5 Crucial Ways Fintech Paves the Road to Economic Inclusion

The world is entering a new era of cash displacement, where digitisation will lead to better economic inclusion, driven by innovative fintech companies.

Emerging economies, particularly those across Asia and Africa, are leapfrogging advanced economies by going straight from cash to digital and mobile access, providing new opportunities to countless people around the world.

This process has already made a difference: over the past decade, 1.2 billion previously unbanked people have gained access to financial services, with the unbanked population around the world falling by 35 per cent, according to the World Bank. 

But there’s still a long way to go, with an estimated 1.7 billion adults remaining unbanked.

And economic inclusion is about a lot more than just having a bank account, it’s about being able to send and receive money easily, quickly and cheaply. This is critical for the millions of micro-merchants around the world that are trying to earn a livelihood to support their families, staff and communities. 

The United Nations’ Sustainable Development Goal 8 is to promote sustained, inclusive and sustainable economic growth. One of the targets of this goal is to expand access to banking, insurance and financial services for all. But to improve participation, we need to remove the many layers of complexity and barriers to access that have been built up in financial systems over recent decades.

Fintech innovations can enable people in emerging markets to take advantage of high digital and mobile penetration. According to Statista, 6.378 billion people, or more than 80% of the world’s population owns a smartphone. Coupled with the widespread availability of mobile networks and digital payment networks, merchants have alternative pathways to access financial services at their fingertips.

Fintechs and the solutions they can deliver via smart devices hold the key to economic inclusion and financial independence around the world.

Eliminating legacy tech barriers 

If you spend a couple of hours in your local café on any given day, you will likely witness a failed transaction. Often, it’s expensive and inefficient legacy point-of-sale terminals that get in the way of merchants earning their livelihoods. 

There’s no good reason why a small business owner should lose a payment from a willing customer. And thanks to new technologies, merchants no longer have to be at the mercy of the monolithic banking incumbents and their control over business models and customer relationships. All a merchant needs is something they already have in their pocket – a smartphone – to accept any digital form of payment.

Accepting any and every payment

The shift to cashless payments is accelerating and shows no signs of slowing down. Digital wallets and QR-based systems have been steadily growing in recent years. Meanwhile, more and more Buy-Now-Pay-Later solutions are coming to market with adoption skyrocketing, and we’ll start seeing digital currencies enter the mainstream. 

It’s no longer as simple as “cash or card”, but that doesn’t mean merchant acceptance of funds has to be complex. Sophisticated technology has the power to enable simplicity at the point of sale and empower merchants, from the largest multinational franchisee down to the smallest independent business or sole trader, to accept any form of payment using the customer’s preferred method. 

Breaking down the complexity

Technology should never get in the way of a transaction. It should facilitate payments and prevent merchants from missing out on sales due to poorly designed systems.

Layers of complexity have built up around the payments system for decades, and fintechs can tear these barriers away. While many new models are disrupting and replacing existing players in the financial ecosystem, there is also a need for solutions that integrate and consolidate the myriad services available today. 

Accessing transaction data insights

Data is the new oil. With data being captured by businesses and consumers alike at an unprecedented scale, it is now powering the global economy. Access to detailed data insights provides merchants with a better understanding of their business and enables them to make more informed decisions that could impact the long-term viability of their operations. 

Digitised payment systems improve equity and inclusion in this data economy by offering all merchants - no matter how big or small - equal access to insights. Even basic information about purchasing behaviour can inform decisions that improve customer engagement and increase transaction volume. 

Removing economic silos 

According to data from The World Bank, cross-border remittances account for an estimated $600 billion in value.  The average global cost to send this money in the form of cash is 6.8 per cent, but a fully digital transaction drops the cost of this to 3.3 per cent.

Technology that helps remove friction, reduce cost and increase the speed of cross-border transactions will help more merchants participate in an inclusive and sustainable economy.

Now is the time to take advantage of the high digital penetration in markets across the world, and use technology that provides an alternative pathway to merchants than traditional financial services. This is our idea of a digitised inclusive economy - where every merchant has equal access to an entire world of customers.

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About the author: Ian Parke is the Founder and CEO of FIN-PAY.