Like everything else it touches, technology is transforming the banking and finance sector as new innovations revolutionize traditional processes, bring underbanked customers into the fold, and lead to exciting players that are getting better than banks at meeting people’s needs.
Not only is technology demanding that traditional banks catch up, it is also creating new ways to plug gaps in the system, make finance available to more people, and improve the lives of local communities in tangible ways.
Southeast Asia is home to the largest population of unbanked people in the world — there are around 290 million unbanked and underbanked people here, which means they have no or little access to bank accounts or other financial services. These people tend to belong to marginalized groups such as the elderly, women or rural communities.
Without access, these individuals are often unable to start businesses, purchase homes, or protect themselves in the event of financial shocks. Technology has an important role to play here to include people at the margins of the formal financial industry and develop a more equitable society.
For instance, people with low incomes often do not have a credit history, which is an important foundation for them to obtain loans. With the advent of technology, alternative forms of data can be used to vouch for these individuals, such as their app usage or transaction history on e-commerce platforms.
This has opened up the financial sector for e-commerce players such as Lazada, who is working with banks such as UOB to create a seamless financial ecosystem. Their partnership will offer financing access to sellers and small merchants on the Lazada platform.
Other innovations include turning a mobile phone into a point-of-sale system which is a neat solution for micro, small and medium enterprises; peer-to-peer lending that enables people to borrow money from one another without going through a bank; and micro-insurance solutions for narrow target segments at an affordable rate.
Some 60 million consumers joined Southeast Asia’s digital economy during the pandemic alone. The power of technology and data holds immense potential to address existing inequities, which will go a long way to creating a better world for more of us.
Photo by micheile henderson on Unsplash