a mobile phone. However through inconvenient access, a mismatch between customer needs and product design, as well as a lack of financial literacy, accounts remain unopened or inactive. In fact, in India 240 million adults have a mobile phone but do not use their bank accounts, a fact that could actually be costing them money.
In countries where remittances are common, sending money to family and friends can be costly. The use of Fintech, in place of manual payments could halve those costs. According to Xoom, an electronic funds transfer provider, on average digital remittances cost just 3.93% of the amount sent compared to 7.42% across all other transfer types. Countries that have seen a commitment from Fintech services have benefitted greatly from easier remittance payments.
Leading digital money transfer service, WorldRemit, signed a direct partnership with Safaricom in 2018 to enable instant cross-border money transfers in Kenya, a country which now sees 97% of account owners using digital payments and which relies on remittance as one of the nation’s top earners. Increased access to digital money transfer and reduced costs for consumers should therefore have a major impact. This impact will be seen both in the country’s economic growth as a whole and in facilitating economic inclusion for individuals.
There is great hope for the future, with success stories coming thick and fast across the world. In China, adults making digital payments has leapt from 44% to 68% in just two years, thanks to improvements to the services available. Similarly, in Brazil (although the numbers are still comparatively low) the share of account owners using the internet to pay bills or purchase items has almost doubled.
The true impact of these changes is most clear when you look at Fintech firm Tala who are currently targeting developing countries. Of the 1.5 million customers who have currently been able to access their loans, 70% have either used the money to start a business or to expand an existing one, adding to the economy of their country and driving wealth share onwards.
It’s exciting to hear these stories and truly proves the importance of making technology accessible to all. With 40% of CEO’s across Africa indicating that the digital space is their number one priority, I can only see this gaining further traction.