How Financial Technology is Changing Financial Inclusion

  1. Overview
  2. Why does fintech matter?
  3. Fintech at Accion
  4. Learn More




Overview

Financial Technology (fintech) refers to the use of software and digital platforms to deliver financial services to consumers. These digital tools often disrupt established business models by creating new and efficient means of providing services.


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Why does fintech matter?

In the context of financial inclusion, fintech holds boundless potential. As new tools and technologies are developed, and old business models are challenged, financial services can be provided with greater speed, accountability, and efficiency.

Access to financial products and services is becoming more attainable than ever, especially for consumers that live in rural locations or regions without the structures of a modern economy. Not only can fintech make these products and services more accessible, it can also make them more affordable by lowering the cost of doing business for the financial institution, a savings which can be passed on to the consumer. Couple this with the near ubiquitous availability of affordable mobile phones and cellular networks, and a world where no one is excluded from the financial system may not be that far out of reach.

 

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Fintech at Accion

We believe that fintech advancements are vital to achieving full financial inclusion. For this reason we created two venture capital funds focused specifically on strengthening fintech advancements in the world of financial inclusion. Through investment and strategic guidance, Accion Venture Lab and Frontier Investments Group work hand-in-hand to shepherd young, promising companies toward scale and impact. In addition, our Digital Solutions team works with our microfinance partners around the world to develop their digital service channels.

We are supporting fintech advancements that impact:

  • Microfinance, an often people- and paper-intensive industry that requires loan officers to make numerous trips – sometimes to far-flung rural locations – to provide a single client with a loan. Electronic loan applications and banking services could allow for speedy credit decisions and loan disbursal, allowing loan officers to serve more clients in more places than ever before. Our partners Artoo and First Access specialize in equipping MFIs with technology that allows loan officers to work more efficiently and cost-effectively. In addition, our Digital Solutions group recently conducted a case study analyzing the business case for the use of digital banking applications by microfinance professionals.
  • Money Transfers (Remittances) traditionally required a trip to your nearest MoneyGram or Western Union, which can be expensive and potentially far away. New companies, such as our partners Azimo, Zoona , and Quippi, are simplifying this process by allowing people to send money around the world via a mobile phone for a fraction of what traditional vendors charge.
  • Credit History can be a huge road block for people that have never dealt with a financial institution before. Without one, many traditional institutions will not offer products, such as credit, to entrepreneurs that need support to start or expand their business. Fintech makes it possible to harness data from other sources, such as mobile phone payment history (First Access), or online accounts and social media activity (Demyst Data) to create an alternative credit history and help a financial institution to make a loan decision.
  • Cashless Payments present a big opportunity for merchants in the developing world who do not currently enjoy the simplicity and security of digital payments. Dealing with cash is risky, and as more consumers move to digital financing, merchants will need to keep pace. Our partner Kopo Kopo allows merchants to accept payment from mobile money sources, and Clip gives merchants the ability to easily accept payment from credit and debit cards.
  • Deferred Payment Plans allow consumers to purchase big tickets items slowly over time, eliminating the need for large sums of cash. Our partner Eseye is bringing this convenience to the developing world by allowing Africans to purchase solar lamps on a pay-as-you go basis – bringing light to remote villages that lack electricity. They develop technology that connects devices to wireless networks, transmits data, and controls device functionality remotely – allowing service providers to turn a device on or off depending on a customers’ account status.

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Learn More

  1. Center For Financial Inclusion Blog
  2. Digital Field Applications Case Study (pdf)
  3. CGAP Blog - Technologies for Financial Inclusion: Looking to the Past
  4. Wharton FinTech - How FinTech Reimagines the Meaning of "Underbanked"
  5. Citi Blog - How Financial Technology Can Drive Financial Inclusion

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