Unlocking financial freedom – the role of fintechs in emerging markets

In countries like Indonesia or the Philippines, >50% of the population is still unbanked. And without access to the financial system, it is basically impossible for people to have access to education, improve their lives and financial position for their families. Fintech businesses are playing a crucial role in increasing the financial inclusion in emerging markets by providing a more pragmatic, easier and faster onboarding process compared to the traditional retail banks. A good example is BillEase in the Philippines. Their recent research study underlined the positive impact on society. A few highlights from their research work:

  • Over 80% of customers experienced improved quality of life
  • 96% Improved ability to manage their finances
  • 85% worried less about their financial situation
  • 56% improved their savings
  • 95% are now better positioned to face major expenses such as school tuition fees

Driving financial inclusion and providing people with access to consumer credits and at the same time educating them on how to use them in a responsible way, creates value and wealth. Another interesting finding is that 10% of the customers of BillEase use consumer credits for their micro businesses, too, where 40% see a higher revenue and net income as a result of that.

The biggest issue that most fintechs face is capturing the full growth potential. This requires a scalable balance sheet. Funding a balance sheet for consumer credits can be served with VC money in the first phase but it is too expensive for a balance sheet at scale. When scaling a fintech, there should be a decoupling of funding. And this is where development banks could step in. I am part of the Fintech Steering Committee of the World Economic Forum that works on the research paper “Fueling Innovation: Closing Funding Gaps in Fintech Ecosystems” where we are analysing growth limiting factors in more detail. Looking forward to sharing the results once published.