On the promise of financial services for the unbanked

Originally published in the Wall Street Journal on January 17, 2018

How will ordinary working-class and working-poor people save money, get an education, start a business, and ensure that today’s young generation will be better off than the one that came before it?

Some will say that this question has largely been answered in developed countries where the financial infrastructure is mature and access to credit is ubiquitous — giving citizens the means to fundamentally improve their lot in life.

However, the story in developing nations is completely different.

Financial inclusion is a key enabler to reducing extreme poverty and boosting shared prosperity, yet many individuals have been excluded from the traditional financial-services system.

In fact, according to the World Bank, around two billion people world-wide do not have access to traditional financial services, and more than 50% of adults in the poorest households are unbanked. More than 200 million micro, small and midsize enterprises in emerging economies lack adequate financing to thrive and grow due to a lack of collateral and credit history.

Thankfully, these massive challenges are giving rise to a wave of innovation by private companies using financial technology, or “techfin,” to give people upward mobility and access to credit. Techfin represents a historic and global opportunity to promote equality and inclusion, with developing countries, such as China, leading the way.

Close to a billion people in Asia use digital wallets to pay for goods and services, both online and offline. Increasingly, they don’t need to carry cash.

In China, 70 million small and microsize businesses in both urban and rural areas now have better opportunities to access credit, enabling them to gain financial support to develop their businesses and in turn create more jobs.

In India, the speed at which one billion citizens have been enrolled in digital identity verification has been breathtaking, and this has given 99% of the population the newfound ability to gain equal access to financial services and sustainable development.

This is just the beginning. Blockchain, artificial intelligence, cloud computing, the Internet of Things, biometrics and other technologies are generating more ways to upgrade financial systems to make them more transparent, secure, inclusive and sustainable.

Moreover, these innovations in finance and technology can be applied to myriad sectors and real-life scenarios — giving consumers less time wasted on administration, and more time to spend on activities they enjoy. For example, in China, utility payments, movie ticketing and food delivery have seen massive jumps in productivity as service providers integrate with techfinplatforms.

The benefits of such innovation are manifest. However, the future of finance is not a given, and there are many challenges that need to be overcome. Techfin innovators need to work hand in hand with local regulators to build the right framework for tech-driven sustainable development. Data security and privacy protection are needed as significant new components of financial consumer protection. International collaboration is needed to enable micro, small and midsize enterprises to trade on digital platforms that are compatible across borders.

These are pressing global challenges, and techfin provides a path to solve them.

Eric Jing is Chairman and CEO of Ant Financial Services Group.

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