It’s an important innovative tool in ensuring financial inclusion. Unbanked people account for a third of the world population and are mainly concentrated in emerging markets of Asia, Latin America and Africa. Before the advent of financial technology, the proportion of the unbanked was even bigger. According to the world bank, between 2011 and 2014, 700 million people opened bank accounts for the first time. This is the period when fintech had started taking roots. Some of the leading fintech emerging markets are:
- Hong Kong
- South Africa
As fintech continues to expand in these and other emerging markets, the following trends are eminent:
Digital Banking and Payroll
Many people in the emerging markets are using mobile banking even before having a bank account. A good example is Mpesa launched in Nairobi, Kenya by Vodafone. It offers mobile money transfer, mobile savings account (Mshwari), and mobile credit services. Similarly, DoPay, a london based fintech company offers payroll services to unbanked population in India, Asia and Africa. Employers electronically remit salaries to their staff’s DoPay accounts directly by use of cloud technology.
Payments and Remittances
China and India are quite advanced emerging markets. In china for example, P2P payments and remittance are well developed with Alipay, a subsidiary of Alibaba, and WebChat Payments playing a leading role. In India, companies such as Mswipe provide POS services to small businesses.
Digital currencies have considerably penetrated emerging markets. A good example is the Hong Kong based BitSpark that has developed a bitcoin based platform to process Asia remittances at a discount. There is also BitPesa, a UK based startup that processes Africa’s remittances from UK based Diaspora. In Latin America, BitPagos uses bitcoin technology to provide affordable payments services.
The Unbanked people find it difficult to access credit because finance institutions have no way of ascertaining their credit history. Some entrepreneurs who may want to start or expand their businesses may end up not doing so for lack of finances. Fortunately, fintech firms have developed ways of credit scoring appropriate to the unbanked people. Information such as mobile payments history and social networking is becoming useful in emerging markets. Such information enables lending institutions to securely provide financing to unbanked populations in the developing world.
TechCrunch found out that there are over 10,000 microfinance institutions in the world. The number even increases ten times to 100,000 when credit unions, co-ops and other informal institutions are added. Collectively, the institutions serve over 150 million people globally, most of them living in the emerging markets. While microfinance institutions have been operating in India, China and many other emerging markets even before the advent of fintech, fintech has made it easier for them to expand their services.
The limited scope of this article could not allow us to discuss fintech trends in emerging markets conclusively. However, we encourage you to comment below if you feel that an essential trend has been left out
In the developing parts of the world, fintech offers financial services to millions of unbanked people.