PayU’s Marius Costin on how fintech is paving the way for financial inclusion
During the pandemic, we have seen a rapid acceleration of fintech and digital payment platforms, as the demand in emerging markets was even stronger. As a virtuous circle, it is fair to say that fintech and payment platforms are contributing to financial inclusion and it’s interesting to explore how they are doing so, to best understand how this is benefitting populations in high growth markets around the world. Serving the unserved and underserved Facing exclusion from traditional banking institutions, large groups of the global population have long been unable to access financial services including bank accounts, deferred payment options and credit. What’s interesting to note however, is that in countries with large groups of the population that remain unbanked or underbanked, despite low levels of engagement with banking institutions, have high levels of smartphone penetration. With this, fintechs have capitalised on the ‘leapfrog effect’, which has allowed citizens to skip the bank account and use digital financial services directly. They have done this through recognition of how smartphone technology can be utilised to democratise access to financial services and break down barriers to financial inclusion. As more users engage with digital payment platforms, fintech companies have increasingly more access to data and insights that can inform the development and rollout of new products and services, including innovative access to credit. Through our recent innovative product offering in Romania, where 42% of the population remain unbanked, we introduced a deferred payment option that offers Romanian customers access to credit via the eMAG shopping platform. Credit is available to those that can demonstrate a commitment to making repayments on time, facilitating greater diversity of payment choice for customers and helping merchants reach a larger customer base. Accommodating different payment preferences Accommodating different preferences for payment methods in specific locations is also key to breaking down the barriers to financial inclusion. While we’ve seen how the pandemic has accelerated the adoption of payment platforms and mobile banking, it must be acknowledged that in some countries scepticism is high due to increasing crime rates and concerns around payment security. Therefore, fintech companies have a responsibility to offer access to local and global payment methods, which will expand access to financial services in high-growth markets, and account for market sentiment. To meet demand from different regions, fintech companies have diversified how their users can make payments. At PayU, for example, we understand that in Latin American countries and beyond, a lot of our customers appreciate the availability of a mix of relevant payment options at checkout, which allows them to pay for products and services via credit and debit cards, digital wallets, instalments, or with cash. Likewise, we have found that shoppers in African countries prefer mobile payment options, which has informed how we differentiate our market offering to account for sentiment and ever-changing shopping preferences. Understanding these preferences, as well as ensuring the accessibility of relevant payment options for both consumers and businesses are key to breaking down the barriers to financial inclusion and offering the services that users need and want most. Facilitating participation in the digital economy As the pandemic popularised digital payments, this sparked an e-commerce, and subsequent mobile-commerce boom, as many shoppers in emerging markets did not have access to a computer. As more of the unserved and underserved have been able to access mobile financial services, it has enabled many to use payment platforms to make digital purchases, opening a new world of sales opportunities that has allowed many to shop and avoid the cost of commuting to physical stores. Moreover, the fintech boom has made access to financial services faster and cheaper, bringing benefits to both customers and merchants alike. In our report, we estimate that there will be 424 million mobile internet users in Latin America by 2025, and in South Africa, we have observed an incredible shift to mobile payments. Last year, we saw up to 85% of transactions performed on a mobile device in 2020, compared to 50% in 2019. This has proven vital for customers around the world as it has enabled them to purchase necessary products and services while physical stores were closed, and social distancing measures were in place. As such, we can see how fintech and payment platforms have enabled access to the digital economy in high-growth markets, boosting the retail landscape in specific regions. While there is still work to be done to advance financial inclusion around the world, the acceleration of technology during the pandemic has had a lasting impact in high-growth markets, where we are seeing greater appreciation and receptivity to fintech and digital payment platforms. In the future, fintech will be key to the creation of a world without financial borders, where everyone can prosper.