More Mobile Phones than Toilets Makes FinTech a Key Player in Social Entrepreneurship

The digital era is touching everything that it comes in contact with. While there are distruptions felt across the board, the rapid progress towards a global digital economy is an area that is of interest for our work.

According to International Finance Corporation (IFC) Report on emerging economies – the disruptive movement across the financial industry is allowing financial institutions to attract previously “unbanked” individuals in emerging markets, while retaining already existing traditional bank clientele.

The report tracks the reasons for a ‘Financial Technology (FinTech) revolution’ in Africa and Asia. In Africa the rapid growth is due to the financial industry’s deep understanding of customers at grass-root levels and their adequately response to the needs. According to the Financial Times the industry is attracting ample attention from venture capitalists with funding of the tech sector expected to rise from $414 million in 2014 to $608 million in 2018. Asian banks that endured the global tremours felt after the financial crisis in 2008, further cemented their positions by entering successful partnerships with FinTechs. This allowed them to connect to new customers through the digital space making it a less costly way to gain market share particularly in locations where they have a limited supply of physical distribution channels. Owing to its success track it is widely believed now that fintech products and services are usually, more innovative and much cheaper when compared to those offered by the traditional financial institutions.

Fintreck, a report on FinTech in East Africa, suggests that the FinTech market is projected to grow at 25% from $3300 billion to 5082 billion in 2019. More importantly, the digital finance ‘market share’ will grow from 10% to 27% during this period. The report states that Asia pacific and Africa have been harbingers of mobile payments which has led to the FinTech boom in these regions. Global investments in FinTech and the number of startups in FinTech has grown exponentially in the period 2014 – 2015. These investments translate into a flurry of new business models, including pure online banks and insurance companies, non-bank lenders, credit scorers using big data, payment services offered by technology companies.

Carola Schwank, Head of  empowering people. Network at Siemens Stiftung says: ‘We are observing that more and more finanical technologies are becoming a crucial component for the economic development in the developing regions. For example FinTech can facilitate the management of microfinance. We have seen in Kenya the main part of payment is tele payment via mobile phone. For example M-pesa is a huge player in the field of mobile money transfer.’ empowering people. Network member Tala invented a consumer lending application. They provide fast, personalized loans to approved borrowers and help customers build a digital credit history, or financial identity, over time.

There is a rapid mobile penetration in emerging economies for countries like India where there are more mobile phones than toilets. India is also home to the second largest FinTech startups in the world. While this disparity is very stark, the underlying opportunities for FinTech in developing regions are immense. This may easily make FinTech  the buzz word for an entire generation of entrepreneurs working for communities in developing regions. It is therefore a strong reason for the network to embrace this disruptive technology as one of the eight categories for the upcoming empowering people. Award 2019, launching on July 5th 2018.

Stay updated as we will bring you stories on FinTech entrepreneurs on how they are harnessing change for communities living in the remotest areas of the world.

Photo creditTala

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