How fintech is closing the financial divide

by Frank Breuss, CEO and co-founder, Nikulipe

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Nikulipe’s Frank Breuss discusses the correlation between a country’s GDP and its accessibility to digital financial services, which suggests fintechs are key to financial inclusion in emerging markets.

More than 1.4 billion adults around the world still lack access to formal financial services, which includes savings accounts, loans, and insurance, according to the World Bank, Although many can take it for granted, having a bank account means participating in the formal financial system and benefiting from the opportunities it provides for individuals and businesses.

A bank account allows a person not only to make and receive payments, but also to save money and have a recorded financial history that enables its possessor to get insurance, a loan or credit. That said, back in 2011, only 51% of the global population had access to bank accounts; ten years later this number was cut by half to around 24%, which is still a significant number of those unbanked.

The progress in account ownership has been significant and could be attributed to the emergence of digital financial services enabled by fintech.

Still, financial access distribution is extremely uneven: countries like Denmark and Iceland have 100% bank account coverage, while Afghanistan and Guinea have 9.65% and 13.77% coverage respectively. As the world becomes increasingly interconnected and technology advances at an unprecedented rate, digital financial inclusion remains a critical issue that requires urgent attention.

From mobile banking apps to online payment platforms, fintech has enabled millions of people to access financial services that were previously out of reach. Let’s see in detail how fintech innovation has been changing the way people pay and receive money in largely unbanked markets while transforming those societies.

Providing more secure and affordable payments

The lack of easy access to and the high costs of traditional banking services can lead individuals to resort to informal financial services like moneylenders or borrowing from family and friends. These options can be expensive, risky, and not always accessible, leaving many without reliable financial options.

Fortunately, the internet and mobile devices infrastructure has spurred the development of cheaper and more secure technological innovation, leading to increasingly accessible financial services in developing economies.

Various Local Payment Methods (LPMs), such as mobile money solutions and wallets, have emerged that have been touted as revolutionary for their role in expanding access to financial services in lower-income countries.

For instance, the introduction of mobile money services like M-Pesa in 2007 has revolutionised the financial landscape in Kenya. M-Pesa and other mobile platforms have increased financial inclusion in the country dramatically, from 27% of the population having access to formal financial services in 2006 to 84% in 2021.

Such innovations not only benefit people in fast-growing and emerging markets by offering a much cheaper alternative to traditional bank accounts; it also empowers these often young and booming societies to participate in the global economy by creating new economic opportunities.

To close the gap of financial inclusion even further, emerging markets need additional opportunities that connect these local payment methods to the larger global economy. At Nikulipe, one of our overarching goals is to empower consumers from fast-growing and emerging markets to take part in global e-commerce.

We facilitate access to local payment methods for fintechs, PSPs and their merchants and open doors to previously inaccessible markets. This, in turn, will create new opportunities for millions of people by connecting them with global merchants.

Improving financial literacy

Another noteworthy barrier is the lack of financial literacy that prevents individuals from accessing these services. Financial literacy is the ability to understand and effectively manage personal finances by making informed decisions about spending, saving, investing, and managing debt.

Fintechs positively affect the level of financial education directly and indirectly.

For instance, Nequi, a Columbian digital bank, began a revolution of digital financial inclusion in the country, which together with other government initiatives helped increase the banking population in four years from 49 to nearly 90%.

It made digital banking and other financial services accessible and affordable to people that were previously excluded from formal banking; it reached people in remote areas and low-income communities; and enabed customers to send and receive money without additional fees.

Additionally, a financial education platform called Nequi Academy was offered to educate the population on budgeting, saving, and investing.

A low level of financial literacy obstructs the use of financial products, but fintechs have emerged as new means for the unbanked to use a familiar tool — a phone or smartphone — to manage finances.

Among the unbanked and financially excluded, women are often disadvantaged when it comes to accessing financial services due to barriers to education (including financial literacy), cultural norms, and reduced mobility.

Fintech solutions such as mobile money that have a simple registration process compared to that of the traditional bank account enable women to manage their finances and, as a result, strengthen their financial independence and enable economic empowerment. For instance, the gender gap in account ownership across developing economies has fallen from 9% to 6% points, where it stayed for many years and is largely attributed to more diverse digital financial solutions.

Increased availability of financial products

From mobile money solutions to online payment platforms, fintech has enabled millions of people to access financial services that were previously out of reach. For instance, mobile banking solutions allow people to open bank accounts, make transactions, and even access credit without having to physically visit a bank branch.

This is particularly crucial in areas where traditional banks are not accessible or where people cannot afford to maintain a minimum balance in their accounts (typically a precondition to get an account in the first place).

In 2011, only 46% of the Chinese population had a bank account, which left a significant portion without access to formal financial services. Particularly acute in rural areas, where people had limited access to banks and other financial institutions.

The introduction of Alipay and other wallet solutions provided an alternative way to access financial services and products. These platforms have made it easier for people to make transactions and access a range of financial services, such as wealth management and insurance, without the need for a traditional bank account.

As a result, the adoption of mobile payments has grown rapidly in China, and by 2020, it was estimated that over 89% of the adult population in the country had a bank or bank-like account. This growth has helped to promote financial inclusion and has provided a low-cost way for small businesses to accept digital payments.

Fintechs have become an essential enabler of financial inclusion. Still, around 1.4 billion people need access to financial services, and universal financial access remains a goal to be achieved.

Governments, regulators, and financial institutions must work together to create an enabling environment for fintech innovation to thrive, while also ensuring that consumers are protected from fraud and abuse.


Frank Breuss is the CEO and co-founder of Nikulipe.

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