The Rise of FinTech: Transforming Financial Services Across Emerging Markets
It is no exaggeration to say that the world of finance has changed for the better. Over the years there has been a shift in emerging markets due in part to the emergence of Fintech. Fintech enabled businesses and people to offer and access financial services. It has increased efficiency, but also served to make financial services more widely accessible, such that those segments of the population that were previously marginalized in the traditional banking structure have now been catered to.
Fintech disruption is not going unnoticed in emerging economies that are still developing but are growing and becoming more digitally oriented. With 1.7 billion adults around the world still not using a bank, this is where Fintech comes into its own. By utilizing untapped solutions like mobile wallets, credit circles, and Fintech companies are helping deliver financial services to millions of people who have been previously restricted by geography, socio-economic conditions, or bureaucracy.
The penetration of mobile money platforms and systems is a key effect of FinTech in developing economies. According to recent statistics, roughly, there are 350 million Mobile Money users in the world and it is expected to reach to almost 750 million in 2021. Services like M-Pesa in Kenya and even Mynt Wallet in Philippines has shown how the use of mobile technology can liberate people by allowing them the control to send and receive money, shop, pay their utility bills or even obtain loans, all on their mobile devices. In OCG’s proposition, it has indeed changed the way people perform their monetary management. With the increased volume of smartphones, the scope of mobile apps expands and many services get to even more users. Furthermore, there are prospective solutions for mobile financial apps to disrupt and enter untapped markets.
There is also the increased attention of FinTech on the Small and Medium sized enterprises (SMEs). The statistics show a rather startling figure that global SMEs contribute to 70% of employment but receive less than 2% of total financing. SMEs are however key in growth and development for developing nations but many lack the ability to obtain funding from financing institutions as banks have many restrictions from regulatory agencies in areas such as interested underserved populations as SMEs. FinTech networks have specifically targeted this problem by developing non-conventional lending solutions with more adaptable requirements to small and medium sized enterprises. Such an approach enables great number of SMEs to access the capital they need, developing in the process the local economies providing jobs in the process.
The advanced technologies of AI and big data analytics are expected to add more value to the continuum of FinTech offerings in the emerging markets. These technologies allow companies to evaluate their risks, get more optimized services, and even operate in a more efficient manner. For example, artificial intelligence (AI) based credit scoring models are now able to look for other collaterals such as social networks and mobile money in order to assess the creditworthiness of an individual or a business. This helps not only in facilitating wider access to credit but also helps in minimizing the risks involved in lending as well, which ensures its viability for the FinTech providers.
The regulatory framework in the emerging markets is also starting to change to the benefit of FinTechs. This is because governments are gradually realising the merits that come with these innovations and are now taking steps to ensure that the industry expands. For instance, there are regulatory sandboxes that allow FinTech firms to launch and test their products without a fully operational market, encouraging development and protecting consumers. The collaboration between FinTech companies and regulators is essential in developing an enabling environment for the provision of financial services to thrive in a sustainable manner.
Nonetheless, the development of FinTech at an expedited pace also has its challenges. There are serious issues pertaining to cybersecurity, data privacy, and regulatory compliance. As the number of users of digital financial services grows, so too does the risk of cyber threats. There is a higher probability that FinTech firms need to pay more attention towards more robust security mechanisms to safeguard sensitive user information from being compromised. Further, considering the growth of the sector, there is an urgent requirement for a framework of regulations that can deal with the pain points of FinTech innovations.
In conclusion, the advancement of FinTech is changing the way financial services are offered in developing countries enabling millions of people and businesses. Utilizing technology to improve accessibility, efficiency, and inclusiveness will enable FinTech to help foster development and contribute to the empowerment of societies. Given the continual changes in the financial sector, it is important for all stakeholders to come together to solve the potential problems and maximise the opportunities that FinTech presents so that the entire society benefits from it. Digitalization of finance is the future of things to come; the future of finance is now not just digital, but is transformational, and also very inclusive.
