Money has always been an ingredient in life. So, when technology takes great leaps into the future, obviously, money tags along. Simply put, today’s world could be summed up with just two words: Business, and Technology.
'Money is the medium by which earthly success is measured’, wrote George S. Clason in his book ‘The richest man in Babylon'. To prove this statement true, we witness the race for financial literacy and the growth of the FinTech industry.
What is Financial Literacy?
The wisdom and the ability to understand, evaluate, and effectively use various financial skills like investing, budgeting, saving, and so on are known as financial literacy. When an individual is financially literate, it enables him or her to make informed decisions related to money matters and helps navigate the complex world of finance.
Money is a tool that can either lift a person up or throw a person down the drain. With technological innovations rocketing forward, the complexity of the world of finance is at its peak. Today, hundreds of FinTech startups are constantly immerging before us. This is a major revolution, and this is where the wisdom of financial literacy comes in aid.
Have you ever transferred money via Messenger, WeChat, Amazon Pay, Apple Pay, or any other software application?
The answer will be a big yes, MOST of the time.
Truth be told, it is pretty hard to believe that people in the 21st century have no access to bank accounts. But yes, even in this digital era, millions of people are still unbanked.
‘The Global Findex Database’ is a source of data on global access to financial services. In its 2021 edition, based on surveys of adults in 123 economies during the COVID-19 pandemic, it reports, “Lack of money, distance to the nearest financial institution, and insufficient documentation were consistently cited by the 1.4 billion unbanked adults as some of the primary reasons they did not have an account.” The report also provides solutions, stating that governments, private employers, and financial service providers—including FinTechs—could aid in expanding financial access for the hard-to-reach populations.
Well, what is FinTech anyway?
FinTech is short for Financial Technology. It is the innovative use of technology in the design and delivery of financial services, and it is transforming the banking world to a whole other level.
Composed of specialized software and algorithms that are used on computers and smartphones, FinTech covers a wide range of areas and industries, such as Artificial Intelligence, investment management, education, digital currencies, robo-advisors, blockchain, and retail banking, to name a few.
We may be unaware, but yes, we use FinTech services in our day-to-day lives. Some examples are transferring money digitally, managing investments online, using digital wallets, and trading stocks.
FinTech companies aim to expand financial access to everyone, enhance, and transform the traditional banking experience with the use of game-changing technological innovations. Some of the major changes are:
AI-powered chatbots that mimic human conversations are likely to take over call centers.
Peer-to-peer (P2P) lending platforms offer consumers the opportunity to receive loans directly, cutting out the middlemen.
Robo-advisory platforms aid in providing investment and asset management solutions or advice.
Trends in mobile banking ensure consumers have easy access to their finances anywhere, anytime.
InsurTech is the application of technology to simplify insurance services.
Usage of digital currencies (bitcoin, Ethereum, etc.) and digital tokens (NFTs) for transactions.
Financial Inclusion
If you are someone with a bank account, I am pretty sure you are not so satisfied with your traditional banking experience. The reasons can be long lines of waiting, piled-up paperwork, delays in services, limited accessibility, and more.
Consumers demand better than this. They seek convenience, user-friendliness, affordability, and greater control over their money and investments.
FinTech ensures that it can meet all these consumer demands with just a few taps on a smartphone. This industry is reshaping the way consumers and companies interact, creating new opportunities, and improving customer service.
This major revolution makes sure that even people living in harsh economies are capable of accessing banking services.
A review published by Yildiz Technical University in Turkey under the name 'Impact of Generative AI on FinTech in Africa’ states, “The fastest-growing startup sector in Africa is FinTech, which is expected to get 54% of all startup investment in 2021.” The review further says that despite the GDP of roughly $2.4 trillion, almost 65% of Africans lack or have insufficient access to banking services.
This is where 'Financial Inclusion’ comes into play, which is one of the major objectives of FinTech. Simply put, financial inclusion focuses on poverty creation, achieving sustainable economic growth, job creation, and income equality for all nations alike. The World Bank has recognized financial inclusion as a driver for seven of the seventeen SDGs.
FinTech has the potential to bridge the gaps that underserved populations face. In Asia too, FinTech is rapidly growing, and the adaptation to these innovations among consumers is positive, with digital payments, mobile banking, and online lending services being made possible.
Collaborators vs. Competitors
Like any other industry, fintech has its own pros and cons. We have already gone through major positive impacts. Let me brief out the negative perspectives too.
Some adults prefer the traditional way of life, no matter how much the world evolves with innovations. This could be due to various reasons.
Education gap: Adults with less education are more likely to not own a bank account than adults who are educated. And then there is the technical knowledge. Even folks with smartphones may sometimes find it hard to deal with banking software without the help of somebody. Adding to the list are trust issues about personal information and financial status.
Urban-rural division: Lack of facilities to access the internet. Studies show that account ownership tends to be lower in rural areas than in urban areas due to the population density or the unavailability of certain services and infrastructure.
Unemployment: Working adults have many reasons to own a bank account, such as receiving wages, saving, or accessing other financial services. 'The Global Findex Database' reports adults in Pakistan and Nigeria who are active in the labor force are roughly twice as likely to have an account as those who are not.
These are only a few issues among consumers of FinTech. There are also challenges faced by this industry with the legal system. The traditional banking system can be a collaboration, a competition, or both with this rising technological innovation.
Traditional banks have a vast customer base, strong infrastructure, trust, and reputation built over many years. Plus, they have deep industrial knowledge and experience. When you have a problem with your banking app, won’t you run to the bank itself to solve it?
However, their assets can also be obstacles. It is quite challenging for banks to take huge risks or adapt to market changes quickly with a well-reputed customer base.
Through collaboration, FinTech has the chance to access resources and customer bases that would take years to build. The same goes with the other party as well. Through collaboration, traditional banks can use new technology and keep their consumers up-to-date.
But collaboration doesn’t mean everything will work fine. ‘Forbes’ states three fundamental principles that should be available in a Bank-FinTech partnership: a culture of compliance, an innovation mindset, and a commitment to transparency and accountability.
Conclusion
Technology, however, will keep evolving. Therefore, there is no doubt that FinTech combined with technology has the potential to revolutionize how the world works.
However, in my personal opinion, I see almost a dead end if these two industries go their separate ways. Collaboration isn’t the solution most of the time, but remember what Helen Keller said: “Alone we can do so little; together we can do so much.”
By forging alliances, these two industries can address a greater market, modernize platforms, expand distribution networks, create mutually beneficial partnerships, improve financial inclusion, and create innovative financial products and services that will benefit both consumers and the industries as a whole. Furthermore, this win-win collaboration will ensure that people build a smart relationship with money and that the percentage of unbanked populations will decrease gradually.
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