Why we should keep an eye on the Fintech industry: the convergence of financial inclusion and innovation
In almost every area of our lives, digital means we’re doing things differently and finance is no exception. The rapid growth of Fintech enables new players to bring new products to the market in record time that challenge existing business models. We can all agree that Fintech is transforming the world of finance, but what I find most fascinating is the potential Fintech has to be used as a force for good. There is no hype in that.
“We can all agree that Fintech is transforming the world of finance, but what I find most fascinating is the potential Fintech has to be used as a force for good.”
It is with this in mind that I recently joined a forum at the 54th session of the commission for social development at the United Nations, hosted by Uwaifo Aromose, Barinu Institute. I gathered with change agents at the UN headquarters in New York to share perspectives on the convergence of financial inclusion and our respective sectors including:
- Innovation and Fintech (Jesse Podell, Startupbootcamp FinTech / Dustin Shay, Village Capital / Avi Karnani, Alice);
- Education (Chanel Frazier, I Have a Dream Foundation);
- Social and Infrastructure (George Charles Bouchereau, Ph.D. socio-economist).
What is this idea of convergence and why is it so important?
Based on data from the World Bank around 2 billion people (or 38% of the adults in the world) don’t use formal financial services and more than 50% of adults in the poorest households are unbanked. It goes without saying, there is a lot of work to be done here but the disruption in the financial services industry caused by technological advances has created fertile ground for innovation and entrepreneurship. Jesse Podell once wrote that financial inclusion for the underbanked and underserved is not just good for our society, it’s very good business, too. I couldn’t agree more. This means that not only banks but also anyone in the financial inclusion or social development space should consider taking steps to embrace the paradigm shift caused by Fintech.
The convergence of the 2030 Sustainable Development Goals and the Fintech uprising create massive opportunity for entrepreneurs who want to make an impact and accelerate financial inclusion. Startup incubators and accelerators are already doing a great job in combining forces with corporate partners and established industry players to leverage financial engineering and advanced technologies to not only co-create new financial services but also high-growth businesses.
If we take mobile payment services as an example, both Silicon Valley startups and entrepreneurs in developing nations have revolutionized the way that payments are made, promoting a more inclusive financial system. Millions of individuals in remote areas that historically were excluded from the banking system are now connected through their mobile phones. Financial institutions can’t get enough of blockchain (i.e., the underlying DNA of cryptocurrency). Equity crowdfunding and decentralized investment platforms have emerged to provide financing for small and medium sized companies that previously could not have turned to banks.
Whether digital shares or cryptocurrencies, the likes of bitcoin, will fail or succeed remains to be seen. But if they do take off, and everything appears to point in that direction, their impact on social development could be massive and suddenly the “aggressive” UN adopted 2030 Sustainable Development Goals, which include eradication of extreme poverty and fighting inequality, no longer seem like a fairytale.
The role of Fintech Incubator and Accelerators
We are witnessing a welcoming shift. In the past two years there has been an uptick in traditional financial institutions teaming up with early-stage startups to launch innovative platforms. This paves the way for social development organizations (such as NGOs and financial inclusion advocates) to:
- Embrace an entrepreneurial mindset and tap into innovation; and
- Collaborate with entrepreneurs, grassroots nonprofits and startup accelerators to brainstorm new solutions.
The next big thing that will disrupt financial inclusion may just start in your neighborhood coffee shop.
The Future
We can’t anticipate what turn technology will take in the next fifty years. We are barely scratching the surface when it comes to things like blockchain and digital currencies. There are many variables but one thing is clear. The odds have never been more in the entrepreneur’s favor. The ones that capitalize on this Fintech-fueled momentum and figure out how to leverage financial engineering have the power to bring something of true and lasting value into the world. We are living in the most exciting of times. Not only are we the most determined generation in history to build businesses that matter but thanks to technology we also have the resources to “invest in the change we (you) want to see in the world”, as investor and author Kelly Hoey (who moderated the discussion at the UN), likes to say.
The future is what we make it. Let’s make some noise.
Varelie Croes is an international tax lawyer turned entrepreneur and startup ecosystem builder. She had a successful career in “traditional” financial services until the entrepreneurial bug bit her. Read more.
