How can FinTech help developing countries? | Experts’ Opinions

Innovations in financial systems, more freedom and security, time-saving tools and financial education are just a few concepts that characterize the fintech industry which is currently evolving at a rapid pace. Although fintech and open banking have already revolutionized traditional banking systems in many developed nations, they could also significantly impact the development of less wealthy nations. By offering accessible, efficient, and secure financial solutions to developing nations, fintech could empower them economically. We discussed this topic with fintech specialists so, if you are curious to find out their opinions, check the article below.

DevelopmentAid: How can fintech help developing countries?

“Fintech is revolutionizing the financial services landscape in developing countries, presenting a beacon of hope for millions who face barriers in accessing traditional banking services. The World Bank has indicated that countries with well-established financial systems experience higher economic growth and rapid reductions in poverty and income inequality. Across developing nations, most of the population remains unbanked or underbanked due to traditional banking procedures or mindset, resulting in higher business costs for medium-sized enterprises. The higher operational cost of the service providers is another hurdle that hampers access to finance for those already deprived and especially women-led businesses. Where access to financial services is often limited, fintech emerges as a catalyst for change, providing innovative solutions to foster economic development. Mobile banking stands out as a game-changer, allowing individuals in remote areas to access banking services through their smartphones. This facilitates convenient transactions and promotes financial literacy among populations previously excluded from the formal banking sector. Digital payment systems further streamline financial activities, reducing reliance on cash transactions and contributing to a more transparent and accountable financial ecosystem. Moreover, fintech solutions enable microfinance initiatives, empowering small businesses and entrepreneurs by granting them access to capital that was once elusive. In essence, fintech is not merely a technological advancement but a force that will drive financial inclusion and economic empowerment in developing countries.”

“Financial technologies have shown a lot of potential in developing countries, where financial inclusion is lower than in developed states. According to the World Bank, most people do not have a bank account, especially those in rural areas. However, most of those people do own a smartphone. Through fintech, these people can gain access to financial services without having a traditional bank account. M-Pesa in Kenya is a great example of this and showcases the immense potential of fintech in servicing the unbanked and underserved populations. The success of financial technologies in developing countries was further evidenced during and after the COVID-19 pandemic. Access to traditional banks is one of the major reasons why most people in rural areas find it hard to have bank accounts. They often have to travel long distances to perform basic banking activities. Now they can save time and money through mobile money. With the advances in technology, they can even receive remittances from abroad directly to their mobile money accounts. The new financial technologies bridge gaps, offering efficiency and security to underserved populations and empowering them in the process.”

“Today, mobile phones have become more critical than traditional banking structures for accessing finance. As the 2021 Global Findex Report highlights, widespread and affordable internet access is vital to further progress in access to finance. Over the past decade, global account ownership has increased by 50%, and 76% of the world’s population now has access to financial services. Fintech products, particularly mobile banking tools, have been instrumental in achieving this progress. Mobile banking, digital technologies, and branchless banking have increased people’s access to essential financial services such as loans, savings, money transfers, and insurance. Inclusive finance has made it easier for people, especially the most vulnerable, to manage daily financial transactions, start businesses, manage risk, and pursue education. Access to affordable financial products and services is critical for vulnerable populations to improve their economic situation. Fintech companies are now becoming essential intermediaries for individuals, small family businesses, and SMEs to access finance by bridging the gap between financial institutions and users. In particular, people living in rural areas, disadvantaged segments of society, and MSMEs are the main beneficiaries of these fintech revolutions. In the near future, financial and economic development will depend more on fintech than on traditional products and services.”

“Fintech’s evolution in developing countries marks a significant turning point, especially for small and medium enterprises and entrepreneurs who traditionally grapple with limited financial access. The rise of digital payments and mobile banking, driven by fintech innovations, is revolutionizing how financial services are delivered. These advances are particularly transformative in assessing creditworthiness and processing applications digitally which have long been stumbling blocks for smaller enterprises. By leveraging technology to evaluate credit applications more efficiently and inclusively, fintech is closing the substantial financing gap faced by SMEs. This is crucial in regions where traditional banking systems have been inadequate or inaccessible, particularly in remote areas. Fintech’s ability to offer more equitable financial access catalyzes economic growth and empowerment for individuals and businesses. The impact of these fintech advances extends far beyond mere transactional convenience. They are pivotal in creating a more dynamic, inclusive financial ecosystem where small and medium-sized enterprises can secure the necessary funding, foster innovation, and compete effectively. In essence, fintech is not just changing how financial services are accessed; it’s reshaping the economic landscape of developing countries, enabling growth and sustainability.”

“Fintech or financial technology, refers to the aggregation of technologies used to deliver financial services to businesses and households. Nigeria, a developing and Africa’s most populous country serves as a case study on how fintechs can help developing countries. In 2016, Nigeria experienced a major turning point in the fintech revolution where SunTrust Bank Limited started operations and adopted a branchless approach. This led to a proliferation of several fintech start-ups and platforms such as Flutterwave, Piggybank, Remita, among others. This revolution led to an increase of e-payment systems such as Automated Teller Machines, Point of Sale Machines, and Mobile Money Operators. It is important to point out that between 2014 and 2021, Nigeria’s fintech platforms raised a whopping US$600m in funding, attracting US$122m (25%) of the US$491.6m raised by African fintech startups in 2019 alone – the highest on the continent. With the adoption of a technology-driven strategy, fintech platforms in Nigeria are providing financial services to large populations of unbanked and underbanked. A positive for Nigeria is how fintechs are helping to reach previously underserved communities with financial services. The Nigeria example, I would argue, can serve as a roadmap for other developing countries.”

See also: Does financial education matter for a sustainable future? | Experts’ Opinions

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