Highlights from the Singapore Fintech Festival – Financial inclusion to the fore

• The Fintech Festival’s third day had UN secretary-general’s special advocate for inclusive finance for development, Queen Maxima of the Netherlands, give a keynote address focusing on the benefits and opportunities of financial inclusion
• Bill & Melinda Gates Foundation director of financial services for the poor, Michael Wiegand, shared his vision of how fintechs can change the lives of the poor
• Industry experts also looked at initiatives of using payments solutions to increase financial inclusion

Day three of the Fintech Festival had a strong emphasis on financial inclusion, as well as innovation by leading financial technologies (fintechs).

Queen Maxima of the Netherlands, the UN secretary-general’s special advocate for inclusive finance for development, started the day with a keynote address focusing on the benefits of financial inclusion and business opportunities.

Financial services are the lifeblood of the economy, she said, as well as a vital tool for addressing poverty and opportunity for all. Indeed, access to financial service can change people(‘s) lives. However, 40% of adults are locked outside the formal global economy.

While governments are increasingly recognising the importance of extending financial services to excluded people, inclusion also represents a tremendous business opportunity and no sector is better positioned than fintech to address the issue. There are three key areas to consider

First, fintechs have the greatest opportunities for achieving global financial inclusion. Although financial services companies have provided $120 billion of unsecured loans to small and medium enterprises (SMEs) over the past five years, about half of SMEs still do not get the financing they need, even though they are the engines of job creation and account for four of every five new positions. Moreover, even though people leapfrog to the most modern technology tools technology firms build (redundant), 69% of mobile accounts globally are not being used. Fintechs’ focus on customer centricity to provide a genuinely useful service holds our best promise for developing solutions.

Second, technology can be a double-edged sword. Data privacy, fraud, cyber-attacks and discriminatory lending can all undermine consumer trust. If the technology gap widens, so too does the gap in opportunity. “We need to continue to develop a toolbox for practises including data collection, to understand and address the risk.”

And finally, fintechs need to build the right infrastructure in order to promote financial inclusion. “We identified key prerequisites: data privacy, cybersecurity, financial literacy, digital ID, connectivity, interoperability, fair competition and physical infrastructure. Without these, it will be hard to develop rapidly. For this, we need to foster collaboration between government and the private sector,” Queen Maxima concluded.

Financial services for the poor

Carrying on with the same theme, Bill & Melinda Gates Foundation director of financial services for the poor, Michael Wiegand, shared his vision of how fintechs can change the lives of the poor.

Digital technology is the only way to deliver the goal of financial inclusion, Weigand emphasised. Fintechs can enable the poor to use, store and manage their money easily and safely. “It can make it possible for 1.6 billion people to enter the formal economy for the first time and would add $3.7 trillion to global gross domestic products. It’s a catalyst for economic development.”

To get there, Weigand said, “we need the right policy, participants, innovation and investments. He said that pro-poor payments systems have five key traits: accessibility, reliability, value, affordability and profitability. And the three essential conditions for digital financial systems to support development are use of real-time push payments, a wide range of financial service providers, and true interoperability among those providers.

Using payments solutions to increase financial inclusion

Turning to the issue of using payments solutions to increase financial inclusion, industry experts looked at how initiatives around the globe are brining access to fruition. As Rashmi Dalai noted, managing editor for Asia Pacific of The Economist (Rashmi Dalai, managing editor… The Economist noted), only 50% of adults in Asia have an account at a financial institution (FI) and only 29% receive their salary through an FI. “There’s vast opportunity for more people to join the system.”

The way banks have been attacking the issue, MasterCard Lab head Ken Moore said, is to bring people in to a branch, use forms and give them entry-level products. “That was financial services-oriented. It doesn’t move the needle fast enough.” Fintechs, on the other hand, see a vast emerging economic class, and are attacking it from the customer(s’) perspective. Ron Hose, chief executive officer, Coin.ph, also noted that the key challenge in emerging markets is removing friction.

As they take steps to increase financial inclusion, companies use vastly different metrics. MasterCard, for example, says it wants to include 500 million people and SMEs by 2020. Coin.ph, on the other hand, looks at direct benefits to the people it serves. “No one wakes up saying ‘I’m not financially included’,” Hose observed. “They wake up with a need. We’re giving people time back. Everybody wants convenience. We saved 280 years of time in line for our customers.”

The technology that will bridge the gap best is likely to be mobile. Yet several factors hold people back. “Some of this comes down to the value we create,” Visa vice president Mark Jamison, noted. “It’s behaviour and change over time.”Hose believes that internet connectivity is also holding people back. “People confuse digital services with financial inclusion,” he said. “Interoperability and blockchain provide fair access. Competition creates a healthier ecosystem.” If Facebook has figured out how to connect people, fintechs should be able to connect them too.