In Singapore, access to financial services is a given. Cash is just an arm’s length away – through the over 220 retail bank branches, more than 2,600 ATMs scattered strategically across the city-state, and the expanding network of over 4,100 cash withdrawal points. From mature estates to the burgeoning suburbs, financial inclusion is a thread woven into the fabric of society.
But venture out from Singapore into the rest of the region, and the tapestry of financial access changes dramatically. Here, the narrative is not one of abundance, but of scarcity and fragmentation. For instance, just 2,355 km away from Singapore, the Philippines has faced challenges and barriers in its banking and payment system for years. Despite the Philippines’ rapidly growing economy, a study published by Statista, based on data from DataReportal, We Are Social, and Hootsuite, found that as of 2022, the share of the population aged 15 and above with an account at a financial institution remains below 35%.
As financial technologies evolve, there is a growing opportunity to bridge this divide, not just in the Philippines but throughout the rest of the region, offering empowerment through digital solutions and education. The potential for smartphone penetration, which is expected to reach 82% of Asia’s population by 2025 as per the Center for Financial Inclusion, offers an opportunity to leverage technology to provide targeted financial services to the underserved.
Roadblocks to financial inclusion
However, the road to financial inclusion is fraught with challenges. In regions with vast unbanked populations, traditional banking models often fall short. The infrastructure for physical bank branches is inadequate, particularly in rural or economically disadvantaged areas.
Moreover, the unbanked often lack the literacy to navigate complex financial products. While digital payments carry the potential to provide people with a simple and convenient way of performing financial transactions, factors such as a lack of trust or weak internet infrastructure have led to a slow adoption to digital payments.
Finally, the unbanked frequently do not possess the necessary collateral to secure standard loans. Without collateral, the risk factor for banks increases, often leading to higher interest rates or outright disqualification for potential borrowers. This underscores the importance of finding alternative means of securing loans for the unbanked, which do not rely on traditional collateral requirements.
Empowerment through financial technology
The digital revolution brings with it a promise of inclusivity, especially for the unbanked. Technology, when implemented right, is a game-changer for financial inclusion. Digital wallets, online banking, and fintech apps allow users to perform financial transactions from their mobile devices, bypassing the need for physical bank branches. This is especially empowering for underbanked segments, as it offers convenience and access to financial services that were previously out of reach.
But first, this shift would require elevating financial literacy. Education is essential; the public needs assurances that their digital transactions are protected, their savings are secure, and their financial identity is safeguarded. This requires transparent practices from service providers, robust cybersecurity measures, and clear communication regarding privacy policies and user rights.
Cybersecurity measures, including fraud management solutions that detect, analyse, mitigate, and deter fraud attempts, can offer peace of mind and a greater sense of trust among the public. Similarly, the adoption of advanced technologies, such as biometric logins, may add an additional layer of security. This approach helps to safeguard against unauthorised access and identity fraud, making it possible for only the rightful account holders to initiate financial transactions or make changes to account information.
To achieve the broader objective of inclusive finance, financial institutions can enhance loan accessibility for the unbanked by adopting alternative credit scoring methods. These surpass traditional credit histories by analysing transactional patterns, consistent bill and rent payments, asset data from bank accounts, and proof of income. AI technology is playing a pivotal role in this shift, facilitating the processing of a large volume of loan applications. This approach is broadening access to credit and reducing the risk of bias.
Paving the road to financial inclusion
The transformative power of finance lies in its ability to dismantle barriers and foster a more inclusive and equitable economic landscape. Through technological advancements, education, and a dedication to societal values, the finance sector can empower individuals and drive positive change in the world.
The commitment to expanding access to financial services and improving living standards is essential for promoting the aim of powering good within the sector. As finance continues to evolve, its potential to benefit not just the economy but also people and the planet becomes increasingly evident. Ultimately, financial inclusion should be recognised not as a privilege, but as a fundamental right that enables equitable participation in the economy for all individuals, regardless of their socioeconomic status.
