Power of warm 'Impact Fintech' solving financial exclusion

Hanna Yim, Head of Business Impact Group, SENTBE

One of the biggest talking points in the recent fintech industry is 'financial inclusion'. Financial inclusion means improving access to financial services such as saving, payment, remittance, loan, and insurance, etc. so that lower-income groups in developing economies. According to the World Bank, only 54% of adults in low-income countries own bank accounts.

In Indonesia where a population of around 270 million is scattered in multiple islands, only 49% of its adult population own accounts. However, the phenomenon of financial exclusion has been solved with the introduction of fintech.

According to the Indonesian Financial Supervisory Service, there are 350 million smartphones which can be interpreted as more than one smartphone per person. In such an environment, Go-jek has evolved beyond mobility services like Uber into the fintech area more recently. The company started its wallet service, Go-Pay, and has been extending its business to the whole market in Southeast Asia beyond Indonesia.

In Kenya, the share of people having an account with a bank appeared to be only 42% and since there are no many banks the closest banks are found 10km away from each other. As a result, the majority of Kenyans used to keep money in cash at home and cash robberies have often happened as it is not easy for them to deposit at and send money via bank.

To solve this problem, M-Pesa started with withdrawal, transfer, and payment services based on widely used mobile phones and has become a financial service platform serving micro-loan, insurance, and remittance.

As a result, the share of adults using an account of financial services via mobile phone or internet was recorded at 72% in 2017. It has been also observed that the Kenyan government was able to reduce corruption by using M-Pesa's digital payment system.

The aforementioned examples were introduced at several side events of the United Nations (UN) General Assembly held at its headquarter in New York last September since the UN has been also directly working for improving financial inclusion.

Korea is not detached from such a trend. The change recently made by migrant workers coming to Korea from Southeast and South Asia and beginning to use digital remittance service was introduced at the 7th International Conference on Sustainable

Development, held as a part of the side event associated with the General Assembly of the United Nations last September.

While it is not relatively much recognized in Korea, the coutry 10th in the world for the amount of individual outward remittance to low-income countries. Only are Korea and China Asian countries among the top 10 countries. In this regard, the UN and the G20 has been paying keen attention to individual outward overseas remittance services from Korea to low-income countries.

Local fintech service providers in Korea has been significantly contributing to such outward overseas remittances to low-income countries. For instance, SENTBe, a remittance service provider, charges only 1.2% of the total amount of remittance, which is much lower than those of traditional banks, even up to 90%. In addition, this fee rate is at a level that has already achieved the UN's goal of reducing remittance fees for migrant workers to less than 3% by 2030. As such, fintech has been solving problems which have not been addressed by traditional players in finance by growing and evolving into diverse services.

fintech is growing day by day, introducing a variety of services and solving problems that have not been addressed by the traditional financial sector so far.

Nonetheless, only about 1% of 303 Korean fitechs is addressing financial inclusion. Only recently have a few 'Impact Fintech' companies emerged that intentionally work on creating new values so that the financially underprivileged access financial services with more convenience. Such Impact Fintechs have been settling down as offering a wide range of services including overseas remittances, salary advances, and finance matching platforms based on an alternative credit rating system.

In the recent situation in which economic polarization and financial exclusion have been getting worse and serious, calls for solutions for this haven accordingly growing over time. The social necessity of Impact Fintech is namely increasing now over than ever.

The value of fintechs' innovativeness and inclusive value would shine more when fintechs pay more attention to social problems solving. Korean Impact Fintechs which have just begun to sprout would expand their journey and efforts further.

Published in Aju Business Daily on November 15, 2019.

Source: https://www.ajunews.com/view/20191114084756844