Financial inclusion is an area where financial technology (fintech) is ideally suited. Known for creating innovative ideas and solutions, the fintech industry may have the answer for solving the problem of providing financial services to the world’s unbanked and underbanked population.
Asia is a continent that could see significant benefits from adopting fintech, particularly in South Asia, where only 46 percent of adults have bank accounts. What options are available, and how can fintech help build greater financial inclusion?
Most developing countries in Asia have bypassed building more landline telephone connections in favor of wireless communications. Take India, for example, where only 53 percent of adults have a bank account, mobile phone penetration has reached 80 percent.
The mobile wallet market in India has experienced considerable growth due in part to the federal government’s national financial inclusion initiative. There are three main categories for payments using mobile wallets: platforms managed by telecommunications companies like Vodafone M-Pesa, platforms from independent companies like Oxigen Wallet, and platforms offered by banks like ICICI Pockets.
Singapore’s biggest bank, DBS, has created a clever take on mobile wallets with its DBS digibank offering. Also available in India, DBS offers digibank e-wallet accounts that can be opened in as little as 90 seconds. Once the mobile wallet is active and in use, it can be easily converted into a full digital savings account that can earn high interest.
Peer-to-Peer (P2P) Money Transfer
Due to low numbers of account holders combined with the difficulty in accessing financial services in remote regions, peer-to-peer (P2P) money transfers are especially popular in Asia. For 2016, the total transaction value for Asian P2P transfers is expected to reach nearly $5 billion. By 2020, that number will more than double to over $11 billion.
There are a number of different competing P2P money transfer platforms available in Asia. For India, popular platforms include Mobikwik and Paytm and there are similar options like fastacash and Kashmi.
Asian Fintech Seeing Huge Growth
Asia’s fintech sector stands to gain from increased investor interest due to the opportunities in the region as a result of its large population and limited banking network. In 2015, fintech startups in Asia received $4.5 billion, triple the amount received by European fintech firms over the same period.
Just as Asian countries leapfrogged to wireless technology over landlines, the same is already happening for fintech and traditional banking. The lack of extensive banking infrastructure and the prohibitive costs of building new bank branches in far-removed communities has created an environment that is ideal for fintech solutions.
Two high-profile fintech conference series have launched in Asia in response to the rapidly growing fintech community there. Finnovasia began hosting events in Hong Kong in 2015 and actively promotes the fintech scene in the former British colony. Finovate, which got its start in the United States, has been steadily expanding globally to Europe and will host its first Asian event in Hong Kong on November 8, 2016.
“We have here a huge international pool of talent involved in the financial services industry, with nearly 90 international banks present in Hong Kong,” said Anthony Sar, Finnovasia chief executive and co-founder.
What do you think the future holds for fintech and financial inclusion in Asia?