The unbanked and the underbanked are those who either have no access or limited access to banking. Such people find it almost impossible to get access to financial services. This was a problem prevalent from long. Thanks to fintech, technology is now making financial services available for the unbanked and underprivileged observed Bahaa Abdul Hussein.
The unbanked, underbanked, and fintech
Unbanked refers to people who do not have a bank account. The underbanked are those how may have a bank account, but don’t use it effectively. They do not use financial services mostly due to lack of access. This problem is faced more by people who are economically underprivileged. Fintech firms are known for bringing out innovations in the sector. They have been able to enhance financial inclusion by making financial services accessible to the unbanked and underbanked.
Fintech firms are reaching out to the underprivileged in different ways:
- These firms offer financial products and services (including banking) at lower costs. They charge lower commission as compared to traditional financial companies. They are able to do this by reducing manual work and using more of automation. Using intermediates also helps them reduce costs, and they can pass on the reduced costs to customers.
- Some firms offer microbanking and micro financial services. This brings down the costs associated with accessing financial services making them accessible for the underprivileged.
- There are specialized fintech firms that focus on specific needs or niche areas. Eg: loan advances or partial salary withdrawal, etc. These are services that people are looking for and which conventional firms don’t offer.
- Fintech firms also focus on amplifying financial products and services. By doing so, they expand its access reaching out to more people. These services are offered for freelancers and the self-employed who may otherwise find it difficult to get financial services.
- Fintech firms are also involved in financial education. They offer assistance to customers to manage their finances better. This is done by encouraging them to save more and giving them tools to handle expenses better.
- Fintech firms reach out to people in remote areas, particularly rural areas. This allows them to get access to banking and financial products/services. The use of technology enables them to do it at a fraction of the cost that conventional bankers spend. Basic products and services are offered at low costs to ensure the unbanked get access to financial services.
- The approach of fintech firms is user-friendly, technology-driven, and cost-effective making them a preferred choice for people.
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