Financial inclusion is often thought to be a problem limited to developing countries and the unbanked poor but it is a much more complex issue. In the UK, estimates are that 25% of the population has limited access to financial services and in the US an estimated 22% of people are either unbanked or under banked, meaning they’re often losing money on short-term payday loans or check-cashing services.
Things have improved globally, but nevertheless 1.7 billion adults (31%) remain unbanked and there are large gaps by gender and household income.
There are various reasons for this.
· Financial institutions, such as brokerage firms and banks, often impose strict and detailed documentation requirements for opening an account or making money transfers without considering personal circumstances (many times this is an automated process).
· In many countries, women cannot own land or access assets and are therefore excluded from the formal lending and banking arena.
· A lack of nearby financial institution offices and high minimum balance or opening account balance requirements provide further barriers to financial inclusion to businesses with limited resources.
· The high cost of internet data limits can cause people to restrict the number of financial transactions they make to the bare minimum, such as utility payments, money transfers etc.
Benefits of fintech
The rise and growth of financial technology – commonly referred to as fintech – is considered a major contributor to increased financial inclusion and has also significantly reduced the cost of many financial services.
In some parts of the world, mobile payment networks such as Kenya’s MPesa or China’s Tenpay have long since overtaken the use of cash at all income levels.
Two thirds of the unbanked adults have a mobile phone, which helps reduce the inclusion gaps related to gender and income.
In addition, the expected increase in the availability of 4G and 5G services will provide the bandwidth to offer a more sophisticated range of mobile-first financial services beyond pure payments and remittances.
These may include the provision of credit lines or insurance coverage, further narrowing the financial inclusion gap. Providing greater financial inclusion to small businesses is vital because it can help to create more jobs and improve the standard of living in a community.
The role of financial inclusion in reigniting the global economy in a post-pandemic world cannot be understated. It has the power to boost economic growth and support industry and innovation. It will help nations find a path out of the fiscal damage wrought by the pandemic.
Finally, education is a primary pillar of financial inclusion, yet the reality is that millions of individuals around the world are financially illiterate and simply reaching them is not always the answer.
It is not only about having an account; it’s about being financially active, supported by financial education and having a close connection to banking services and institutions.
At PayPugs, we understand the complexities of fintech services and the uncertainty our clients may experience. We believe in the human touch and begin with a personal call that explains everything, making the process simple and fast for freelancers, entrepreneurs or medium to high-risk businesses.
Our team members are highly trained and certified in legal and security requirements and see you and your business, as a working partnership, not a faceless list of categories and risks.