Sujit J. Chaudhari, General Manager – Solution Consulting, Telecom & Fintech Industries, Tecnotree Corporation
As economies worldwide experience the uncertainty of GDP contraction, corporate bankruptcies, the collapse of banks, rising interest rates and high inflation, there is one industry that has the power to contribute significantly to economic development. As most industries undergo Digital Transformation, Fintech and the digital payments industry have evolved to show strong and steady growth both in terms of volume and value of transactions.
The disruption in the financial services sector has been a huge contributing factor in the development of economies for a number of reasons. A drive towards financial inclusion in developing economies from Asia, Latam and Africa has now enabled large numbers of people with digital payment and banking options where previously they may have gone unbanked. In emerging markets, the combination of growing middle class spend power and increased connectivity thanks to 3G, 4G and 5G network evolution is contributing to an increase in purchases for payment companies from previously untapped and vast tracts of the population. This is largely the result of mobile wallet applications because mobile phone penetration in these regions tends to be high.
In many African developing nations like Kenya, Uganda, Ghana and Nigeria, Fintech has emerged as a growth booster, reforming the financial services value chain, promoting financial inclusion and stimulating development in key sectors. With mobile penetration increasing across developing markets and the popularity of smartphones growing, mobile money and mobile wallet solutions are driving change in the way financial services are delivered. Leveraging technological innovation, these platforms are overcoming geographical boundaries by providing financial services in Tier-2 and Tier-3 cities and beyond. Mobile money and Fintech offerings now thrive with innovation, adoption and usage in several countries like Kenya, South Africa and Nigeria.
Fintech is distinct from other technological innovations. It connects with the real economy to revolutionise financial services. It addresses current gaps in financial services such as customer experience, ease of transactions, self-service abilities and assisted services through agents. This has helped financial service providers to tap untapped markets.
Technological advances in terms of blockchain, AI-ML, robotics automation, cloud computing, Open APIs and regulatory acceptance are alt helping Fintechs transform the accessibility of their services. This enables things like access to credit for example by developing cost effective solutions that allows financial institutions to disburse credit in an easier, more efficient and secure manner. The simplified user experience and user interface (UX/UI) design capability of Fintechs, backed with complex, advanced artificial and machine learning (AI/ML) algorithms are helping create a dynamic ecosystem for Fintech solutions.
When it comes to further tackling economic uncertainty, there are a range measures that need to be taken to ensure sustained Fintech adoption that allow them to be progressive across markets. For example:
- Promoting financial inclusion. The development of tech-based solutions in the financial sector is to ensure more and more inclusion. The synergies between financial service firms and Fintech solutions can further enhance the social and economic development in a country. In many instances, regulators have provided limited banking licenses to Telecom Service Providers as they enjoy huge subscriber bases. Fintech services complement these and provide new revenue streams.
- Digital banking for economic growth. Digital banking makes financial processes hassle-free for users, allowing them to make secure and well-informed financial decisions. For the past few years many people have adopted such solutions and it has transformed the way people engage with financial services, be it for banking, lending or investments. Younger and tech savvy generations are equipped with digital ways and the Fintech sector riding this wave to empower financial aspirations across varied industries and individuals, thereby fueling economic growth.
- Digital microfinance. Digital microfinance provides better access to finance for the unbanked people of an economy, which can impact economic growth within a territory, enabling individuals, households and enterprises to do more and embark on new ventures, as well as aiding job creation, etc.
- Digital microlending or credit access. Digital technology has improved access to credit. Leveraging AI and ML technology, an increasing number of digital lending platforms have started using modern tools to understand a client’s access to credit, risk profiling and payback capacity. Various alternative data sets are analysed to plot the risk profile of a customer. Loan default predictions and credit scope allows microfinance banks or other financial institutions to lend money more responsibly and with greater awareness. Digital solutions make it very convenient for people for apply for and achieve loans. Individuals and small to medium size enterprises are able to choose from a selection of loan products right from daily small ticket loans up to credit lines needed to run a business.
In times of uncertainty no one can forecast with full confidence how the macroeconomic climate will look in the future. But at the very least, Fintech businesses are discovering ways to work more efficiently by creating solutions that help clients more completely and intelligently. These intelligent Fintech solutions are promoting the growth of the financial service sector. Actionable insights from market trends and consumer behaviour and technological advancements provide data-driven solutions to an increasingly tech-savvy audience. Moreover, the revolution is leading the fintech industry by expanding its services across all sectors and promoting financial inclusion, gearing up for future economic growth.
