FinTech: A way to improve financial inclusion
- FinTech, or financial technology, is a “rapidly growing industry segment aiming to deliver financial services more broadly and efficiently with a tremendous innovation using powerful online technologies, enabled big data, and cloud computing
- From new developments in banking and shopping to online lending and digital currency, FinTech is paving the way to a more financially inclusive and sustainable future
FinTech, or financial technology, is a “rapidly growing industry segment aiming to deliver financial services more broadly and efficiently with a tremendous innovation using powerful online technologies, enabled big data, and cloud computing,” says the moderator, Juan Aronna, Managing Director and Head of Investment in Solutions and Products of RBC Wealth Management Asia and International.
Payment services like PayPal and Alipay are some early examples of FinTech, and though these are still relevant, the industry has made even greater advancements in more recent years. Many FinTech enterprises are now offering a wide range of financial services, including: credit, insurance, investments, and more.
How Is FinTech Evolving?
FinTech is growing more quickly than ever because of four major factors: the recent growth in e-commerce, the underserved population around the world with little or no access to banking services, the massive amount of data available around e-commerce transactions and other internet-consumer touchpoints, and the inability for regulators to keep pace with FinTech advancements.
As FinTech continues to evolve, financial services will likely become “unbundled,” meaning each person and organisation will be able to receive the specific financial services they need for their unique financial situations.
Financial Inclusion and FinTech
Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore (MAS), mentions “FinTech founders and FinTech employees … want to solve certain problems which they have themselves experienced or have seen others facing.” One such problem is financial inclusion, as a large percentage of the population is underserved (or “underbanked”), meaning they don’t have access to lines of credit, investment opportunities, or different kinds of insurance.
FinTech can improve financial inclusion with technology that allows for affordable financial solutions. Anthony Thomas, Chairman of Momo, notes the aim of FinTech is to reach this underserved population with a wider range of services, because “access to payments provides convenience, but access to financial services like credit, investments, and insurance is what truly improves lives.”
Existing banks are also using FinTech to create digital banking solutions. FinTech enables technology for traditional banking systems to allow easier lending so “people with little or no collateral,” can be lent to “based on alternative data,” explains Tan Bin Ru, CEO of OneConnect Financial Technology in Southeast Asia.
Mohanty remarks on “the fundamental risks we carry in a digital world are lack of privacy, lack of consent, [and] inadequate protection of data from cyber challenges.” This is why regulation in the FinTech industry is so important一without policies, rules, governance structures, and regulations in place, there would be too many opportunities for unfavourable events like money laundering and general instability of the financial system.
Though regulation is important, there needs to be a balance in place so that innovation is not inhibited. In order to achieve this balance, Mohanty suggests making several small modular regulations addressing each specific risk as opposed to making widespread policies that prevent further innovation.
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