Accelerating Financial Inclusion - The Transformative Power of New Technologies
The United Nations recognises financial inclusion as a catalyst for economic growth and a fundamental element of its sustainable development goals for the year 2030. Hence, reinforcing financial inclusion plays a crucial role in addressing different societal issues, including economic growth, employment, poverty mitigation as well as income equality across both developed and developing nations.
To measure financial inclusion, three indicators are taken into consideration:
· Access indicator which measures the depth of financial institutions outreach.
· Usage indicator which measures how clients use financial services.
· Quality indicator which measures the extent to which financial services and products meet clients' needs.
As per financial inclusion in 2023, 50% of adults worldwide remain underbanked and 27% remain unbanked (according to Boston Consulting Group). This comes with four main reasons that unbanked adults consistently mention; lack of capital, perceived costs of accounts, distance to financial institutions and insufficient documentation. However, FinTechs possess significant possibility in tackling these issues by offering a range of innovative solutions, facilitating greater accessibility and affordability of financial services for those in need. According to Harvard Business Review, FinTech companies held a combined global market value of $5 trillion in 2022, and it is anticipated that the industry will experience a growth rate surpassing 23% over the upcoming five years. Even with this significant growth, the industry still faces a number of challenges:
· Compliance and Regulations: FinTechs should follow laws and stay up to date with the latest government policies since finance is one of the heavily regulated sectors,
· Data Security: Data security has become more critical than ever before due to the increasing reliance on digital technologies and the widespread use of the internet. FinTechs might want to adopt data encryption and real-time alerts as an effective approach for this case.
· Technological advancement adoption: Technology advancement offers numerous opportunities and poses significant challenges for financial inclusion. Challenges that are mainly related to access, understanding, affordability, security and trust. Technological advancement can also increase the divide between individuals who have access to and are comfortable using digital tools and those who are not.
· Insufficient Mobile and Tech expertise: The lack of mobile and tech expertise represents a significant challenge for FinTechs in the journey towards financial inclusion. Many individuals in underserved communities are struggling to embrace and use digital financial services due to their limited knowledge of technology. The knowledge gap challenge does not only limit their access to advanced financial tools but also exposes them to many security risks. Therefore, FinTechs should focus on designing user-friendly solutions and providing a solid customer support to make digital financial services more approachable and inclusive for those with varying levels of technology proficiency.
As stated, FinTechs operating within the banking sector can play a significant role in promoting financial inclusion. They offer innovative solutions aimed at revolutionising the financial landscape, making banking more accessible and convenient. These solutions go beyond mobile banking apps, e-wallets and peer-to-peer (P2P) payment platforms to open banking initiatives that offer a more personalised experience, and real-time payment systems that speed up transactions. These innovations cater to diverse financial needs, from microfinance to customer service, but also bring regulatory and security challenges that must be managed as the FinTech sector continues its transformative journey.
HPS - simple, seamless & secure
HPS is a valuable partner for FinTech companies. Thanks to PowerCARD fully digital platform, FinTechs can create exceptional customised digital-first experiences. They can easily stay up-to-date with data security, regulatory and compliance laws. PowerCARD digital payment platform enables real-time communication with end-users, improving retention and loyalty. The digital payment platform enables the launch of any digital and mobile product, empowering FinTechs to actively contribute to financial inclusion by launching new solutions that address the needs of any market, including developing markets.
To know more about how HPS helps FinTechs, please contact firstname.lastname@example.org