FinTech Financial “Inclusion”: Bridging the Gap for the Unbanked and Underbanked
By Dhwanit Shah
By widening the scope of financial inclusion, FinTech firms can play a crucial role in offering the masses access to banking, investment, and insurance services, among others.
Despite monumental efforts, a large portion of the world’s population still has limited access to the traditional banking system. Sample the World Bank estimate, which suggests that 1.7 billion people around the globe still have limited access to traditional banking and financial services. Financial technology (FinTech) firms can play an important role in bridging this gap. The strikingly different tech-based approach of these firms offers faster, more cost-effective, and personalised financial services, which are proving instrumental in widening financial inclusion globally. In other words, FinTech firms are heralding transformational changes in the financial sector, which is bringing a chunk of the unbanked or underbanked population under the financial net.
FinTech: A Beacon of Hope
With 25% of the world’s total population unbanked, the significance of FinTech firms in ensuring financial inclusion couldn’t be overemphasised. FinTech solutions that combine digital platforms, mobile devices, and advanced data analytics are now playing a crucial role in meeting the banking demands of underserved populations. Many well-known names such as Visa, PayPal, and Mastercard are leading the FinTech revolution and getting incredible support from new-age startups such as Paytm, Khazna, and PhonePe, among others. As noted by the World Bank, the technology-led approach of FinTech is proving extremely beneficial in cross-border payments, and thanks to the combined efforts of all these platforms, the percentage of people holding an account (bank or mobile) has risen from 51% to 76% within a decade between 2011 and 2021.
FinTech Role in Bridging the Divide
FinTech brings multifaceted benefits to the financial ecosystem across the globe. Not only are these tech-oriented financial platforms widening financial inclusion, but they are also catalysing technological innovations in the financial domain. The crucial role of FinTech platforms in equipping Indians with banking services is no less than a game-changer. A research report by PwC found that around 80% of the Indian population is now in possession of a bank account. The country is home to more than 1300 flourishing FinTech startups, which have attracted a total investment of $5.72 billion since 2014. Even on cross-border remittances, the significant impact of FinTech platforms is very apparent. By enabling access to simplified banking solutions, credit facilities, and peer-to-peer lending, FinTech solutions are effectively contributing to ensuring financial autonomy for the masses aligned with the Sustainable Development Goals (SDGs) of the United Nations.
FinTech Platforms: Use Cases
The FinTech industry consists of many prominent players, with the likes of PayPal, Ant Group, and M-Pesa already bringing revolution to the financial space like never before. These firms are bringing people into the financial mainstream and playing the role of catalysts in raising the living standards of the masses. In India, the success of Paytm, Gpay, and PhonePe is phenomenal, and powered by the unified payment interface (UPI), these platforms are catapulting the reach, access, and affordability of financial services to a whole new level.
FinTech Adoption: Issues and Challenges
As promising as it looks, the growth story of fintech platforms is not without its share of challenges. Prominent among these are regulatory concerns that need special attention, as maintaining compliance with regulations is of utmost importance to fintech players. The complexity of regulatory requirements becomes even more acute in the case of cross-border payments, and hence, overseas payments need even more attention. In addition, the safety of customer data, digital literacy, and network connectivity are also prominent issues that FinTech players need to contend with for their smooth functioning. The good thing is that most of these challenges can be easily addressed by striking a collaborative approach that ensures the creation of holistic benefits for all stakeholders in the financial ecosystem.
Conclusion
No one can deny the crucial role played by the FinTech platforms in propagating the cause of financial inclusion among the masses. These new-age firms are becoming instrumental in widening financial security, and by offering the masses efficient, cost-effective, and faster financial services, these platforms are rewriting the tenants of the conventional banking system. To realise the full potential of FinTech platforms, all the stakeholders must come together and collaborate to promote digital literacy, cyber security, and financial inclusiveness so that a better and more secure financial future can be created for our current as well as upcoming generations.
(The author is Dhwanit Shah, Senior Vice President at MSys Technologies, and the views expressed in this article are his own)
