How can early-stage fintechs drive financial inclusion?
The “strong correlation between levels of financial inclusion and economic growth means we should strive towards the World Bank’s goal of achieving Universal Financial Access. Identifying innovative fintech startups that promote financial inclusion is one way to support this goal.”
Executive Chairman of Merryn Capital and Inclusive Fintech 50 judge
Ensuring a competition like Inclusive Fintech 50 is successful depends on several things, including involving the right people. Thankfully, we were able to bring together a diverse, experienced, and thoughtful group of judges to select the most promising early-stage fintechs. We have judges from technology firms, commercial banks, development finance institutions, impact investment firms, and mature fintechs. The diverse and varied perspectives will help provide a balanced assessment of the fintech applicants.
But, having succeeded in bringing them into the Inclusive Fintech 50 fold, we wanted to further tap into their expertise. So, we thought we’d get their insight into a few key questions including: How can early-stage fintechs drive financial inclusion? Here’s what they told us.
Stay hyper-focused on the customer and their needs
There was a clear trend from our judges’ responses that didn’t require any data analysis (we’ll save that for the applications). Several judges identified the customer value proposition as a key focus for early-stage fintechs. For example, Amolo Ng’weno, the CEO and East Africa Regional Director at BFA, said that early-stage fintechs can drive financial inclusion “by paying attention to what the customer needs first and technology to serve that need (too often it seems to be the other way around).” Alejandro Del Bosque Patoni, Director General de Captación at Banco Azteca, added, “Many fintechs are bringing a freshness to the industry. A customer-driven experience instead of a traditional banking approach has allowed new unbanked segments to feel that the services and attention provided are meeting their expectation.”
Furthering this idea, Rob Levy, who has plenty of experience with consumer preference in his role as VP of Financial Health at the Center for Financial Services Innovation, shared his observation that, “Fintech startups are already having a huge impact with financial inclusion and financial health by helping consumers across the globe spend smarter, save more, borrower more efficiently, and plan for their future.”
Rethink traditional business models
Building a great product is necessary but insufficient for a fintech to move the needle on financial inclusion - it also needs a business model that can accommodate often challenging market landscapes. Bernhard Eikenberg, Fund Manager at Bamboo Capital Partners, explains: “Fintechs are not constrained by previous business models and can thus think freely and creatively of new solutions to better bank the still un- and under-banked.”
Zennon Kapron, Founder of Kapronasia, a leading fintech consulting firm, builds on this idea: “It is often difficult for incumbents to cost-effectively serve the financially excluded. Early-stage fintechs have a unique opportunity to create new business models that are based around the needs of this underserved market and are better suited to serving what can be a costly segment of the market.”
But even with an innovative business model, Mr. Eikenberg of Bamboo Capital Partners emphasized that startups should not lose focus on the product offering: “Last-mile delivery and the user experience are two particular pain points ideally suited for solutions from fintechs.”
There’s no time like the present
With investment capital flowing into fintech ecosystems in major markets - and initiatives like Inclusive Fintech 50 generating visibility for underinvested regions - now is a good time for early-stage fintechs to build products and business models that reach the underserved. Not only that, but the shifting consumer and technology landscape has expanded the opportunity to introduce those solutions. As Françoise Lamotte puts it, “Technology and consumer behaviors are ripe to address the critical opportunity and challenge of financial inclusion. Fintech[s] driven by purpose are well positioned to make the change.”
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