Leveraging Fintech to Drive Financial Inclusion: Strategies and Best Practices

Imane Adel is executive vice president for strategy at Paymob.

Financial inclusion (ie the availability and accessibility of financial services to individuals and businesses) is a fundamental goal of governments and organizations worldwide. Despite progress in recent years, there are still many individuals and local communities who lack access to basic financial services such as savings and credit. Fintech, or financial technology, has the potential to play an important role in solving this problem by making financial services more accessible and affordable to those who need them most.

A key way fintech can drive financial inclusion is through digitalisation. By digitizing financial services, fintech companies can reduce the cost of providing these services and make them accessible to a wider range of people. This is particularly important in developing countries, where many individuals and small businesses lack access to traditional financial services due to geographical and financial barriers.

This is what our business, a payment infrastructure and fintech company based in Egypt, has done by giving micro and small merchants the ability to accept payments directly from their mobile devices. This has bridged the gap and empowered thousands of merchants who were previously excluded from accessing important financial services.

To initiate digitization, fintech firms can take the following steps.

• Carry out a thorough market analysis: Understanding the users in the target market, their financial needs and habits and any existing barriers to financial inclusion is critical to the success of fintech solutions aimed at promoting financial inclusion.

• Prioritize the user experience: Fintech solutions must be intuitive and user-friendly to encourage adoption and use among the target audience.

• Ensure availability: Financial services should be accessible to everyone, regardless of location, language or literacy level. Consider designing solutions that are accessible via mobile devices and can be used by people with limited technology access.

• Collaborate with relevant stakeholders: Collaborating with local financial institutions, governments and other relevant organizations can help fintech companies better understand the needs of their target audience and increase their chances of success.

• Comply with regulations and standards: Adhering to financial regulations and standards, such as KYC and AML, is important for building trust and maintaining the legitimacy of fintech solutions.

• Embrace financial literacy and education: Promoting financial literacy and education can help users better understand and use digital financial services, leading to greater uptake and use.

• Focus on scalability and sustainability: Consider the scalability of the fintech solution and ensure that it can accommodate a large number of users and transactions while being financially sustainable.

Another strategy for driving financial inclusion through fintech is to focus on specific segments of the population that are currently underserved. For example, fintech companies can target women, who are often excluded from financial services due to cultural and social barriers. A report from the World Bank Group’s Global Financial Inclusion Database shows that there is a significant difference in access to financial services between men and women worldwide. The study found that globally, 9% fewer women have access to formal financial services compared to men, with a wider gap in developing countries. For example, in sub-Saharan Africa, women have 25% less access to formal financial services than men.

A study conducted by UNCDF showed that women in developing countries face barriers to financial services, including lack of awareness, limited access and lack of identification. Fintechs can help financial inclusion among women by addressing these barriers and targeting their needs. They can also target low-income individuals and small businesses that may not have the security or credit history required to access traditional financial services.

To be effective in driving financial inclusion, fintech companies must also focus on building trust and relationships with their customers. This can be achieved through clear and transparent communication and by offering high quality services and support. In addition, fintech companies can partner with existing financial institutions and organizations to leverage their existing networks and expertise.

Another important aspect of fintech for financial inclusion is the use of blockchain technology, which can be used to increase transparency and security in financial transactions. Blockchain can also be used to create new financial services and products that are more accessible and affordable to individuals and communities.

One such solution is Remittances, a blockchain-based platform that streamlines cross-border transactions, providing a more efficient and cost-effective solution for migrant workers and their families who have faced difficulties with traditional financial services. Another innovative solution is Provenance, a blockchain platform that aims to connect small-scale fishermen in developing countries with consumers, bypassing middlemen and increasing their income. Herkomst leverages the transparency and accountability of blockchain technology to improve trust and transparency in the supply chain.

For those interested in using blockchain for financial inclusion, the following steps may be helpful.

• Conduct thorough research and analysis: Before starting to implement blockchain for financial inclusion, it is important to understand the unique needs and challenges of the target audience and how blockchain can best address them.

• Partner with relevant organisations: Partnering with organizations working towards financial inclusion can help companies gain valuable insights and ensure that their solution is well received and adopted by the target audience.

• Ensure security and privacy: Given the sensitive nature of financial transactions, it is critical to ensure that blockchain solutions for financial inclusion prioritize security and privacy to protect users’ personal and financial information.

• Focus on ease of use: Blockchain solutions must be user-friendly and accessible to a variety of users, including those who may not be tech-savvy.

• Emphasize transparency: Blockchain’s transparency and traceability features can be leveraged to build trust and increase transparency in financial transactions, especially in areas where trust in financial institutions is low.

• Consider scalability: When implementing blockchain for financial inclusion, it is important to consider the scalability of the solution, to ensure that it can accommodate a large number of users, transactions and data.

Fintech can drive financial inclusion by digitizing services, targeting underserved populations, building trust and using blockchain. To succeed, fintech firms must understand regulatory environments and work with regulators. A strategic approach, considering unique challenges and opportunities, with partnership and adaptation, is necessary for a more inclusive financial system for all.

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