By Mansi Gogri
The financial technology aims at providing traditional financial services in a better way. It enables tasks like depositing checks, moving money among accounts, paying bills, applying for financial aid, peer-to-peer lending, purchasing insurance, crypto exchanges, tax calculations and play in the stock market without any former investing experience. According to the United Nations Capital Development Fund, Financial inclusion is an enabler of eight of the seventeen developmental goals in the 2030 Sustainable Development Goals. Various countries around the world have adapted to the ‘new normal’ post covid-19 and fintech services are a part of it. The world needsonline payments services, health and other insurance, financial budgeting and savings, advice on investment decisions now more than ever to recover from these uncertain and unprecedented times. Fintech played a significant role in alleviating the economic impact of the COVID-19 pandemic by facilitating targeted fiscal measures to be deployed efficiently and quickly to their intended beneficiaries, even the unbanked.
According to ‘The Promise of FinTech: Financial Inclusion in the Post COVID-19 Era’ by Monetary and Capital Markets Department, International Monetary Fund (2020), fintech is aiding in alleviating the gender gap but significant consideration should be taken to ensure women are not left behind because barriers to digital financial inclusion such as lack of access to resources and familiarity with technology (mobile phone, internet), socio-cultural norms, lack of financial literacy maybe higher for women. Although fintech’s potential to boost financial inclusion is extreme, it is difficult to quantify the risks and benefits because the data for digital payments and digital lending, savings, and insurance is inconsistent. The COVID-19 crisis highlighted the importance of promoting digital services to the needy. Their research suggests countries’ circumstances should be prioritised to promote financial inclusion. Countries with low traditional access and usage have more opportunities to improve financial inclusion through fintech. Whereas in countries with higher digital access, the crisis has provided the needed push to fast-track initiatives related to building conducive regulatory and institutional frameworks that were in the offing.
Fintech benefitted many low-income households and small firms with typically little access to traditional financial institutions. Just as the SARS epidemic in 2003 expedited the launch of digital payments and e-commerce in China, now lockdowns and social distancing due to coronavirus are accelerating the use and impact of digital financial services globally.
Figure 1- Comparison of FinTech categories ranked by adoption rate from 2015 to 2019
Source 1- EY Global Fintech Adoption Index 2019 Report
According to the above figure, money transfer and payments have the highest adoption rate-75%. Money transfer and payments are the most popular fintech service adopted globally because of the ease of setting up an account. Under the Government of India’s ‘Pradhan Mantri Garib Kalyan Yojana’ more than 20 crore women account holders of the Pradhan Mantri Jan Dhan Yojana received Rs. 500 per month for three months as part of the Covid-19 economic stimulus. Whereas the local governments in China distributed vouchers through WeChat Pay to encourage immediate spending. Digital payments limit in-person transactions and hence lessen the disease transmission, this is beneficial when the economies restart in the post-covid19 era. High adoption rate for some FinTech services does not necessarily indicate market saturation. As per the survey, there is growth potential in areas such as budgeting and financial planning, and savings and investment services. To further tap this potential, factors like access to electricity, mobile and internet coverage, financial and digital literacy; and the avoidance of data biases are necessary post pandemic. During the pandemic when Insurance companies started functioning online, it not only reduced their operating costs but helped them switch to big data modeling from statistical analysis of historical data. By using Insurance technology, especially post pandemic, the consumers’ dependence on physical service outlets is reduced, saving commute time and effort. Also, insurance policies can be easily compared online giving consumers a variety of options to choose from as per their willingness and ability. These features can be introduced to farmers, small and micro enterprises, low-income groups, and people living in remote and rural areas through online channels. Awareness for the same can be created through the online and offline media in different languages. Governments, banks, financial institutions, fintech companies, think tanks like CGAP housed at world Bank and CFI, NGO foundations like the Bill and Melinda Gates Foundation, Mercy Corps, MetLife Foundation, BRAC and Grameen Foundation are investing a huge sum of money in financial technology and research to make financial services affordable and available at the touch of a button.
A variety of financial products and services are provided by fintech companies globally which are suitable for various income groups, demographics, including women, children, and elderly. But to access all these financial services, basic digital infrastructure and basic digital literacy should be provided to people. Enhancement only in financial technology is not enough, the technical know-how should also be taught. The easiest way to do this would be to add it to the school curriculum. New technology is one of the main reasons for rising income and wealth inequalities. It is a major concern for various countries around the globe and it is likely to exacerbate during the post COVID-19 era unless financial exclusion is addressed.