How To Promote Financial Inclusion Through Technology

Thanks to the latest advances in technology, consumer habits are changing as the products and services offered by different companies have been modified, offering greater speed, quality, and a better user experience.

In the same way, the development of financial technology is helping to stimulate productivity, promote financial inclusion, and, therefore, economic growth.

Access to Banking Services Worldwide

Although many people have the opportunity to participate in the economy requesting credits or using payment alternatives, there are still groups of people who continue to be excluded around the world with barriers that make it impossible for them to participate.

Women, the unbanked, or people who live in rural areas are just an example of those who have difficulties accessing credits to do business.

According to Statista, access to banking services differs widely around the world. While countries like the Netherlands, Australia, and Canada have a 0% unbanked population, countries like Morocco and Vietnam have 70% and 69%, respectively.

This is because the most underdeveloped countries tend to have less stable economies with weak financial systems.

The Effect of the Pandemic on Financial Inclusion

The pandemic did have one positive note, it opened the door to economic inclusion for many credit invisibles.

In the case of Latin America, the proportion of the unbanked population decreased with COVID 19 as new social programs were promoted in the region to alleviate the economic impact.

Between 2020 and 2021, many fintechs were born with the mission of leveraging technological advances to provide alternative solutions to users isolated by the pandemic. 

These startups offered new ways for people to participate in the economy through new payment services, loan platforms, and digital banks, alternatives to the classic banking system.

Fintech Adoption

Fintech adoption differs by region depending on factors such as internet penetration, mobile usage, trust, and access to traditional services.  

At the end of 2021, there were 10,755 fintech startups in the Americas, including 2,482 new platforms in LATAM, thus becoming the region with the most fintech startups globally. 

In the EMEA region (Europe, Middle East, and Africa), there were 9,323 fintech startups and 6,268 in the Asia Pacific region.  

Alternative Data and Machine Learning Technology

With digitization, user behaviors changed, allowing more companies to see an opportunity to innovate, improving the user experience and providing greater facilities.

For example, the use of machine learning and alternative data has brought a new and more inclusive scoring approach

Alternative data comes from multiple sources, such as browsing, bill payment, app usage, and geolocation.

Through alternative data and machine learning, fintechs can predict user behavior, determine their solvency and possible fraud, improve traditional segmentation models, increase conversions from marketing campaigns, and reduce the cost of acquisition.

With this solution, lenders can discover new profitable and safe markets while helping the unbanked population become validated, with no need to prove their credit history.

Staying Compliant and Following Regulations

Regarding regulations, each region has its own law to protect its citizens’ information against fraud or misuse.

In the European Union, the General Data Protection Regulation (GDPR) sets the guidelines for data protection.

This law establishes that when personal data is anonymous, and individuals are no longer identifiable, it is not considered personal information anymore.

Therefore, some providers, such as credolab, can predict human behavior and always stay compliant by using non-personal metadata.

The Future of Financial Products

The road to financial inclusion is being paved.

The rise of new financial products such as e-wallets, alternative payment methods, and scoring has brought new opportunities that were unthinkable some years ago.

It is now possible for companies to find new business opportunities while working for a more just and equitable society.

About Michele Tucci

Michele is the MD of credolab’s Americas and also its Chief Strategy Officer. Before joining credolab in 2018 as Chief Product and Marketing Officer, Michele has worked on international consulting assignments, product management, and business development roles with Capital One, MasterCard, Intesa Sanpaolo Bank, and Telecom Italia Mobile.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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