The movement that is financial inclusion, particularly in the era of the stubborn COVID-19 pandemic, cannot be undervalued. The potential to provide comprehensive reach to virtually all manner of financial products and services has been highlighted in eight of 17 Sustainable Development Goals by the United Nations, an initiative recognized for laying the ground for bringing an end to global poverty and world hunger while realizing gender equality.
Financial inclusion has the capability to drastically improve economic growth while reinforcing innovation and industry in many sectors. It can play a key role in emerging economies in many nations by carving a path out of the economic troubles COVID is perpetuating. According to Forbes, improving access to financial services is estimated to add $3.7 trillion to the GDP of emerging economies by 2025, or six percent – equal to 1.5 times the current GDP of Africa. The additional GDP could create up to 1.5 million jobs.
Still defining financial inclusion and who it helps
The concept of financial inclusion among some insiders, however, is still misinterpreted due to the idea that the cause itself applies only to the poor or the “unbanked and underbanked.” But let’s take America on its own in this scenario; one of the world’s largest economies, an estimated 22 percent of consumers are either unbanked or underbanked.
Now, the term “unbanked” refers to a person or entity “not having access to the services of a financial institution.” Merriam-Webster concisely defines the term describing something that is “not deposited in a bank.” That’s a glaring indicator on the state of financial literacy and education among wealthy and poor alike. Many “well-off” consumers may also have terrible money management habits paired with poor credit scores, not to mention the fact that many of those consumers are losing what money they have to opportunistic and expensive payday lenders or check-cashing services.
Make no mistake, having a bank account does not always mean having the capability to access certain financial services like loans. If there is a saving grace in these circumstances, there are already signs that, ironically, the COVID pandemic could provide a boost of financial inclusion everywhere. Over the past year leading to February 2021, a record number of new accounts have been opened by entities offering mobile money, fintech, and online banking services. Through these digital platforms, we have an opportunity to reduce unequal access to financial services that once appeared to be impossible for those of limited economic means.
Fintech makes room for itself in the digital transformation movement
This last decade has certainly seen the journey of financial inclusion, especially in these last couple years. Continued development of digital transformation and the fintech movement specifically is critical to realizing the ultimate potential of financial inclusion for consumers everywhere. Increasing the accessibility of 4G and eventually 5G services will offer capacity for a better, more advanced array of financial services such as provisions for insurance coverage or credit lines, thereby further reducing the financial inclusion divide.
In a report by the Committee on Payments and Market Infrastructures, findings reaffirmed yet again that fintech can take a central role in improved design of transaction accounts and payment products. Such offerings make them universally accessible with enhanced user-experience and awareness. Fintech can make services perpetually efficient while lowering economic barriers to entry.
Digital innovation through fintech is offering economically-meaningful changes in the production of financial services in nearly every financial market, with major implications for the entire industrial framework of finance itself. Ever-changing improvements and upgrades offer your credit union the chance to update your product and service offerings on par with the best, most accessible, and affordable fintech available.
If your credit union is prepared to offer your members an accessible and easy-to-install mobile small dollar lending program, we invite you to request a demo here and see how our frictionless, SaaS-based, CDFI-approved QCash platform can facilitate improved financial inclusion in your communities!
