Fintech's Dual Role In Driving Inclusion

In 2023, the global fintech industry witnessed exponential growth, with revenues reaching £79.38 billion. Projections by Statista Market Insights indicate this figure will soar to over £141.18 billion by 2028.¹

What started as a tech-driven niche has clearly become a major part of finance, offering a fresh, innovative approach. Fintech firms are disrupting traditional models, particularly in payments, investments and savings management while accelerating financial inclusion.

In this article, we'll explore fintech's important role in driving inclusion, as well as the challenges and the opportunities it presents.

What is fintech and what is its role in driving inclusion?

Fintech was originally coined as shorthand for ‘financial technology’, but has since become a term that describes an entire sector, albeit one that represents the dynamic synergy between finance and technology. Its evolution has been marked by the gradual integration of technological advancements within traditional financial services, reshaping the way individuals and businesses engage with financial transactions and services.

How is fintech reshaping the world of payments?

Fintech has catalysed significant transformations in the realm of payments, profoundly reshaping how transactions are conducted globally. This evolution is driven by technological innovations that streamline processes, enhance security and broaden access to financial services.

Fintech is reshaping local and global payments through digital solutions built on traditional banking systems, such as user-friendly apps, digital cards and mobile wallets, offering accessibility and convenience to all. These platforms prioritise low fees, provide fair exchange rates and disrupt traditional banking models.

Diversity and equity for a more inclusive world

Fintech's role in bridging the financial inclusion gap

In recent years, the fusion of financial technology with the mission of accelerating financial inclusion has been a beacon of hope for billions around the globe. Fintech, characterised by its innovative use of technology in financial services, has significantly contributed to narrowing the gap in financial access, particularly in underserved communities.

“Access to affordable financial services is critical for poverty reduction and economic growth. Countries with deeper, more developed financial systems enjoy higher economic growth and larger reductions in poverty and income inequality.” - The World Bank²

The coronavirus crisis underscored the significance of digital financial services across multiple dimensions and their pivotal role in advancing the UN's Sustainable Development Goals.³

Fintech has clearly demonstrated its resilience and adaptability, providing essential financial services remotely and facilitating economic activities amidst disruptions. However, despite its pivotal role in fostering financial inclusion, the sector encounters numerous challenges across both B2C and B2B solutions.

The future success of this industry hinges on its ability to effectively transform these challenges into opportunities.

Regulatory framework: navigating the landscape for inclusive innovation

Fintech solutions are often built on cutting-edge technological advancements. Ironically, the rapid pace of development presents one of its main challenges. On one hand, cybercriminals exploit the agility, speed and usability of advanced technology solutions, utilising channels like automation, cross-border transactions and instant payments for illicit activities.

On the other hand, fintech firms operate globally, engaging in cross-border transactions, thereby subjecting themselves to varied regulatory requirements across jurisdictions. These regulations often lag behind in addressing emerging threats associated with new financial delivery and inclusion methods.

“While people everywhere enjoy the convenience of a globally connected financial system, criminals exploit this intricate network to move illicit funds across borders and evade capture.” - IMF⁴

Innovative solutions addressing FinCrime

Transaction monitoring: Swift digital payments require ongoing surveillance to detect suspicious activity. Advanced anti-fraud platforms provide real-time alerts, enhancing detection rates and mitigating losses. As digital payments continue to evolve, the integration of AI-powered anti-fraud platforms will become increasingly feasible for fintech companies to fight a wide range of FinCrime including money laundering.

Digital identity and onboarding: Identity serves as a fundamental component within the financial ecosystem, presenting an ideal entry point for financial criminals. Enhanced KYC/CDD is vital in the era of deep fake IDs. Dynamic platforms integrate with watch lists for real-time screening, bolstering FinCrime prevention.

ISO20022 and cross-border payments: The Bank of England forecasts cross-border payments to reach $250 trillion by 2027.⁵ Standardising messaging, with ISO20022 adoption, aids fintechs in regulatory compliance for cross-border transactions. This framework enables sophisticated anti-financial crime checks, which are crucial in handling large data volumes swiftly.

Responsibility for fintech companies extends beyond merely ensuring full compliance with prescribed regulations in every country where they operate and safeguarding the data and funds of their users. It also entails building trust among individuals and businesses towards digital payment solutions. The latter is an essential component for increasing financial inclusion. Those who have previously operated in underbanked or unbanked conditions may harbour scepticism towards advanced digital solutions.

