Sabeer Nelliparamban is the Founder & CEO of Zil Money Corporation, Online Check Writer and Tyler Petroleum Inc.
The financial ecosystem has been changing significantly due to fintech, and this has significant implications for financial inclusion. Fintech is bringing about change by making it easier for underbanked and unbanked populations to obtain financial services. Access is being democratized through fintech at a level that has yet to be seen through traditional banking methods. Fintech can help close the gap between underbanked and unbanked people, revitalizing legacy banking, especially for the underbanked.
How Fintech Drives Financial Inclusion From A Business Perspective
Viewing fintech from a commercial standpoint is crucial to understanding its impact on ensuring access to banking for everyone. Fintech businesses play a vital role in achieving this goal while remaining profitable. They are tasked with developing novel concepts that can benefit consumers while remaining financially sound.
In 2021, the Federal Reserve discovered that 13% of Americans lacked all the necessary banking services, with an additional 5% lacking any banking services at all. However, fintech is promising to change this landscape by making banking services more affordable and accessible.
A 2023 United Nations report highlights how fintech reduces the cost of financial services, offering digital options like direct deposits. As a result, people won't have to spend as much on expenses like check cashing.
MORE FROMFORBES ADVISOR
Financial Inclusion: Bridging The Gap
Contrary to the idea that fintech will replace traditional banking, I believe it's actually set to enhance it. Research from Statista shows an increase in collaborations between traditional banks and fintech companies from 2020 to 2021, highlighting the potential for mutually beneficial relationships between old-school and modern finance. While traditional banks provide trust and stability, fintech brings innovation and efficiency, giving the industry a boost. The important question here is: How can fintech partnerships with traditional banks help improve financial inclusion?
The simple answer is that partnerships can lower the cost to participate for consumers, widening the net to include consumers who may have previously been left out.
A 2023 United Nations report supports this idea as it claims that fintech can lower the cost of delivering financial services, which can in turn, lower the cost for consumers and help boost access. For example, in the U.S., one estimate suggests that households can spend $150 or more each year on cashing checks. It is estimated that these check-cashing costs add to other costs for the unbanked or underbanked, and can total around $3,000 annually. With the introduction of digital solutions like direct transfers, fintech offers choices beyond what is currently available for the underbanked and unbanked.
As fintech innovation develops, it's critical to know that existing banking systems may not be entirely replaced. Rather, fintech is positioned to enhance and work alongside traditional banking services. This collaborative approach offers several advantages.
Firstly, traditional banks have a long-established presence and reputation for stability and security, instilling trust in customers. Fintech companies, on the other hand, bring fresh and agile solutions to the financial landscape, often streamlining processes and increasing accessibility.
This synergy has the potential to expand financial inclusion, particularly for those underserved or excluded from the financial system. Fintech's data-driven approaches can serve a wide range of the public, including those with little or no credit score, enabling enhanced risk assessment and tailored financial solutions. This inclusiveness empowers individuals and startups by providing the financial support needed to participate more actively in the economy.
Empowering Financial Inclusion: Fintech Leaders Driving The Way
Fintech leaders hold a pivotal role in advancing financial inclusion by prioritizing inclusivity in product design and promoting digital education by advocating for supportive policy frameworks and launching training initiatives. This ensures the advantages of fintech are accessible to everyone, regardless of their tech expertise.
Partnerships between fintech companies and conventional banks help address access gaps to financial services. This collaboration can yield creative answers that enhance financial services for marginalized communities, improving the fairness and accessibility of the financial system for all.
According to the Centre for Strategic and International Studies, realizing the full potential of fintech requires addressing digital literacy through effective strategies, including investments in digital infrastructure, policy frameworks, governance and training. This ensures that the advantages of fintech transcend beyond the tech-savvy to a wider populace, thereby fostering financial inclusion.
The Future Of Finance: Fintech And Inclusion
Fintech is promising to transform transactions and enhance financial services’ accessibility and convenience. In addition to changing the financial landscape, financial literacy is being promoted by demystifying difficult financial concepts and offering user-friendly interfaces.
My entrepreneurial journey began with the realization of the challenges in managing financial aspects. This prompted me to create a software solution initially for personal use, which proved successful. Recognizing its potential, it was offered to the public, bridging the gap for individuals, whether from financial or non-financial backgrounds, to efficiently manage their operations.
This journey, from a personal necessity to a broader vision of democratizing fintech, resonates deeply with our mission.
Non-finance entrepreneurs entering fintech encounter challenges, including limited financial expertise, regulatory compliance, competition, building customer trust, data security, and funding concerns. However, we firmly believe that their entry expands opportunities and addresses a broader range of pain points. These entrepreneurs bring fresh perspectives, fostering innovation that transcends traditional financial services. Usability and user-centric design make financial services more accessible to diverse users. With the right support, training and collaborations, they can overcome these challenges and advance fintech’s development and innovation.
Final Thoughts: Fintech As A Force For Equality
Fintech is a financial industry change that seeks to promote inclusion, efficiency and resilience; it is more than just a passing trend in technology. With further development and cooperation with reputable banking institutions, fintech is positioned to transform the future of finance and make it more accessible and equitable.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
