Financial technologies (FinTech) have emerged as a driving force behind financial inclusion, particularly in developing countries like Ghana. Fintech promises to deliver greater financial inclusion due to the high cost of traditional finance, a supportive regulatory ecosystem, and other macroeconomic factors.
As we inch closer to the year 2030, concerns about investment and preparedness to attain the United Nations (UN) Sustainable Development Goals (SDGs) have intensified. Interestingly, financial inclusion has been identified as an enabler of seven out of the 17 SDGs and is recognized as a key enabler in alleviating poverty and boosting sustainable growth. At the forefront of this is digitalisation.
Digitalisation continues to redefine various sectors of the global economy. In sub-Saharan Africa, digitalisation continues to drive the finance sector with fintech, innovation, and technologies at the forefront.
More recently, the Covid-19 pandemic has mainstreamed digitalisation initiatives, boosted by existing technology advances, improved mobile penetration, lower data costs, and a young, rapidly urbanising population that has laid the foundation for financial inclusivity.
Financial inclusion refers to the accessibility and availability of affordable financial services to all individuals and businesses, including those who are unbanked or underbanked.
According to the research and news portal ‘Disrupt Africa,’ more than 40 percent of Africa’s population remains unbanked, while around 90 percent of financial transactions are cash-based. In this environment, fintech companies are enabling access to financial services through innovative solutions that are both convenient and cost-effective.
Ghana has made significant strides in its efforts to promote financial inclusion on the back of a digital economy with the banking, finance, and fintech ecosystem playing the leading role in promoting financial inclusion. FinTech such as eTranzact has been in the background providing the infrastructure that enables customer interactive entities to foster transactions.
The unparallel solutions of Fintechs
Fintechs leverage digital technologies, such as mobile devices and the internet, to provide financial services to individuals who previously had limited access. They enable users to access financial products and services anytime, anywhere, reducing the need for physical branches and paperwork.
In a similar vein, Fintechs often simplify and streamline financial processes through user-friendly interfaces, automated systems, and simplified documentation requirements. This reduces the complexity and barriers traditionally associated with accessing financial services.
Additionally, some of these platforms also provide tools and resources to improve financial literacy and education, empowering individuals to make informed financial decisions.
Data-Driven Approaches. Fintechs leverage data analytics and alternative data sources to evaluate creditworthiness and assess risk for individuals without extensive credit history. This enables them to offer financial services to underserved populations who would typically be excluded based on limited credit information.
Fintechs often adopt innovative business models that allow them to provide financial services at lower costs. By leveraging technology, they reduce the need for traditional infrastructure, extensive paperwork, and intermediaries, resulting in cost savings that can be passed on to customers.
Fintechs ensured holistic inclusivity
In Ghana, traditional banking initially saw Fintech as a competition and showed some signs of push back, however, through partnerships and collaborations, fintechs often engaged with traditional financial institutions, governments, and other stakeholders to extend their reach and impact. These partnerships helped leverage existing networks and infrastructure to scale their operations and reach underserved communities more effectively.
Fintechs were instrumental in driving financial inclusion by increasing access, lowering costs, fostering innovation, simplifying processes, utilizing data-driven approaches, and forging collaborations. Their disruptive and technology-driven nature has the potential to drastically improve financial access and inclusion for millions of individuals and businesses globally.
Immense Opportunity
It is estimated that about 60 percent of the population in the country remains unbanked, despite the significant progress made. This implies that there is still more work to be done to bridge the digital banking divide.
Having said that, it is worth noting that this also presents immense opportunities for the development of innovative digital banking solutions to boost financial inclusion.
Having mentioned Fintechs as the trump card for financial inclusion, there is the need to step up efforts and foster strategic partnerships with banks, other financial institutions, and insurance companies to deploy various digital touchpoints to deepen its digital footprint.
While fintech offerings range from mobile money and lending to regulatory technology solutions, currently fintechs are predominantly focused on payments as the payments segment is huge.
A need to develop more solutions that cater to the specific needs of underserved populations, offering services such as micro-loans, micro-insurance, and peer-to-peer lending to create new opportunities for individuals who were previously excluded from the formal financial system still abound.
Regulatory developments such as the African Continental Free Trade Area (AfCFTA), which has created the largest free trade area in the world, and the roll-out of the Pan-African Payment and Settlement System (PAPSS) have opened new avenues of growth for fintechs by increasing cross-border payments and trade, and the players in the country must not miss out.
Areas of Interest
There is increasing fintech activity in insurance markets (insurtech), and even in some wholesale applications like trade finance. Yet in wholesale markets, like syndicated lending, derivatives markets, or clearing and settlement, fintech penetration remains low, notwithstanding potential applications of distributed ledger technology. Also, cross-country differences in the scale of fintech adoption are areas of consideration.
Cross-border Financial Inclusivity
Nonetheless, research shows that fintech adoption has been greater in countries where financial services are relatively more expensive, hence the need for more pragmatic efforts towards reducing the cost of financial services and digital taxation.
Fintech activities could increase cross-border competition in financial services over time. While many fintech firms start by focusing on one economy, there have been several examples of cross-border expansion, and of the imitation of successful fintech business models in different markets. Such cross-border financial integration could support greater diversification and risk-sharing across economies.
Way forward
As the backbone of financial inclusion, Fintechs must endeavor to include those excluded from opportunities to save, borrow, insure, and invest in their futures which can lead to poverty, inequality, and limited economic growth for communities and the country as a whole.
More platforms to leverage peer-to-peer lending: creating a platform that connects borrowers with investors, enabling borrowers to access funding and investors to earn higher returns.
Digital wallet solutions that enable users to store and transact money digitally, promoting cashless transactions and financial inclusion must be easily accessible.
As the Executive Director of our company, I can confidently say that eTranzact is more committed now than ever to fostering financial inclusion as it forms a key component of our company culture, and we will continue to uphold this initiative as we grow and expand globally.
We are committed to promoting financial inclusion and leveraging fintech to change the lives of underserved communities globally.
Recently we partnered with some media organisations to create a platform that generates resources through crowdfunding to source resources to support victims of the Akosombo Dam spillage.
Collective Action
The importance of financial inclusivity to our society cannot be overemphasised but it is a collective initiative that requires dedication from all stakeholders including the government, policy-makers, financial institutions, and the investment community.
Innovation must lead the operations of fintech buttressed by collaboration and partnerships. It is possible to increase financial inclusion to the optimum level if we all work together for a better ecosystem.
The writer is the Executive Director, eTranzact Ghana Limited, a leading financial technology entity.
