While the developed world may take financial access – and associated financial infrastructure for granted, simple financial terms, products and services like savings accounts, debit cards and credit are completely foreign to large populations in developing regions and specifically across developing countries. Financial exclusion remains a major issue holding developing communities back from combatting poverty with various negative results which include largescale starvation and civil unrest.
Financial inclusion is central to economic empowerment, and engaging in economic activities such as the exchange of goods and services traded for cash, enables previously side-lined communities to become a part of economic clusters. The development of these clusters then directly impact the growth of local economic systems ultimately resulting in sustainable regional development.
This is where the rise of innovative FinTech companies come in as a potential solution, not only to assist richer nations in streamlining processes and increasing convenience, but also in opening up the financial world to those who have been excluded to-date.
With their unique blend of innovation and cutting-edge technology (which refine the process of banking, building credit and other short-term financial services), FinTech’s have the ability to address inadequate competition in the banking sector, the lack of microfinance institutions, the presence of financial infrastructure and mobile technology all of which create opportunities for financial inclusion, lifting people out of poverty.
As a large portion of the poorest countries are found in sub-Saharan Africa, this is an obvious focus area for a FinTech such as MyBucks which is also the first, and currently only, listed FinTech business in Africa to make use of credit technology, supported by an in-house AI team.
‘The Global Microscope 2015: The enabling environment for financial inclusion an index and study’ by The Economist Intelligence Unit noted that limited progress to-date is of great concern.
Although the majority of countries included in the study improved on their 2014 scores, the average increase was by only two points out of 100. Moreover, the overall average is just 48 out of 100.
The emergence of mobile phone networks however, has transformed communications in subSaharan Africa, effectively allowing its population to jump straight into the digital age.
So, while logistic and infrastructure challenges as well as high business start-up costs have prevented many financial institutions from establishing themselves in developing markets in the past, technology and access to mobiles have made this easier. This in turn creates a thriving environment where poverty is decreased, economies grow and employment opportunities are up-scaled.
FinTechs can therefore be regarded as game changers and, as customers shift their behaviour and move more towards digital, intelligent solutions, traditional banks will need to rethink their digital and innovation strategies if they want to be part of this financial inclusion revolution.
By Dave van Niekerk