Every week, new companies pop up with bright and innovative visions for the future, with banking-as-a-service (BaaS) providers making it increasingly easy and accessible for anyone to launch their own kind of financial product, unlike anything on the market today.
For those who closely follow financial news, readily investigate the latest entrants to the market and understand the developments within the ecosystem that make this rapid evolution possible, this can only seem like good news.
These products can offer tech-savvy, financially stable individuals new, better-suited services that can improve their financial wellbeing. More options mean greater variety – and greater potential to benefit. This, sadly, does not apply to everyone.
Tackling the problem of sub-prime
Many of us live with limited or no access to banking and financial services, either through a lack of knowledge or due to various barriers to entry. The unbanked, underbanked and financially vulnerable portions of the population might view the fintech revolution as though it were taking place on the far side of a telescope – as if meant for someone else.
For the 12.5 million UK adults with little to no confidence in their ability to manage money, or the one million who don’t have a bank account, the growing popularity of tools like open banking and BaaS might seem irrelevant, but this really couldn’t be further from the truth – these things might be able to change their lives.
Increasing financial inclusion within the UK must be a priority for us as a nation. People who don’t have access to the best banking solutions are less able to improve their own financial health and are more vulnerable to sudden disruptions, like those we have seen emerge from the pandemic.
28% of UK adults (14 million people) experienced a direct negative impact on their income due to the coronavirus pandemic (as of May 2020), which goes to show why increasing financial inclusion is so important – particularly in a country that views itself as a leader within the financial world.
The value that exponential innovation and the proliferation of new fintech players can offer those in need, is that the increased variety and personalisation of these new products and services can lower the barriers to entry and gaps in knowledge that keep so many people unbanked. The responsibility lies with the current and upcoming generations of fintech to integrate the ideal of financial inclusion into their DNA and ensure their products are accessible, inclusive and fairly priced.
The road to financially inclusive fintechs
A common cause of financial exclusion is the problematic practice of standardised credit scoring factors. Judging everyone to the same standards can be unproductive, as many people and groups face outlying factors and atypical circumstances that, if left unchecked, might preclude them from accessing the best financial services available.
Powered by BaaS and open banking, fintechs with bright ideas and the ability to see them through have the power to lower costs, increase speed and accessibility and allow for more tailored propositions that can suit these otherwise excluded groups. The rise of flexible and cloud-native banking infrastructure underpins the ability of businesses like these to quickly spin out products that address the – often overlooked – needs of their end-users.
Making socially responsible decisions
In the case of neo-lenders and creditors, being able to offer an online and upfront decision empowers customers to check their eligibility for products with ease, to pick the best loan for their situation and to receive the funds within minutes. Increased access to products that are right for them is a positive step for many towards increased financial inclusion.
Source : From the Web