The fintech sector has seen impressive growth in recent years and has had a significant impact on financial inclusion. With the integration of new technologies like artificial intelligence (AI) and machine learning, experts predict that consumers will massively adopt 100% digital financial services in the coming years. Indeed, technology offers a remarkable opportunity to reduce transaction costs, improve the accessibility and speed of financial services, leading to a more complete range of specialized services. According to the World Bank, 1.2 billion people have gained access to financial services over the past decade, reducing the unbanked population by 35%. However, 1.7 billion people remain unbanked, but fintech applications are a way to make it easier for them to access them.
What is Fintech?
Fintech, a term derived from the combination of the words “financial” and “technology”, is a sector that is developing at a rapid pace. It refers to companies that use technology to automate and improve financial services and processes. From mobile banking and insurance to investment apps and cryptocurrencies, fintech has a seemingly endless range of applications. Most of the applications currently available to the public allow you to efficiently and quickly perform tasks such as domestic and international money transfers at low cost, bill payments and loan applications.
Impact of Fintech on Financial Inclusion
Financial inclusion refers to the provision of financial services and products to the entire population, regardless of their economic and geographical conditions. Despite the existence of the traditional financial system, accessibility remained a challenge. However, the growth of fintech companies is having a positive impact on financial services and accessibility.
Reaching the Unbanked
The generalization of the Internet has made it easier for Fintech companies to reach the most remote populations, even in areas where physical banks cannot establish themselves. This gives unbanked users access to basic financial products and services and helps them save and grow their money.
Through the integration of AI and ML with big data, Fintech companies can provide user-friendly services and make it easier to bank for people living in remote areas of the globe. This is particularly the case of neobanks and services such as Wise, Worldremit, Remitly or Orange Money which offer to open accounts for free in African and Asian countries and transfer funds at lower cost.
Improved access to credit
Fintech companies require minimal paperwork to get a loan, unlike traditional banks, which require extensive documentation. AI is used for risk assessment, analysis of income and spending patterns, which is useful for local businesses seeking microfinance services and capital investments. Fintech companies also use various tools to educate their audience on financial literacy, helping users understand loan requirements and processes.
Compliance, trust and transaction security
Fintech companies have fewer compliance requirements than traditional banks. This helps reduce customer acquisition costs and allows companies to innovate and roll out new products and services faster while complying with government regulations.
Also the lack of trust in online payments has been a challenge, but biometric technology plays an important role in ensuring the authenticity of online transactions, making banking faster, more reliable and more efficient, and preventing data compromise. Thus, people who are recalcitrant towards the traditional banking system are more likely to use Fintech services.
Very positive prospects for the future
The future prospects of Fintech in terms of financial inclusion are very favorable. With the potential to reach a large underserved population, it has the power to effect positive change in the financial world.
However, challenges such as restricted regulatory policies and a lack of financial and digital literacy still exist, and it will be important for companies in the sector to overcome these barriers and continue to collaborate to drive financial inclusion for all.
