Accessible Financial Services: The Fintech Revolution
Written by Slice Capital’s Aren Raisinghani.
The first two quarters of 2016 saw promising growth in the fintech sector with $7.4 billion in VC-backed investment and 416 deals completed, according to a recent report by CB Insights. Attention in fintech has been focused mainly on further building the established subsectors, including robo-advising, marketplace lending, and crowdfunding. An entire other concentration of the industry is centered around innovation to address the needs of the unbanked.
The term unbanked refers to individuals who do not have traditional bank accounts or access to financial services. Asian countries have some of the greatest populations of these individuals: China (21% unbanked), India (47% unbanked), Indonesia (64% unbanked). Comparatively, about 6.5% of the United States population is unbanked. The unbanked tend to face struggles pertaining to lack of money, paying high brick-and-mortar banking fees, and meeting brick-and-mortar bank account requirements. In general, these individuals distrust the traditional banking system. Furthermore, many members of this population live in developing areas where the banking infrastructure is less widespread, and hence, difficult to access.
Fintech companies have spearheaded new solutions for this market. Numerous have developed apps that enable people to conduct monetary transactions without opening or having a bank account. Examples include: AliPay (China), Paytm (India), MoMo (Vietnam), True Money E-Wallet (Thailand), Smart Money Mobile Wallet (Philippines). Additionally, many companies are developing new ways to conduct credit scoring and risk measurement to serve unbanked populations that are unable to build credit scores based on the established FICO scoring model (since the unbanked have never borrowed money formally). Examples include: Lenddo (Singapore-based social media-based credit scoring algorithm), Sesame Credit (China-based social media analytics credit scoring), MyBank (China-based digital only banking), digibank (India-based digital only, mobile based bank).
While traditional financial services are geared to the wealthy, fintech is easily scalable and is economically feasible to be used by the masses. As Asian markets continue to expand and countries face economic growth, the need for accessible financial services increases. As a result, some nations are looking toward a fintech revolution.
In August 2016, The Monetary Authority of Singapore (MAS) opened the FinTech Innovation Lab to aid with cutting-edge development. One of MAS’s main goals is to encourage the adoption of e-payments among the population. MAS Chief Fintech Officer stated, “Of all the developments in fintech, it is in payments where the gains in financial inclusion are potentially strongest — for the simple reason that we all need to use payment services to participate in the economy and society…[o]ur vision is to make Singapore an electronic payments society.”
As fintech continues to grow and evolve, the following message becomes clear: it is here to stay and will pave the way for the future of the global financial industry.
Sources Cited:
· (Forbes, 08/22/2016)
· (TechCrunch, 08/14/2016)
· (ZDNet, 08/24/2016)
