OPINION – Fintech’s role in promoting inclusive finance

Financial technology (Fintech) has been a buzzword in recent years. The rise of Fintech has led to disruptive changes in the financial services industry by offering greater convenience to the general public in accessing and using financial services. A typical example is the use of online or mobile banking. However, the applications of Fintech go much further. Among them, an important role is to promote “inclusive finance”.

Inclusive finance or financial inclusion refers to efforts to improve the reach, quality and availability of financial services – such as savings, lending, payment facilities and insurance – to people who are underserved or financially excluded, including but not limited to those living in rural areas. , marginalized communities and small businesses. Previous studies have shown that there is a positive connection between financial inclusion and sustainable economic growth.

An example of inclusive finance is Grameen Bank in Bangladesh, which has aimed to alleviate poverty and empower the marginalized poor in the country through microcredit since 1983. It empowers women and involves them in economic activities by lending them money to start up their own. businesses and move on to better lives. Another well-known example is Alipay in China. It has provided financial services through mobile payment platforms to people living in rural areas without good access to traditional banking services. By using mobile phones, people can access basic financial services, such as savings, loans and payments, without having to visit a bank.

Although Macau is a very small place and most people can access a bank easily within walking distance, Fintech can still contribute significantly to inclusive economic development in the city. With cooperation between the state and various financial institutions, there has been a rapid development of automatic banking services and e-payment services, such as mobile banking, stored value cards and e-payment apps. This was particularly critical during the 2019 COVID pandemic when social distancing guidelines were in place to minimize physical contact between people. One of the benefits we have experienced over the past three years was the government’s distribution of electronic consumption vouchers. This has obviously been of great help to the underprivileged, such as the elderly; they could simply use the stored card to get the subsidies and make payments without carrying much cash. However, it is believed that inclusive finance can be promoted even more than in Macau.

The small and medium-sized enterprises (SMEs) have played an important role in the Macau economy, but it has been difficult for them to borrow money from the banks at favorable interest rates over the years. The reason is that they can hardly provide the financial data required by traditional banks as proof of their ability to repay, leading banks to consider them a higher credit risk.

In this regard, the use of Fintech can perform the function of inclusive financing by paving the way for SMEs to better and more convenient access to capital. If banks can provide a comprehensive digital cash management platform to their SME customers to manage their banking and day-to-day trading transactions efficiently, they are able to collect all the important data about the performance of their SME customers. By adopting more sophisticated data processing and analytics, banks can improve their credit risk assessment processes. Furthermore, if the SME customer database held by each bank is large enough, the bank can even combine the data to analyze the performance of different industries, which can further improve the credit rating of each SME customer. However, it is very common in Macau for SMEs to use more than one bank to conduct their banking and trading transactions. In the long term, it would be ideal if all parties, including the government, financial institutions and SME customers, could agree to incorporate all banking and trade transaction data of SMEs into a centralized platform similar to the individual credit data platform. . Banks can then obtain sufficient data to perform credit assessments leading to greater confidence in providing loans to SMEs at a lower cost, which will encourage SMEs to flourish.

In conclusion, Fintech has great potential to play a transformative role in promoting financial inclusion for various business sectors and individuals. Financial institutions in Macau can continue to use Fintech so that even marginalized communities can enjoy essential financial services. This will certainly help promote and sustain economic growth in the city.

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