Fintech can be the unbanked’s best hope for financial inclusion

If you had asked anyone in the region about fintech just a couple of years ago, you would have been met with blank stares – and not the eyes-glazing-over kind that some people get when someone mentions finance. Today, it’s the fancy, shiny sports car that just pulled up in the town square; it’s all everyone seems to be talking about, and they’re all wondering if they can hitch a ride.

There’s a lot to be said about fintech’s different applications; from peer-to-peer lending, to micropayments, to Bitcoin and blockchain wallets and marketplaces, the possibilities are as diverse as the average person’s financial needs. To put it simply, there’s something for everyone. Or is there?

Fintech is well placed to give the current financial system a good shake up, that much is true. However, there is a large number of people around the globe that are not even part of that system. These are the so-called unbanked. Their number is about two billion adults in 2015, according to the World Bank’s estimates.

The unbanked have no access to banking services and institutions that developed countries take for granted. They don’t have bank accounts, they can’t apply for loans. They use cash for their everyday transactions and their savings account is their mattress. A credit card is little more than a colorful piece of plastic, as far as their immediate needs are concerned. But the whole point of fintech is that it works differently than traditional financial institutions. Being smaller, nimbler, and innovative, fintech startups can reach those people in ways that banks never can.

Striving for inclusion

Financial inclusion, the dogma of making financial services available and affordable to disadvantaged and low income members of society, is not a new idea. Initiatives such as the Alliance for Financial Inclusion have been around for several years. Perhaps the most well known is Vodafone’s mobile payment initiative, M-Pesa, which began in 2007 and is currently available in Kenya, Tanzania, South Africa, Afghanistan, India, and more recently across Eastern Europe.

But now, with the advent of new technologies, fintech startups seem to be getting in on the action more than ever before, says Markus Gnirck, co-founder and global COO of accelerator Startupbootcamp Fintech. “Financial inclusion takes a big piece of the fintech pie,” he tells Tech in Asia. While Gnirck doesn’t feel fintech is defined solely by its financial inclusion potential, it’s a very important part, especially in Southeast Asia.

“We have timely real-world problems that can be solved by fintech startups,” he says.

Some of those startups are part of Startupbootcamp Fintech’s current accelerator program.

Kyepot, for example, aims to enable lending and borrowing within small, trusted groups, using social tools. Sidd Gandhi, the company’s co-founder and CEO, brings in his expertise of 14 years in the banking sector, which also allows him to put fintech’s rise into perspective. Established financial institutions, he says, have always used advanced technology, but that is now changing.

Even older devices can be instrumental to people getting access to online payment systems.

Fintech is making this technology available to people who had never had access to it before, Gandhi argues. “That’s where we come in, as firms who can actually use new, lightweight technology,” he says. Just like several industries that are being disrupted by startups working with new solutions to old problems, the idea is to use those channels and devices that are becoming popular, such as mobile phones, web, and mobile internet connectivity, to reach people and areas that were unreachable before.

“I think fintech helps scale up normal human behaviors that have been in this local context in Southeast Asia,” chimes in Syakir Hashim, co-founder and COO of SkolaFund, a startup that aims to provide scholarships to underprivileged students via crowdfunding. “It’s natural for people to help their family members, their community members, and their fellow countrymen.” So far, initiatives like scholarships have been based on affluent benefactors offering money to the less fortunate. What SkolaFund proposes brings in the middle class, leveraging technology to increase financial assistance options for low income students.

Overworked and underbanked