Financial inclusion is achieved when everyone has access to financial services. However, in the current financial landscape, the definition of financial inclusion has become broader and more important.
Fintechs and traditional financial institutions compete to develop new products and services. On the one hand, it gives the power of choice to the consumer, but on the other hand, with most services being digitized, many people are excluded even further. At the Fintech Day 2022 panel discussion, industry leaders discussed what has to be done to achieve inclusion and have more people partake in financial processes and what are the obstacles and solutions to financial inclusion.
Opening the economy to financial inclusion
Financial inclusion goes hand in hand with an open economy. Many financial companies and banks work outside their country and industry borders, which gives great opportunities to create more inclusive products and reach more people.
According to Gibson Nascimento, the head of Solutions Emea at Sensedia (an API platform), financial inclusion and an open economy go beyond traditional banking. “What’s important is offering consumers more affordable services that match their lifestyle to provide a better solution that fits them. Moreover, it’s not only about consumers but also about allowing small banks and companies to be more connected with the information and big banks that could share that information to bring more meaningful services to their customers.”
But to achieve a synergy between companies, their offerings, and consumers, we need to overcome many obstacles.
Two main obstacles: digital exclusion and the lack of education
Digitization and digital products are created to attract more consumers and digitize the financial sector. However, Rūta Banytė, a deputy at FoxPay (digital payment service), says that digital expansion and digital payments don’t guarantee financial inclusion. And it can make the situation even worse.
Andrius Bartminas, a co-founder and CEO at Super How (development of blockchain and AI solutions), seconded her statement. “When we talk about digital, it means you need to be digital to access it. And with blockchain products, it’s all about technology, but many native solutions aren’t user-friendly. So, it creates even more exclusion because the technology is complicated.”
The resistance to learning and adopt new technologies often comes from a lack of trust. Rūta Banytė explained that most of this mistrust origins from poor financial education and literacy. People who don’t have enough information tend to be more skeptical about new services and, in general, don’t trust technologies, banks, and other financial institutions to handle their money.
How can simplification, competition, and education become a solution?
When the two main obstacles to achieving financial inclusion are a lack of financial literacy and the complexity of digitization, education and simplification can be the key to inclusion. “Education is a key point. We see now that even the big banks invest in educating children because we need to start from the beginning,” Rūta Banytė emphasized that now we have a responsibility to raise the new generation of financially educated and secure people.
But the responsibility of education also falls on the service provider’s shoulders, says Gibson Nascimento. “When it comes to the end consumer, like the elderly and people in poverty, they often don’t trust banks and other financial institutions because everything is changing so fast, and those service providers often change their propositions that can sound contradictive. So it’s our responsibility to explain how everything works and what we’ve been doing to improve our security and data privacy.”
When talking about the digital transformation, Andrius Bartminas believes that it’s a matter of time when it becomes normality, “like with every new adaption there’s maturity and simplification of things, and everything is about how easy it is to use it. So, it’s just a matter of time.”
However, he also believes that to expedite this transition, people need to see value to feel incentivized. “You need a value proposition. You need to put value, for example, cheaper, easier to use, and value not for the government but for the people.”
Steve Warner, a CRO at Ondato (a compliance management solution), believes that, in the end, what drives these changes is competition. “Making a proposition - more open, fairer, and for ourselves knowing your customer, knowing your business - leads to the end solution, but ultimately, for big businesses to adopt this is also about being competitive because, in the end, it’s a business.”
“Fintechs and traditional banks are constantly developing new technologies and offering more advanced services, but amid this fast progress, it’s crucial not to get carried away and not forget the most important - the person. More financial services don’t automatically make them inclusive or user-friendly. For that, we need to come back to the basics - listening to people and finding common ground to educate and learn from each other”, - summed up Lina Žemaitytė - Kirkman, Head at ROCKIT.