The Trend of Inclusive Finance

Financial technology innovations have forced a shift in traditional financial services paradigms and prompted large financial institutions to re-evaluate how they do business. The outsized impact that fintechs have had on the industry over the years has not only been disruptive, but quantifiable. The COVID-19 pandemic has been a game-changer for digital financial services. Low-income households and small firms have benefited greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic growth. While the pandemic is set to increase the use of these services, it has also posed challenges for the growth of the industry’s smaller players and highlighted unequal access to digital infrastructure.

Great strides have been made toward financial inclusion and 1.2 billion adults worldwide have gotten access to an account since 2011. Today, over 69% of adults have an account. Moving from access to account to account usage is the next step for countries where 80% or more of the population have accounts (China, Kenya, India, Thailand). These countries relied on reforms, private sector innovation, and a push to open low-cost accounts, including mobile and digitally-enabled payments. With that in mind, here are five fintech and financial inclusion trends to keep an eye on.

Trend 1: Breaking the brick and mortar securely

Although fintech and big data have had an outsized impact on traditional banks, the microfinance sector has not been immune to the sea change effects that have resulted from the rise of these digital technologies. Traditional banking models, which rely heavily on profits earned from transaction fees and require customers to physically come to branches to do their banking, are quickly becoming a thing of the past. Such models are giving way to a new space carved out by fintech innovations, where customers can expect service providers to offer practical, clear-use products that cater to their needs; where making transfers, payments and remittances can be done without a fee and financial services can be accessed remotely on mobile devices.

Fintech innovations are bringing banking closer to where people live and work, and offering them more customised options. Despite their utility, innovative technologies do have some inherent flaws. In Kenya, for example, the growing popularity of digital credit accessed through mobile phone apps has brought with it increasing incidences of identity fraud. According to a recent report issued by MSC, rapid loan approvals and the ease of acquiring personal data are the key drivers of this trend. Additionally, clear guidelines governing privacy protection and sharing data are lacking in many markets that offer digital credit. Finally, in Kenya, the decreased costs of delivering digital credit at scale have not trickled down to the consumer and the interest rates offered by the various digital lenders on the market are erratic and are often not less than what traditional financial services providers offer.

Trend 2: Financial Industry Collaboration

Innovative fintech products are challenging the dominion traditional lending institutions have over others within the financial services sector and will continue to level the playing field within the industry. And while fintech organisations have been disruptive, they don’t have to be the death knell for banks. Quite the contrary – when fintech and banks collaborate, they can create impactful new financial products and channels that better serve existing clients and help expand outreach.

The reality is, banks need tech firms – especially when they can’t develop digital products and services in-house. Fintechs also need banking partners to reach their full potential, and they need them much more than many people realise. In many markets, a banking licence is needed to directly provide most financial services. This is something most fintech do not have. Even when a fintech manages to obtain a banking licence, providing loans from its balance sheet is a complicated process. Most fintechs don’t want to become banks. They want to be fintechs. Financial institutions provide stability, and they also have advantages in distribution, savings, customer experience and marketing that fintech firms struggle to replicate. Banks also know more about their customers because they have personal relationships with them.

At the end of the day, there is a huge opportunity to reach more people with digital finance. Collaboration helps seize that opportunity.


To build inclusive societies and address rising inequalities during and after the ongoing crisis, global and national leaders must close the digital divide across and within countries to reap the benefits of digital financial services

Daniel Mainye

Trend 3: Tech-Human Touch

No amount of digital technology can change the fact that financial inclusion is and always will be about people. That is why a delivery model that combines the efficiency of digital finance with the personal trust of in-person or “touch-tech” banking, is important. Rather than replacing branches and loan officers, touch-tech uses digital channels to foster relationships with customers. While frontline staff members are key players in providing services, leveraging digital technology to optimise processes helps frontline staff do their jobs better, leads to greater outreach, as well as better outcomes for the clients.

