How fintech is ‘paying it forward’ in societal inclusion

Fintech may have become a multibillion-dollar business. But happily, those it is benefiting are often in the more vulnerable and underserved segments of society.

The Global Fintech Industry Market is expected to be valued at $382.38 million by 2027. According to a report published by Coherent Market Insights, it will have a CAGR of 7.05% over the period of 2020-2027.

But perhaps the developing’s sector’s greatest value is this. Tech-enabled financial solutions are proving that they can radically enhance and foster financial inclusion.

Better still, they have the potential to do this faster and at larger scale than traditional financial players.

Early-stage fintechs, in both advanced and emerging markets, now offer new solutions for credit, insurance, payments, savings & personal finance.

Together, they are tackling the specific challenges of their under-served customers, including the unbanked.

This vulnerable segment is not just a feature of the third world. Even in the UK, there are 1.2 million adults in this situation according to the 2020 Financial Conduct Authority 'Financial Lives' Survey.

Those without basic bank accounts include people of no fixed address, prisoners, the homeless, and refugees.

Their vulnerability was highlighted by the global pandemic. It shone a light on the urgency of having access to financial services as a stabilising force for low-income households and businesses.

So how are fintechs filling the gap? Through their speed and agility is the answer.

Unlike high street banks, fintechs don’t have legacy systems that are difficult and expensive to adapt. Nor do they have the costs of expensive branch networks and hefty payrolls.

They are also more environmentally friendly. The agile technologies typically used by fintechs, the Cloud included, make redundant energy-gobbling on-site data centres, let alone hosting infrastructure and regular maintenance.

Fintech is now opening the door to exponentially increasing global financial inclusion in a way that goes far beyond the microcredit products offered in the past.

Firms are tapping into technology to design, customise and distribute a broader range of financial products that fit with the needs of those on a low income, such as microinsurance, microsavings or remittance products.

Plus, their tech-enabled solutions are reducing operating costs and increasing efficiency, which add up to making it easier for them to reach people in remote and rural areas the world over.

Their achievements are not going unnoticed either. In 2021, the Center for Financial Inclusion launched an awards scheme called the Inclusive Fintech 50.

Its aim? To identify the most promising early-stage inclusive fintechs in advanced and emerging markets.

The winners who stood out for TechCrunch were these:

• A digital loan product that unlocks credit for small businesses with no fixed collateral.
• An end-to-end healthcare marketplace that delivers micro-insurance to rural communities.
• A subscription service that helps low-income households save money by financing bulk purchases of essential goods.
• An ERP system that drives a credit scoring engine and enables partner banks to assess loan risk.
• A mobile app that enables refugees and migrant labourers to access loans, insurance, and remittances.

In multiple ways, fintechs like these are making a difference to the world’s social, political and environmental challenges.

They are, in other words, paying it forward.