These three fintech trends are key to building an inclusive future

Michael Schlein will speak at TNW Valencia 2023 about how fintech innovation can drive inclusive growth. Check out this discussion on the Impact stage on Thursday, March 3.

The world has changed so much in recent years. The global pandemic, the war in Ukraine, worsening climate change, widespread social unrest – all these challenges have had major consequences for families, small businesses and communities globally. For the first time in our lifetimes, global poverty and hunger are increasing, and the economic environment remains uncertain and unstable.

As challenges evolve, so do solutions. While today’s challenges seem overwhelming, we also see powerful opportunities to build a fair, inclusive and robust economy. In accordance 2021 Findex, more than a billion people have gained access to formal financial accounts over the past decade – thanks to a digital revolution accelerated by the pandemic. This is very encouraging progress.

But 2 billion people remain excluded from the global financial system – and they will be much harder to reach. They are small farmers, micro and small businesses in remote areas and, more often than not, women.

As more people gain basic financial tools, they can use them to improve their lives—and access a broader suite of tools to build resilience. A farmer can buy insurance to protect against climate disasters, a small business owner can access revolving credit to deal with supply chain issues, and an aspiring software developer can save money and gain new skills to increase her income.

Inclusive fintechs are uniquely positioned to maximize these opportunities – and respond to challenges. Accion helped pioneer inclusive fintech by launching one of the world’s first global fintech funds for the underserved, and by nurturing innovators with funding and support, we’ve seen how they can disrupt the status quo to deliver meaningful social change.

Today, we are particularly excited about three fintech innovations with the potential to facilitate this momentum and address the challenges that disproportionately affect underserved communities globally:

1. Built-in economy

While traditional finance often requires customers to jump through hoops, built-in economy makes it possible to offer services to customers in advance, using their data to anticipate their needs and credit risk.

For example, Accion’s inclusive fintech investor, Accion Venture Lab, has invested in Cash invoice in India, which utilizes small business data to embed supply chain finance products into large platforms that small businesses already use, such as inventory providers for fast-moving consumer goods stores. This innovative practice has the potential to seamlessly equip millions of underserved people with the financial tools they need to improve their lives.

As more financial tools integrate with all aspects of the digital economy, we seek to scale innovations that create new entry points for embedded finance in platforms that our end customers already use, such as retailers selling seeds to smallholder farmers. We believe embedded financing solutions focused on reaching farmers, small businesses and women have great potential to promote resilience and inclusion.

2. Agtech finance

Two thirds of the world’s working poor earn their living through agriculture, and they are increasingly vulnerable to climate change. By equipping farmers with new financial tools and digital capabilities, we can help them build resilience. And in the relatively new field of agritech, we’ve seen exciting innovations emerge over the past few years that have great potential to generate social impact.

We have already seen encouraging results our work with agtech fintechs that PULA and Apollo Agriculture which leverages technologies including satellite imagery and mobile apps to equip smallholder farmers across sub-Saharan Africa with crop insurance, tailored advice and credit. Through digital transformation and fintech integration, we have also strengthened the impact of microfinance providers such as Fundación Génesis Empresarial in Guatemala and Dvara KGFS in India which provides credit and other financial services to farmers.

As agtech finance continues to evolve, we are particularly interested in targeting other service providers within the agricultural value chain, including aggregators, farmer-allied intermediaries and distributors, to help them serve farmers and their communities more effectively.

3. The labor economy of the future

Increasingly, people earn their living through non-traditional employment models, including gigs or informal work, and are particularly vulnerable to economic shocks. By nurturing financial services providers with a focus on these populations, we can help them gain a stronger foothold in the economy and strengthen their resilience.

For example, our fintech partner MyRobin hair created a digital platform that gives workers in Indonesia access to fair employment opportunities, training and financial services that strengthen their resilience and advance their careers, and our partner UGLY FOOD in Uganda is help refugees start businesses and gain access to financial tools.

In the short term, we are investigating opportunities to support workers in the transition from informal to formal work through gaming platforms, prioritizing those that address women. In the long term, we can also consider the global implications of automation, migration and displacement on the workforce – and how solutions such as cross-border payments and upskilling can help these workers build their financial health.

Accelerating change through knowledge and collaboration

Sharing our knowledge is essential to creating systemic change. Meetings like TNW Valencia are essential for sharing insights and exploring the impact of new innovations – including those in embedded finance, agtech, and the future of work – to better measure the effectiveness of our own work, and promote demonstration models that enable suppliers to better serve their customers.

I am excited to work with our team – and with partners across the public, private and social sectors – to scale our impact. The future is uncertain, but the challenges of the past have given us new lessons, powerful tools and greater determination to support people with the most pressing needs.

Interested in learning more about inclusive fintech and Accion’s work in this field? Come check out Michael Schlein’s FT Power Hour talk on how fintech innovation can drive inclusive growth at TNW Valencia 2023 on Thursday 30 March from 13:05-13:25 on the Impact stage.