Smartphone adoption in developed nations has led to a massive fintech revolution. This has created easy access to fintech services and led to the sudden boom in the fintech sector. Moreover, with easy access to financial tools and products, the public is embracing digital finance.
However, fintech is not limited to developed countries, instead, it is the developing nations that are leveraging the real power of fintech products. But how are fintech companies transforming developing countries? Today we will explore how fintech can help developing countries in terms of financial inclusion, economic growth and social development.
1. Financial Inclusion
Before the era of the fintech revolution, most developing countries didn’t have access to basic fintech products or to convenient financial services. As per the World Bank, 1.7 billion adults in the world are unbanked, i.e., they don’t have access to financial institutions or have any bank account. This is due to the traditional banking systems are inefficient, inaccessible, inconvenient & expensive.
Fintech addresses this problem by offering alternative & innovative solutions to access financial services. You only need access to a smartphone to avail of services like mobile money, digital wallets, P2P lending, crowdfunding etc. Traditional banks lacks in providing customer with a seamless fintech experience which is fulfilled by fintech companies. For e.g. M-Pesa is a mobile money service allowing users in Kenya and other African countries to send & receive money, pay bills and avail of loans. Its unique approach to the underbanked section of Africa has reduced poverty and increased financial inclusion in the country.
2. Economic Growth
The introduction of fintech products & services holds immense potential to boost economic growth within the nation. Moreover, with the ease of access to new financial tools, customers will have the purchasing power in their palm which will directly increase the production and consumption of goods & services in the country. Fintech enhances economic growth by improving efficiency & competitiveness in the financial sector supporting entrepreneurship and innovation along with facilitating trade and investment. Innovation & competitiveness among fintech companies have lowered operational costs, increased speed & transparency, and reduced the risks of fraud and errors. For e.g.: Xendit is a payment gateway providing fast and secure online payment solutions targeting the Indonesian market. Additionally, Xendit offers other services like invoicing, disbursement, subscription, fraud detection etc. Economic growth is the result of entrepreneurship and simplified access to capital, markets, information and networks that are brought by fintech companies.
3. Social Development
Fintech promotes social development i.e., improving the well-being and quality of life of people in the country. Fintech addresses various social issues and challenges like poverty, inequality, education, healthcare and environment. Moreover, it empowers the poor & marginalised sector with financial knowledge and freedom eliminating the traditional agents profiting from their compulsion. In developing countries, fintech companies are running campaigns and setting up booths to educate people about embracing the new fintech product. It is done to improve financial literacy in the country and make them aware of innovative approaches to using various fintech products.
Fintech empowers and protects consumers by providing them with more choices, information and rights. These products present options for users to compare & choose from different financial products like loans, savings, insurance and investments. For example, NEO banking is more common in India easing the bank opening process for the masses. You can open a bank account from the convenience of your home thus eliminating the process of visiting banks. NerdWallet is a personal finance website helping users make smart financial decisions by providing them with financial advice, and reviews of various products and educating them about loans, taxes and investment.
4. Women's Empowerment
By simplifying the process of opening digital accounts, Women have more autonomy and standing within the household. This gives them direct access to government payments and wages rather than depending on their male counterpart controlling household finances. Moreover, access to digital accounts has enabled women to avail of credit directly from fintech apps rather than relying on loan sharks. Microloans encourage women to start their own businesses and empower other women. Additionally, government benefits are reached directly to women's accounts without making them stand in a long registration queue.
Fintech is a revolutionary technology that serves a wider purpose rather than only sending money. It positively impacts developing countries and helps a wider section of the underbanked & underprivileged section of the society. These new technologies provide innovative & accessible solutions imparting the lives of millions and empowering women in ways that are far beyond our comprehension.