Today’s customers are looking for the next generation of financial service providers. In a global financial landscape that is constantly changing and innovating, financial organisations will need to continue to eschew traditional banking paradigms and think more creatively in terms of relationships. This means thinking outside the box culturally, technologically and operationally. For a financial organisation to be successful and thrive in markets that continue to see declines, shifting to a touch-tech service delivery model that combines fintech innovation with a human-centred approach to delivering impactful financial services is something that should not be overlooked.

Trend 4: Gender Inclusivity

Despite fintech’s successes, a gap remains for women, rural residents, and other underserved communities. For this reason, responsible financial institutions cannot rest on their laurels nor become complacent – there is more work to be done to improve financial inclusion for women and those who remain financially excluded. There are two major barriers to women’s financial inclusion that stand out.   The first of which is the digital gender gap that exists. Even when women own a mobile phone, they are generally less likely than men to connect to the internet, preventing them from reaping the full benefits of the technology. Secondly, the social and cultural barriers represent another major hurdle in the pursuit of financial inclusion. This problem is particularly acute in regions where deeply engrained patriarchal attitudes are commonplace.

Fintech needs to do a better job of closing this gender gap. For example, fintech innovations such as mobile and agent banking can be part of the solution, but they must be properly designed and targeted toward empowering women. Research shows that, thus far, fintech has been most effective at narrowing the gender gap in markets where women are already financially included to some degree. Where that isn’t the case, and where women face diminished access to technology and digital literacy training, these solutions are less empowering.

Trend 5: Wealthtech

A new wave is coming and that is wealthtech. An industry that was known as old school is waking up to the reality of convenience and disruptions by technology. The days of waiting for your investment to take a week to get to your account or fill volumes of forms to get an account is over. The Kenyan investment industry is seeing its historical profits disrupted by technology and regulations. Currently, the investments industry in Kenya remains very manual and should accelerate digitization and moving transaction to mobile / electronic. From Initial Public Offers (IPO), to Mergers and Acquisitions (M&A), to research and trading, investment firms are getting leaner, smaller, and reinventing their core businesses to keep up with innovations. The factors driving this include, mobile phone and internet penetration, mobile money penetration, and big data and research.

Some of the investment companies in Kenya e.g. Britam, Cytonn, CIC Group to mention a few have capitalized on this disruption to improve how they interact with their clients. They have done this through interactive mobile applications that enable their clients to invest, withdraw and transfer funds easily without manual intervention. Other firms have gone a notch higher and utilized the USSD (Unstructured Supplementary Service Data) platform to target the feature phone (a mobile phone that incorporates features such as the ability to access the Internet and store and play music but lacks the advanced functionality of a smartphone) users as they expand into the retail market space.

In these four trends, what are Kenyan banking, financial services and insurance (BFSI) providers doing? Safaricom first led the industry with their innovative digital products MPESA in March 2007 and won great recognition from the market. Since then, from 2008, banks started to strengthen their core capabilities through digital transformation and launched unique digital services. While providing customer low-commission transaction and more services, they obtained customers with an amazing effect. Like KCB‘s VOOMA with Huawei, ABSA’s TIMIZA with Craftsilicon, NCBA’s Mshwari with Huawei, SC MOBILE with Craftsilicon, Cytonn App with Eclectic and Safaricom. The list is long.

As I close, the pandemic shows that the trend towards greater digitalization of financial services is here to stay. To build inclusive societies and address rising inequalities during and after the ongoing crisis, global and national leaders must close the digital divide across and within countries to reap the benefits of digital financial services. This means finding the right balance between enabling financial innovation and addressing several risks: insufficient consumer protection, lack of financial and digital literacy, unequal access to digital infrastructure, and data biases that need action at the national level; as well as addressing money laundering and cyber risks through international agreements and information sharing, including on antitrust laws to ensure adequate competition. It’s time for banks to make full use of our core capabilities to win the competition during digital transformation and accelerate inclusive finance development.


Photo by Sean Pollock on Unsplash

Photo by Erik Mclean on Unsplash

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