Undoubtedly, the emergence of fintech has played a crucial role in integrating individuals into the financial landscape who would have previously faced exclusion. This is particularly evident in developing countries, where financial disparities are more pronounced, and there is often a greater need for inward investment—two challenges that fintech can effectively tackle.
Examining the impact on developing countries, James Cope, SVP – Head of Product Management at Crown Agents Bank, notes, “Fintech has, relatively speaking, enhanced the financial well-being of developing nations.” It provides access to financial services for less affluent individuals in emerging markets, services that traditional banks might not offer. From a payments standpoint, it simplifies and reduces the cost of transactions related to development sector payments, remittances, and trade payments, all of which contribute to the economies of emerging markets.
This positive trend is largely attributed to the increasing prevalence of smartphones in developing markets, opening new avenues for financial prosperity. In Pakistan, smartphone adoption was 77.7% in 2021 and is only expected to grow in the upcoming future.
Smartphones not only provide on-the-ground consumers with services like digital payments but also open up new opportunities for inward investment, connecting with development aid, and facilitating remittances from loved ones abroad.
Despite the positive trends, challenges persist in fintech adoption, including inconsistent regulation, technology mistrust, high internet access costs, and the difficulty of connecting large rural communities. However, the World Bank recorded a 30% increase in the number of adults using financial accounts last year, reaching 71% of the global population. This growth is attributed to fintech developments such as mobile money, as mentioned by Karen Jordaan, a representative at the digital cross-border payments company, WorldRemit.
Addressing financial inequities remains a crucial aspect, considering that approximately 30% of the global population, likely more in emerging markets, still lacks access to the financial system. However, fintech continues to play a pivotal role in bridging this gap and is expected to do so in the future.
Cultural factors also come into play in the realm of fintech adoption. Developing countries, particularly Pakistan, face challenges related to a fragmented financial regulatory framework. Stability and clarity in regulations are crucial to supporting secure and efficient services trusted by users.
In conclusion, the trajectory of fintech presents a high probability of success in the ongoing mission to enhance financial inclusion. The sector has proven to be a powerful catalyst in connecting individuals who previously lacked the privileges afforded by traditional financial systems. By leveraging technological advancements and overcoming persistent challenges, fintech continues to break down barriers, offering a promising avenue for greater financial access and opportunities. As it fosters connections among diverse populations, particularly in developing countries, the positive impact of fintech in leveling the financial playing field remains a testament to its efficacy in building a more inclusive and equitable global financial landscape.
