While we find ourselves embracing an increasingly cashless society, it’s still difficult to picture life without having access to a bank account. However, for many adults around the world, the notion of having this level of access to financial management services is still impossible to imagine. The playing field is far from even when it comes to global finance, but emerging fintech may soon help to resolve the problem of the unbanked and monetary inclusivity.
In traditional banking, there are widespread barriers to financial inclusivity. Citizens may lack the necessary identification documents needed to open a bank account, they may live in a region that lacks a financial infrastructure where visiting the closest bank can be a profoundly difficult task, or they may simply lack the level of income to make them believe that banking services are necessary.
Here, it’s important to note that traditional banks are generally inhibitive to lower-income households. Charges like overdraft fees, debit card fees, ATM withdrawal costs, transfer fees and other charges across the banking system can be severely restrictive for account holders in poorer nations.
As data shows, unbanked populations are most prevalent in Africa, Asia and South America. This can be particularly difficult for individuals because many nations from these regions are dependent on remittances from overseas, which requires individuals to have some form of access to financial services in order to receive international payments.
However, while the lack of financial inclusivity is stark across many continents, fintech is evolving to give communities more opportunities to manage their finance and potentially to fight poverty through better wealth management services. Let’s take a deeper look at the rise of inclusivity across finance:
Paving the Way to Financial Inclusivity with Fintech
Financial inclusivity in terms of the accessibility and equality of opportunities to access financial services can bring with it greater social benefits. Basic access to a bank account can represent a significant step towards financial inclusion due to the wider financial benefits that it can deliver like credit services and insurance. This can not only help individuals to better manage their wealth but also has the potential to enable them to start their own businesses or invest their money.
There have been plenty of initiatives created to help deliver banking to unbanked communities, including programs from the World Bank, G20, and the European Bank of Reconstruction and Development. Companies like Visa, Mastercard and Vodafone have also developed financial services to better aid inclusivity in developing countries. However, emerging fintech has the potential to make strides where traditional finance has fallen short.
The rise of digital payments powered by fintech has helped to strengthen the payments landscape across nations like Kenya whilst growing the level of access citizens have to financial tools and services.
Modern fintech wallets require far fewer hurdles to overcome in terms of identification, allowing individuals to set up accounts capable of sending and receiving money via mobile phone apps, without the need of physically visiting stores.
This technology has aided the receipt of remittances. Before digital payment providers, migrant workers and their families found themselves largely excluded from financial services. When migrant workers send money to their families back home, the process of delivering migrant remittances could become drawn out by the lack of sufficient financial resources within their families.
However, in recent years, remittances have grown significantly and have become one of the largest sources of income for many developing nations. Fintech services like Wise help to provide low-cost solutions to the storage and transfer of money. Rather than visiting a bank, Wise simply requires an image of the account owner holding a photo ID to verify accounts.
“The development of efficient, secure and cost-effective payment systems, such as those provided by TransferWise, will not only offer customers greater choice, but will also help improve financial inclusion by providing access to affordable financial services for all economic sectors and segments of society, thereby supporting balanced economic growth,” said Gobind Singh Deo, communications and multimedia minister in Malaysia of Wise’s service.
Other fintech platforms like that of Connectum can work to deliver borderless payments, which have the potential to greatly boost the convenience in which remittances can be sent overseas. The fintech’s multi-currency processing services and card-to-card payments function is protected by AI-based anti-fraud security, helping to not only eliminate the friction of international payments but also to protect the money being sent.
The Role of DeFi in Delivering Global Banking Solutions
It’s also important to acknowledge the invaluable role that decentralized finance can play in the future of bridging the gap to the unbanked. Operating largely in the realm of cryptocurrency, DeFi services can allow users to send and receive assets like Bitcoin and Ethereum through the use of blockchain wallets, some of which require no KYC verification before being set up.
This means that it’s possible for users around the world to send and receive the same cryptocurrency, which would require no overseas transaction fees, all without the need for supplying identification documents that they may not possess.
Furthermore, the DeFi space is evolving quickly and offers more complex services like borrowing and lending, all of which can help to bolster the levels of inclusivity that individuals have access to.
Naturally, there are still hurdles to overcome. Although fintech appears to be a globally disruptive force, it will take some time before the technology becomes widely accessible enough to deliver meaningful change. According to FDIC data, 31% of unbanked Americans didn’t own a mobile phone, whilst 72% had no internet access at home.
Ensuring technological inclusivity is a key part of delivering financial inclusivity. However, fintech has, in the space of a decade, delivered far more comprehensive solutions for unbanked communities than their more traditional banking counterparts have managed in the past century and beyond. With this in mind, it’s exciting to see where the rapidly evolving technology takes us next. Through the emergence of fintech, the world of finance has taken some invaluable steps towards true inclusivity.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.