Financial inclusion: fintech opportunities and challenges in B2C financial services

Digital Financial Services (DFS), enabled by fintech, hold immense potential to transform the financial landscape by lowering costs, increasing speed, enhancing security and improving transparency. Furthermore, DFS facilitates the delivery of tailored financial services to underserved populations at scale, thereby advancing financial inclusion on a global scale.

Savings and investments

In the realm of savings and investments, modern personal finance management apps like MyGuava's All Things Payments app have emerged with user-friendly and transparent dashboards. These platforms empower individuals to better manage their finances by providing detailed spending reports, facilitating various saving methods and offering cashback incentives on spending.

Fintechs are reshaping the landscape of personal investment opportunities by offering accessible and user-friendly solutions. However, a significant challenge remains due to the limited financial literacy among many individuals regarding investment practices. This presents both a challenge and an opportunity for fintech companies.

By leveraging their platforms, fintechs can play a pivotal role in educating users about investment strategies and fostering financial literacy. Through educational resources and simplified investment options, fintechs have the potential to empower people to make informed investment decisions, thereby enhancing their financial inclusion and participation in investment opportunities.

Accessibility and convenience

The accelerating digitisation of transactions witnessed across P2P, B2C and B2B since 2020 has become an enduring trend, resilient even in the face of pandemic-induced spending fluctuations.⁶ The advanced digital payments, mobile wallets and cost-effective, simplified borderless solutions facilitated by fintechs have opened up opportunities for those who previously had limited or no access to receiving and sending local and international payments.

At MyGuava, for instance, through free multi-currency accounts and fee-free international and local transfers, along with increasing accessibility across a growing global footprint, we support financial inclusion by providing accessible and convenient solutions for individuals who may have been disadvantaged geographically or socially in the past.

Closing the gender gap

Fintechs have significant opportunities for growth, as indicated by statistics which predict a significant rise in mobile P2P payment users among smartphone owners by 2025.⁷ However, it's crucial to acknowledge existing inequities such as the persistent gender gap in basic financial aspects like account ownership on a global scale.

Fintechs have the potential to help close the gender gap in financial management

In parallel with leveraging the business potential of expanding digitalisation and digital payments, fintechs bear the responsibility to tackle issues of unequal financial access. By tailoring financial services to women's needs, offering user-friendly interfaces, and providing targeted financial literacy resources, they can contribute to reducing the gender gap. Moreover, by actively promoting gender diversity through hiring and supporting women in leadership roles and advocating for equal opportunities, fintechs contribute to fostering a more inclusive industry.

Fintech's responsibility in B2B financial inclusion solutions

Fintech's responsibility in B2B financial inclusion solutions extends beyond conventional business realms to encompass providing tailored and diverse offerings catering to businesses of all sizes and types, including those in rural and developing areas and marginalised groups.

MyGuava Business, for instance, exemplifies this commitment by offering fair-priced multi-currency corporate accounts, enabling companies to manage finances efficiently and expand internationally with competitive transaction fees. Ensuring end-to-end security measures and offering both physical and virtual cards further enhance the accessibility and usability of financial services for businesses operating in diverse settings.

B2B financial inclusion with digital payments

In addition to these features, Fintechs can accelerate B2B financial inclusion by collaborating with NGOs and government agencies to extend services to remote areas while integrating emerging technologies like blockchain and AI to enhance security and risk assessment. Moreover, offering financial education and training empowers entrepreneurs with essential skills for effective financial management.

By prioritising these aspects, Fintech companies can play a pivotal role in fostering B2B financial inclusion and facilitating global economic growth across varied geographical and socio-economic landscapes.

Guavapay: harnessing technology for a more inclusive financial future

In recent years, our company has undergone rapid evolution and growth, establishing an in-house tech infrastructure and a financial ecosystem that offers comprehensive payment solutions for a diverse range of market players, from individuals to merchants to financial institutes. This transformation culminated in the recent Guavapay rebranding, reflecting our commitment to consistent innovation.

Despite the changes, our core goal remains steady: to keep innovating and prioritising financial inclusion in our product designs. We firmly believe that every individual and business deserves access to accessible and convenient financial management solutions. By harnessing the power of technology Fintechs have the potential to drive the world towards a more equal and inclusive future.

As a global payments enabler, Guavapay is proud to play a key role in facilitating financial access and empowerment on a global scale.

References:

Empowering Financial Access: Fintech's Dual Role In Driving Inclusion

Fintech's Dual Role In Driving Inclusion

What is fintech and what is its role in driving inclusion?

How is fintech reshaping the world of payments?

Fintech's role in bridging the financial inclusion gap