Fintech can positively impact social mobility
Traditionally, mainstream banking products have had high barriers to entry which have excluded people with low incomes or less established credit ratings.
It was poor oversight and blind greed on the part of big financial institutions that took advantage of the marginalized groups mentioned above and brought the world’s economy to its knees in 2008.
Fintech was born out of this great injustice, partly out of mass protest for those responsible for the crash and partly as a response to the demand for user-focused platforms driven by the mobile economy.
The sharp increase in the availability of smartphones and the amount of investment and development into Fintech platforms are certainly connected. This has created an ecosystem where people who would have had very limited access to financial products now have a wide range of opportunities to become more financially aware and take advantage of new platforms.
Linking this back to the marginalized groups discussed earlier, having more and more access to smartphones gives them a better opportunity to access financial products and help them to better understand finances.
Banking for the unbanked
The developing world offers an incredible opportunity for Fintech to streamline its journey to mass global adoption. This also provides a chance for governments to change their financial systems to be more inclusive.
The barriers to entry for financial products mentioned earlier are even more prevalent in developing countries. People who do not qualify for traditional finance are often forced to turn to predatory lenders operating on the black market. This has the potential to be dangerous for the people soliciting the services of those lenders and in a way traditional financial products are providing these loan sharks with a steady stream of customers.
A great example of a situation in the developing world where Fintech can have an immense impact in can be found in India. According to figures from the World Bank, around 80% of Indians have access to a bank account. While this is an encouraging figure, the population of India is such that that remaining 20% of eligible Indians (over 16 years of age) is a staggering 191 million people.
Many of these unbanked individuals in India live in rural areas, where the presence of traditional finance is scarce. Fintechs like Jai Kisan, Gramcover, Credible India and Kaleidofin have made this underserved demographic a priority, with the aim of lifting people out of poverty through microfinance, crop insurance, payment processing and mobile wallets.
Breaking down barriers in e-commerce
E-commerce has completely revolutionized how we conduct business. Traditional brick-and-mortar retailers have made way for online giants like Amazon and AliExpress.
Nigeria, one of Africa's largest economies, is a part of the world where Fintech is putting a lot of effort into lowering barriers for companies wishing to sell their products online. Through different payment platforms it is now possible for merchants in Nigeria to sell their products through links on WhatsApp and Facebook even without having a website themselves.
Combining widely available social channels like WhatsApp with innovative payment methods is a prime example of Fintechs coming up with creative solutions to local problems.
Even in Europe, e-commerce is being reinvented by some unlikely sources to serve socially responsible purposes. Dutch advertising agency N=5 developed Helping Heart, a winter jacket with a built-in contactless card reader, designed to give homeless people an opportunity to collect donations in an increasingly cashless society.
After successful pilots in Amsterdam and Rotterdam, the jackets are being rolled out across Europe, notably in the UK.
Providing and powering a guiding light
Perhaps one of the most innovative and noble applications of Fintech to solve societal issues exists in Kenya, where microfinance has merged with clean energy to give people living in poverty the opportunity to have something we all take for granted, electricity.
A Fintech that has scaled this concept successfully is Trine, a Swedish firm that offers investors around the world the chance to back solar energy partners executing projects in Kenya and other developing nations. These microloans have provided electricity to over half a million people and for nations with little existing energy infrastructure can help to shape their utility networks in a green and sustainable way.
Returns on these investments are a nice incentive, but speak to a wider trend of sustainable investing becoming more mainstream and more accessible to people from outside the world of traditional investments.
As an innovative business model in the challenger banking space, bunq is proud to be a part of this global journey to innovate and simplify finances and help people to take back control of their money.