Around the world over two billion people remain unbanked – they have no bank accounts and are forced to rely on alternative financial services, many of which are predatory. However, an emerging industry called FinTech is quickly becoming a global power source for bridging the gap between finance and philanthropy, growing profitable customers while lifting low-income populations out of poverty.
FinTech stands for financial technology – and is used as a blanket term for technology that is disrupting the financial services industry. The ecosystem around FinTech is growing almost as fast as the industry itself. Supporters for the Innovate Finance Global Summit for 2016 included well-known organizations such as UNICEF, CNBC, World Economic Forum and Bill & Melinda Gates Foundation, but also niche enterprises that have become hubs and incubators for FinTech. These localized centers such as FinTech Mexico, HK FinTech, and eggsplore (fintech Europe) gather together at summits globally to fuel innovation and inspiration.
In fact, the growing momentum of promoting financial inclusion through technology resulted in a separate event at this last Global Summit. FinTech Jam for Good was held as a breakout event, to convene developers, designers and innovators together to find solutions promoting greater financial inclusion in our increasingly digital world. The growth of these macro and micro ecosystem around FinTech is a strong leading indicator of its potential to solve social issues through technology.
The critical link connecting technology-based solutions in the financial industry is, of course, the Millennial generation. They value financial security highly, are deeply committed to their social presence and have a penchant for companies with a social impact. Given their growing presence in the workforce and in the world, we can expect to see more technology-based solutions for social impact in the future.
In fact, Lenddo is a perfect example of convergence for millennials’ love for technology, social network and social impact. Lenddo provides access to financial services for the emerging middle-class around the world by evaluating an applicant’s social network to more accurately determine creditworthiness. The company is rooted in “creating an economically empowered and thriving middle class in developing countries” through FinTech.
FinTech companies have a profound impact on underserved customer segments by reducing cost structures through technology and redesigning social business models. A good example in practice is remittance company BitPesa, which is using the Bitcoin blockchain to enable instant money transfers within Kenya and the rest of the world for nominal fees of 3% or less. Not only has BitPesa lowered the fees associated with transferring money across borders, they have leapfrogged many pre-existing services that may have struggled to expand due to limitations in existing financial infrastructure. To date, Bitpesa has raised $1.1 million in its second round of funding, and is poised to usher in a better future for the African economy. Another company, Wonga, is helping customers who are not typically served by mainstream finance to break the payday loan-debt cycle by providing small consumer loans in Europe, Canada and South Africa. By using the world’s first fully-automated lending process, Wonga can approve and fund loans in only a few minutes.