Globally, Fintech innovation has proven to result in avant-garde business models including products and services that have revolutionized payments and earnings.
-By Fatima Batool October 10, 2022
The World Bank in its 2021 Findex Report identifies that 69% of adults worldwide have a transaction account – which despite sounding overly optimistic also implies that roughly one-third of adults, about 1.7 billion people, remain unbanked. It is shocking to imagine that this vast minority of adults doesn’t have access to modern financial services that we, the privileged other, have become so accustomed to. Consequently our developmental efforts should focus on the under banked and underserved to financially include them and bring their accessibility up to par with those that reside in developed economies.
Though, it is established that Fintech influence on financial services is on the rise with 82% of incumbents expected to focus on Fintech partnerships in the next three to five years, what exactly is Fintech and why is it such a hot topic of discussion in most circles since quite some time now? More importantly, what will be its impact on developing economies particularly in terms of financial inclusion and empowerment?
Simply put, Fintech is a sector of industries consisting of technology-focused companies with innovative products and services, traditionally provided by the financial services industry. These companies could range from stocks trading, peer-to-peer lending, crypto currencies, transfer payments and equity crowd funding to name just a few. For perspective it is important to understand that the Fintech market is dynamic and constantly evolving on a global scale. It is expanding coupled with a diversity of funding sources, opportunity for businesses and geographic range. These innovations are revolutionary in nature; hence they hold the key to modify and restructure existing financial services, pushing developing economies to meet global expectations. This is why it has become increasingly important to focus on both the opportunities provided by upcoming financial technologies and their risks too.
Globally, Fintech innovation has proven to result in avant-garde business models including products and services that have revolutionized payments and earnings. From a consumer’s perspective, Fintechs have led to tailored and interactive services that let them conduct transactions from the ease of their mobile devices, enhancing customer experience. According to estimates, the size of the global Fintech market is expected to reach as high as 8.3 trillion USD by 2022.
Apart from making the users of these applications financially literate , such innovations also offer a whole new world of opportunities for their users, ranging from secure payments to improved availability of financial services, which undoubtedly boost financial inclusion and an provide better efficiency in payments. This is a massive step forward from obsolete payment systems that required physically transferring cash. It is important to note that revolutionized digital payment systems boost financial services such as accessing, storing, saving, and borrowing money. Although financial technologies target greater financial independence, there is still a need for financial inclusion that would shape a fair and equitable society that will ultimately thrive in the long run by way of contributions to the economy’s development that would not only enable social mobility but will include a greater chunk of people in global economic trends and activities.
Special focus must always be placed on the women, the underserved and the minorities in any economy, since they are the ones who are usually financially ousted, thus facing barriers to economic activity. As the financial inequality gap comes under greater scrutiny, we must turn to novel solutions that focus on inclusion. Thus instead of focusing simply on financial awareness and independence, we should pay attention to the specific needs of particular segments in the market. Once this becomes a priority, then Fintechs can develop infrastructure and innovations to fully develop stronger financial ecosystems. This helps companies and governments to use technology to create greater significance for the financially marginalized in a volatile global context. Platforms that can cater to this aim, can spur modern digital infrastructures and more inclusive digital services that can help the under-developed economies transition to a new normal which is in accordance with the developed economies.
Like other developing economies, Pakistan is an emerging market for Fintech, with growing enablement for digital payments, prevalent internet and smartphone penetration, consumer preferences for social media and thriving e- commerce. Additionally, the State Bank of Pakistan provides sound regulations, which can further Fintech growth in the developing economy. Helping such economies to polish their digital transactional platforms with gradual transition to fully developed applications for reliant government-to-person payments, that can lead to the inclusion of the under-served in the financial system. Digital transactional platforms also ensure lower costs for the providers that impact the end consumers, the marginalized, positively. They can then manage their relatively low incomes and expenses and make financially aware decisions. Theft, costs and risks are all minimized with security measures that these modern payment systems come with in addition to lowered reliance on loan sharks and informal cash providers. Enabling asset accumulation is also a possibility for marginalized groups such as women, which boosts empowerment and participation. Every technology is innovative, but if it doesn’t include the underserved, then it is yet another benefit for the top tier only without any real impact and cannot really be called responsible innovation.