How Fintech Solutions Can Help Close the Gap in Financial Inclusion
Fact: only 27% of Southeast Asia’s population has a bank account (you can find the report here). Almost half a billion people, unbanked and isolated from the benefits of formal financial systems. In a similar 2010 study by McKinsey, it was identified that these unserved markets come from emerging Southeast Asian countries, and suggested that, by granting these people formal financial access, ASEAN could increase their economic contribution from $17 billion to $52 billion by 2030.
Though there are millions of people from Southeast Asia that are still unserved, that does not mean that they are unservable. Prioritizing financial inclusion as an essential part of development could raise the population’s standards of living, narrow income gaps, and ultimately tackle poverty.
Financial inclusion pertains to the delivery of formal financial products and services to all segments of a population regardless of their economic status. Though formal banking solutions are available, it does not seem attractive enough as alternatives to existing informal solutions — possibly due to the majority’s low level of financial literacy and awareness. Dabbing into digital finance, however, seems to be a promising solution and it has a potentially transformational opportunity to strengthen financial inclusion.
According to a report by Asian Development Bank, digital financial solutions could play a significant part in closing gaps in financial inclusion. It could address about 40% of the unmet demand for payments services and 20% of the unmet credit needs in the bottom of the pyramid and micro, small and medium enterprise segments.
Taking advantage of technology to widely influence the financial services industries in emerging Asian markets will tap a huge market that the formal banking system has not been able to.
Digital solutions could present significant impact in these key areas of financial inclusion:
- Convenient Customer Identification Process — through digital solutions, users can expect real-time verification processes and more convenient know-your-customer (KYC) schemes.
- Prevalent Payments Value Chain and Ecosystem — initiating digital payments and remittances would create an initial momentum for e-payments, leading to innovation of relevant platforms for such transactions.
- Making Credit More Accessible — through development of alternative sources of data, digitizing financial solutions will make improve customer profiling, credit risk assessment and fraud detection.
- Mobilizing Savings — low-cost and more convenient means and easy KYC processing would result in users that can save through more innovative products such as digital wallets.
Start-up companies have been paving the way towards financial inclusion, using blockchain technology to facilitate financial inclusion to emerging markets. One of those companies is XONIO.
XONIO allows users to convert their prepaid mobile airtime into digital currency to access the digital goods ecosystem.
XONIO aims to empower prepaid mobile users to gain access to the token economy and reap the benefits that blockchain technology — such as financial inclusion — can offer through telco prepaid airtime credits, a highly patronized product in Southeast Asia.
By making digital platforms geared towards the bottom of the pyramid consumers, financial inclusion is well within reach even for the millions of unbanked in emerging markets.
For more info, visit www.xon.io. Join the community on Telegram.
