The global financial markets have been rocked by a spiking inflation in recent years due to a string of complex global events that have led to a reduction in trade activity, with turbulence felt across all sectors of the global economy. With certain regions being hit harder than others, can fintech companies hold the key to recovery?
Paymentology’s Alejandro Del Rio answers this question for Payment Expert by focusing on Latin America and building a roadmap that could also be implemented elsewhere.
The Opportunities for Financial Inclusion
Financial inclusivity, which refers to giving more people access to financial services, remains a major challenge across the globe. According to the World Economic Forum, just 35% of people in low income countries have access to a bank account. That compares to 94% in high-income countries.
Yet fintech can offer huge opportunities to bridge the financial divide, especially in LATAM – a region that is home to a vast unbanked population.
In Mexico, for example, where 60% of the population has no formal bank account, 94% of consumers have embraced mobile banking, thanks to those savvy fintechs that have leveraged the ubiquity of handsets to deliver financial services through an app.
The benefits of financial inclusion are not just giving individuals access to bank accounts. It can catalyse heightened consumer spending, mitigate poverty, and set the stage for steady economic expansion on an international level. For example, DolarApp’s recent integration of Apple Pay for their customers has increased global payment accessibility, marking a significant stride in the financial evolution of the region.
The Risks of Not Prioritising Financial Inclusion
Overlooking financial inclusion through sidelining the unbanked or underbanked populations can truly undermine the potential for fintech growth.
There is also a social risk. Fintechs, with their innovative models and platforms, are uniquely positioned to drive remarkable socio-economic change by democratising access to financial services.
Access to financial services can mean the difference between poverty and economic self-sufficiency for many. It can enable entrepreneurs to start businesses, families to save for education, and communities to invest in infrastructure. By failing to prioritise financial inclusion, fintechs risk missing out on broader societal benefits that go beyond balance sheets.
Lastly, while catering primarily to the already-banked might provide short-term profits, it might not be a sustainable strategy in the long-term. As markets evolve, the unbanked and underbanked populations will become even more critical. Ignoring this emerging clientele today might mean scrambling to cater to them tomorrow, potentially at a higher cost and with more competition.
Real-world Utility: Meeting Essential Needs Through Digital Wallet Solutions
During the current economic turmoil, it has become clear that fintechs that fail to address real-world utility will face extinction. Users are looking for services that make their daily lives easier, more efficient, and more secure.
This explains the success of digital wallet solutions such as Apple Pay and Google Pay which don’t just represent a technological marvel; they address genuine user concerns and fill critical gaps. At the heart of their appeal lies convenience and speed. Users can make payments with just a tap or a scan, significantly reducing the time taken compared to traditional methods.
However, the benefits of digital wallets go beyond speed. In areas where traditional banking infrastructure is either fragile or absent, these digital wallets become more than just a convenience – they are lifelines to the unbanked. They offer an inclusive gateway into the financial world, enabling people to make online transactions, receive remittances, or even save money.
Also, with sophisticated security measures in place, like biometric verifications and tokenization, digital wallets provide an added layer of security. The actual card details stay concealed, shielded from merchants and potential miscreants alike – reducing the risk of data breaches and fraudulent transactions.
Fintechs have the capability to shape LATAM’s economic revival and progression, but this depends on the championing of financial inclusion and real-world utility.
By tapping into the vast unbanked population and designing solutions tailored to their needs, fintech companies can continue to drive sustainable growth in the region. Ensuring practical applications in everyday life will not only build trust but also encourage wider adoption in the long-term.
