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Fintech & Finserv CX

Fintechs Are Forging The Path to Financial Inclusion

How Fintechs Contribute to Universal Financial Access

Receiving government benefits has become a necessity for many individuals and families struggling to cover their basic living expenses during COVID-19. Those with direct deposit, mobile banking or even traditional chequing accounts can easily collect assistance. But what about the 1.7 billion adults globally who don’t have access to even a basic bank account? While some countries have developed novel solutions, such as loadable payment cards, to aid unbanked citizens, others are failing to serve people in dire straits.

The need to access funds during a global emergency is just one example that illuminates the growing importance of financial inclusion. The goal of inclusion is to make fundamental financial services available to all individuals and organizations at an approachable cost, while keeping banks accountable for upholding inclusive practices and policies. 

What causes exclusion?

There are many reasons why people may be excluded from banking, leading them to be unbanked or underbanked. Factors include:

  1. A lack of knowledge about banking
  2. Use of complex, inaccessible language by institutions
  3. Distrust in the financial system
  4. Overly high banking costs
  5. Bank locations being too difficult to physically access

The World Bank says that without adequate banking resources, individuals and families are at a disadvantage when it comes to managing their financial lives, participating in the digital economy, investing in education and health, weathering emergencies and planning for the future.


Fintech solutions level the playing field

Fintech companies are presenting new opportunities for people to access financial services and products at a low cost. Of course, there still remains a large portion of the population.

Approximately 20 percent of households in the US alone – that are unbanked or underbanked.

These consumers represent a niche market, and innovative fintechs are answering the call to democratize banking and investing in these key ways:

1. Banking as a service offers lower fees and mobile access

Consumer-facing companies, such as Google, Apple, Amazon and Alibaba, have been diversifying their offerings to deliver a whole host of interrelated products and services. Payments services have entered this landscape, too, through mobile wallets that let consumers make payments and send and receive money using easy, secure, low-cost accounts. 

Through Uber Cash, for example, users can fund a digital wallet from which they can make payments for all of Uber's offerings (e.g., ride sharing, bike sharing, food delivery, credit cards, flight purchasing, gift cards). T-Mobile MONEY is another banking service that engages customers within an existing ecosystem of products and services. The telco offers a high-interest, online-only chequing account with no minimum balance and no fees. Account holders with a T-Mobile wireless phone plan get 4 percent APY, which incentivizes customers to take advantage of the company’s original offering.

2. Fractional investing brings the market to the masses

Atomizing banking products is one major way fintechs are promoting financial inclusion. Institutions tend to have a defined minimum for products that excludes a large portion of consumers from participating; for example, certain stocks that cost over $1,000 per share are inaccessible to smaller investors. Fintech solutions either eliminate these obstacles or bring the entry point down to a fraction of big banks’ minimums. Through micro-lending, micro-credits, micro-investing and micro-savings, emerging technologies allow more people to get involved, typically through user-friendly apps that use plain language and straightforward processes. 

Robinhood is one well-known fintech that’s bringing the market to the masses, allowing everyday people to buy and sell stocks, mutual funds, ETFs, options and cryptocurrencies. Delivering no-commission fractional trading through an accessible user interface, Robinhood makes it possible for consumers to purchase partial shares to invest in firms with traditionally high points of entry. This approach has captured a unique user base with a median age of 30, half of whom are first-time investors.

3. Other ways fintechs promote inclusion

Fintechs are developing new and novel approaches to delivering financial products and services, including:

  • Reduced commission – Offering traditional banking products and services at a fraction of the cost of traditional banks by using tech to automate tasks and remove intermediaries. (e.g., TransferWise, PayPal, Wealthsimple, Zelle, Remitly).
  • Peer-to-peer lending – Directly connecting borrowers to investors, so consumers can get loans from other individuals rather than using banks as intermediaries. (e.g., Peerform, Prosper, Lending Club, Upstart, Payoff).
  • Robo-advisors – Giving algorithm-driven financial planning services through artificially intelligent digital platforms. Services include account setup, goal-setting, portfolio management, consumer education and more. (E.g., Wealthfront, Interactive Advisors, Betterment, M1 Finance, Personal Capital).


While these innovations are leveling the playing field for individuals globally – supporting the World Bank’s mission to achieve universal financial access – they are also evolving at a breakneck pace that may, at times, clash with the slower, cautionary approach of big banks. The temptation to “move fast and break things” has already gotten some fintechs, notably Robinhood, into trouble with regulators and industry watchdogs. This signals a need to take a measured approach, even as the demand for financial inclusion persists.

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