Fintech innovation is disrupting the financial services landscape and forcing responsible finance organizations to adapt. The following financial inclusion and fintech trends will help define finance in 2019. Fintech is impacting financial services at an increasingly rapid rate, reaching every sector of the industry, including operations, regulation, and customer experience, among others. Global fintech investment rose an astounding 120 percent from $50.8 billion in 2017, to $111.8 billion in 2018.
The World Bank’s Findex 2017 report also found that new technologies are making financial services and products available at unprecedented levels – particularly in emerging markets. In developing countries, bank account ownership alone reached 63 percent in 2017, up from 42 percent in 2011. Between 2014 and 2017, the number of unbanked people worldwide fell to 1.7 billion from 2.1 billion.
This growth in these markets is largely a digital phenomenon.
Mobile phones are becoming more accessible, prompting both fintechs and financial service providers to join forces and reach more people where they are via mobile mediums. But while account ownership has expanded, significant gaps in access remain, especially for women, rural residents, and other underserved communities.
As we approach the second half of 2019, responsible financial organizations will have to focus on leveraging digital technologies to close these remaining gaps.
In light of these gaps, here are four financial inclusion and fintech trends we will be watching for:
Women-Centric Approaches to Financial Inclusion and Fintech
While the Findex showed major progress toward financial inclusion, the picture looks less rosy when you dig into the data. The very large elephant in the room? Women. They are not benefiting equally, despite what the reports seem to say.
In fact, men are still 9 percent more likely to have a bank account than women. This same gap has remained since in 2011! In some regions, the gender gap in financial inclusion has widened from 14 percent in 2011 to 17 percent in 2017 in the Middle East & North Africa and from 5 percent to 17 percent over the same period of time in Sub-Saharan Africa. This gap creates barriers preventing women from fully participating in economic life.
So, what are the barriers to inclusion that continue to hold women back?
For starters, there is a digital gender gap. Worldwide, about 184 million fewer women own phones in comparison to their male counterparts. Of women in developing countries who do own a mobile phone, they are 18% less likely to use mobile internet. This limits the transformational impact that mobile financial services can have.
In other regions, such as in South Asia, women tend to be excluded from the financial sphere for social and cultural reasons. So even if a woman has a smartphone and a data plan, there might not be a use case for mobile banking.
The utility gains from fintech often go to those who are already financially included to some degree. In too many places around the world, that doesn’t apply to women.
People Want Banking, Not Banks
Digital technologies and big data have disrupted traditional banks. The microfinance sector, though still positioned to reach low-income people with credit and savings products, is being profoundly affected.
The traditional financial services model is one that earns much of its profit from transaction fees, relies on loan officers to do outreach, and requires that customers physically travel to branches to conduct their banking. This model no longer makes the cut and should be a trend we all welcome.
The future of fintech is a space where payments, remittances, and transfers are free. Financial services will be available to customers where they live and work, and people will expect service providers to create products with clear use cases.
Pakistan’s first free-to-use mobile e-wallet SimSim, is on the cutting edge of this trend. SimSim is an app that allows users to expand access to financial services by digitizing payments.
Users can create an account in less than a minute and can easily pay utility bills, transfer funds, purchase tickets, and access a range of other services without ever setting foot in a brick-and-mortar bank branch or incurring transaction fees. Launched in September 2017, SimSim already has more than 300,000 users. Roughly 30,000 merchants use it to receive payments and more than 150 companies are now using it as a payroll solution.
These service delivery channels will be expanded in other markets, too including e-wallets in Democratic Republic of The Congo, Nigeria, Tanzania and Kyrgyzstan, and a big push to increase agent banking networks in Nigeria, Malawi and Zambia, among others. Investing in new delivery channels allows us to scale up and reach more people with impactful services.
Banks and Fintechs Will Form Partnerships
It’s widely assumed that fintechs are nothing but trouble for traditional financial services organizations. This way of thinking is understandable – the future of fintech will bring greater competition for banks.
However, this assumption is also flawed.
While it’s true that fintech organizations are disruptive, there’s more to the equation. When they choose to combine forces, banks and fintechs can create new financial products and channels that better serve existing clients and help expand outreach.
Last year, our subsidiary in Guatemala launched a partnership with Uber Guatemala to offer a new Uber Loan product. The loan provides creditworthy Uber drivers with the financing necessary to purchase their own vehicles.
Organizations like ours bring a deep understanding of our customers while our fintech partners bring innovative technologies that can reach a broader audience. Together, fintech and technology partners can integrate digital technologies to make services more user-friendly and scalable.
Personal Connection Will Remain Important
While digital banking is central to current financial inclusion and fintech trends, the finance industry is still about people. A delivery model that combines the efficiency of digital finance with the personal trust of in-person banking, a model that FIF are continuously moving toward. Rather than replace branches and loan officers, “touch tech” uses digital channels to build closer relationships with clients. While frontline staff are key players in providing services, using to digital to optimize our processes helps our frontline staff do their jobs better, leads to greater outreach as well as better outcomes for our clients.
All customers, regardless of net worth, are looking for the next generation of financial service providers. In a global financial landscape that’s constantly changing and innovating, financial organizations need to think outside creatively in terms of relationships – culturally, technologically as well as operationally – to be successful and thrive in markets that are continuing to see declines.
Written by Andrée Simon.
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