Unlike a few years ago, today people can be part of the financial system without having a bank account. Digital services, often provided by fintech companies, offer solutions for money transfer, payments, currency exchange, investments, loans, and a variety of other services that used to be exclusively accessible through traditional bank institutions.
The fintech ecosystem is booming around the globe. According to the World Bank, the financial inclusion fostered by fintech solutions plays an important role in reducing poverty worldwide, and consequently improving countries’ economies. In Brazil, the scenario is no different. As per data by Finnovation, there are currently 377 fintech companies in the country, with as much as 25% of them dedicated to providing innovative payment solutions.
Although numbers by the World Bank show that more and more people have access to financial services, this does not always translate into having a traditional bank account. In fact, each day the demand for more independent services increases, in particular in the developing world, where the obstacles to opening a bank account are greater.
For instance, unbanked people in the developing world remain bankless for a series of reasons, including the distance from where they live and work to the nearest bank branch, lack of trust in financial institutions, lack of money, high fees and even religion. The access to the traditional banking system is also denied to those in a situation of debt, or who cannot present proof of address.
How did the unbanked become trendsetters?
Traditional banks have failed to take the lead in terms of presenting innovative and inclusive solutions to the sector. Thanks to successful initiatives introduced by fintech businesses and adopted by consumers around the globe, traditional financial institutions are also creating solutions to serve a new type of consumer.
Although there are 1.7 billion people without a bank account globally (and over 55 million in Brazil), the World Bank points out that 1.1 billion of the unbanked population have access to mobile phones. For this reason, mobile payments are the main alternative for the unbanked, with highlights being WeChat Pay and AliPay in China and M-Pesa in Kenya. In Brazil, solutions like pre-paid cards and PagBrasil’s Boleto Flash® and PEC Flash® also contribute to the inclusion of the unbanked.
Overall, choosing to remain on the sidelines of the traditional banking system is not only viable but has also become a trend. The unbanked population is driving the creation of new solutions, and financial service providers are focused on ending the barriers for financial inclusion. And because fintech businesses aim to provide a more customer-oriented service, they are now on the radar of banked people.