A recent Fintech report predicted that some developed markets could become cashless as soon as 2023. Payment innovations regularly make headlines in developed markets, but for emerging markets, the mere access to any financial services and products remains a challenge because of the limited physical footprint of financial institutions. But innovation is confronting this challenge, and mobile airtime can be part of the solution.
Being a cash-driven society comes at a cost and entails problems with being short-changed and the endless issues of authenticity and quality of notes and coins. All of which could easily be replaced and resolved with a cashless solution. The presence of electronic points of payment - which grew exponentially with the growth of mobile networks - ironically only serves banked customers. It does not help financial inclusion and is costly (power/paper/connection) to operate.
Emerging markets are still primarily cash-driven, but the dawn of Neo Bank/Fintech solutions is bringing new opportunities which may result in unbanked populations “skipping” the need for a traditional bank account and directly opting for a Fintech provider instead. “You can’t miss what you haven’t had” is how Fintechs in emerging markets are looking at the problem; since a large portion of the population has little or no experience dealing with a financial institution, it makes them a perfect addressable market for a new wave of alternative financial solutions.
One of the growth drivers is the fact that the majority of unbanked are only looking for a solution that meets their basic needs of payment, deposits, and savings, and are therefore much less interested in loans and mortgages which are the core of traditional banking business. In addition, the simplicity of only needing a Smartphone and basic KYC requirements to open an account instead of visiting a bank branch is attractive to the habits of younger consumers.
Analysing market trends, we can see that the Fintech space is being captured by players that have identified the problems with cash and points of payment and are replacing those with peer-to-peer contactless payment solutions. In some ways, this is a fundamental shift not dissimilar to Intel’s approach of BYOD (Bring your own device). The solution leverages the technology in the hands of its consumers and not the hardware it provides and connects that with the service it offers. This approach is very inclusive and brings decentralisation by essentially enabling any user and device to become a point of sale/payment.
The big difference between Fintech and traditional banks is that Fintechs are unafraid to try, and sometimes fail, as they grow and refine their business models, whilst banks cannot afford to fail since they have been established for a long time.
Over the past three years, there has been a significant adoption by the global public of Fintech solutions as an alternative to traditional banking. The Covid crisis, which prevented people from visiting their banks or complicated their contact with banks, has further reinforced the need for such solutions. Contactless payments have already disrupted the expediency and physical location of a payment process. Alternative financial services are ready to innovate solutions for the unbanked to embrace contactless technology.