How Fintech businesses can help emerging markets
If you’re a startup in the fintech space and you feel you have a higher purpose to address through your business, here’s a suggestion for you — target emerging markets.
According to the World Bank 10% of the world’s population subsisted on less than USD 1.90/day in 2015. Most of them can be found in emerging markets like the Philippines, Indonesia, and India. In these countries, less than 35% of the population have access to formal financial services.
For fintech startups, the big opportunity lies here — creating products and services that spread mass awareness and provide easy access to financial products can help empower individuals to improve their current economic standing.
Financial inclusion is truly essential in helping uplift these economically underprivileged sections of society.
Starting a financially inclusive business not only promotes public spirit, it can also be lucrative if deployed properly in the right markets. Getting interested? Here are some suggested areas you might want to consider building on:
1. Low cost remittance
In emerging markets, remittance is biggest opportunity for digital solutions providers. A World Bank report found that nations like India, China, and the Philippines were the world’s highest remittance receiving countries in 2017. With a global average cost of sending at 7.1%, there is a clamour for cheaper, faster alternative means.
In the recent years, there have been a number of blockchain-powered remittance products that have offered secure, high speed yet ultra low (to almost zero) cost transactions. These projects have been gaining steady traction, but admittedly not yet enough to replace traditional banks and physical remittance partners that most people are used to.
If you are thinking of getting into this space, know that there already a few established fintech companies that have been introduced in almost every emerging market, so be well-armed for the stiff competition.
2. Microloans and Microcredit
Traditional banks and private institutions that offer loans demand a long list of requirements. A typical loan application, for example, will require you to submit government IDs, proof of income, and proof of assets that most individuals from emerging countries cannot afford to produce.
Hence the rise of microloans and microcredit — products that were created to fit the needs of low income individuals. The requirements for these loans are much more lenient, some even offering credit at zero collateral. Though interest rates may be slightly higher than the regular loans, they’re not as astronomical as those offered by informal lenders (who sometimes even resort to physical violence just to process a repayment).
The challenge for this space is to create ingenious solutions that will bring microloans and microcredit closer to the public, especially where physical banks do not exist or are several kilometres away. In countries that are composed of thousands of islands, collection can pose a bigger challenge as well.
3. Microinsurance
Many global insurance companies have already acknowledged that low income individuals are more vulnerable to road accidents, natural illness and injury. To address the need for protection in this specific market segment, insurance companies have created specialised products that can provide protection in more affordable and easy to understand packages. These bite sized packages are called microinsurance.
In a typical microlife insurance, individuals can already enjoy USD 100 coverage good for a few months for as low as USD 1.
If you are thinking of entering this space, this can be a bit challenging because apart from the inaccessibility of physical branches that can facilitate payment of premiums, there is also the lack of education about insurances in the lower income segment of emerging countries.
4. Digital payments
The ability to pay for goods and services anytime, anywhere can indeed boost overall business profitability. Stores are no longer confined to physical location. Now, anyone with internet connectivity in the world is a potential customer.
In emerging markets specifically, the rise of digital payments have resulted in the empowerment of small to medium enterprises. Before, they were always at a disadvantage over retail giants, who needless to say have deeper reserves of marketing monies. But now, as long as you have a great product, an even better type of advertising can be achieved by “word of mouth”, which phenomenally has been put on steroids by the rise of free social media platforms like Facebook, Twitter, and Instagram.
Using Blockchain
Here at XONIO, we aim to deliver financially inclusive services to mobile prepaid users in emerging markets using nothing but their mobile phone and airtime credits. The best part is, it will do so with the many benefits of blockchain technology — low cost, secure, transparent and speedy transactions.
Our goal is to offer the simplest, most convenient way for anyone to access a plethora of financial products and services.
For more info, visit www.xon.io. Join the community on Telegram.
