Reaching the unbanked through FinTech
Financial inclusion is one of the greatest developmental challenges of our century. At a time when many nations are achieving sustainable GDP growth, income inequality and access to finance remain critical issues with huge political and economic implications. Figures from the World Bank indicate that roughly around 2 billion adults are currently unbanked, with many of these people in employment and living in institutionally poor economies in the global south.
At the same time, global wealth continues to grow. According to figures provided in the World Wealth Report 2015, global wealth is forecast to reach the unprecedented level of $70.5 trillion by 2017. This has led to questions about the distribution of wealth not only within the developing world but also within developed countries such as the UK.
The figures on financial access and education in the UK remains stark. 2 million adults do not have a bank account with around 40% of adults with little practical understanding of the impact of inflation on the value of money. Therefore people in the UK face a double bind with finance: a lack of access to financial institutions and gaps in savings education.
FinTech innovations provide some solutions to these problems. With the rise of telecoms and smartphones, there are multiple platforms and systems currently in development by Innovate Finance members which provide crucial steps in ensuring wealth does not remain insulated to the few.
One company making a change through the utilisation of mobile communications is DoPay. Targeting the two billion employed unbanked, the firm (which is a graduate of Barclay’s Techstar Accelerator programme) has developed a cloud-based payroll software platform to enable employers to pay workers with prepaid debit cards instead of cash. By providing this mandatory solution, there is greater possibility for transparency in economies with fragile institutions and exposes the number of ‘ghost employees’ usually lodged within employee payrolls.
Other FinTech innovations making waves in financial access are new mobile phone apps that encourages users to start saving. Innovate Finance members such as Moneybox utilise the power of mobile to educate users about money. These platforms help people to review spending habits, incentivise the process of saving through rounding up everyday purchases and offering simple investment options and saving goals.
Crowdfunding platforms are also providing an alternative form of finance for those with access to the Internet. Fund Dreams India, Wishberry, Catapoolt and Ketto are all crowdfunding sites that are making significant inroads in shaping the future of India by enabling people to raise funds for personal and social causes without having to go to a bank to ask for money or to even possess a savings account.
Unlocking the potential of the unbanked is not only important for humanitarian reasons. The economic and business opportunities arising from tapping into the purchasing power of the unbanked can transform communities, empower individuals and change the path of the global economy. By providing a multiple of platforms for payments and savings, it is possible to democratise the financial destiny for the masses across the globe.