As fintech services become more prevalent, these technological barriers present a significant challenge for ensuring everyone can benefit from financial inclusion. According to a 2021 report from the World Bank, 60% of adults in low-income countries remain unbanked, and digital barriers are a significant contributing factor to this exclusion.
In this article, we will examine the issue of the digital divide from the viewpoint of financial inclusion, single out the impediments that the excluded must overcome to reach fintech, and discuss how financial technology companies are solving problems through innovation, networking, and digital access.
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What is the Digital Divide?
The main effects of these inequalities come from disadvantaged families, restricted community locations or provincial/primitive areas, and a lack of education and infrastructure. As far as financial services are concerned, this situation is reflected in the inability to adopt fintech tools, particularly in areas where transportation and communication are inadequate and only a few people are too poor to acquire technological gadgets.
However, the main issue here is the digital divide, the gap in access to the internet, and how it is distributed. This gap affects the poor, those in rural settings, and developing countries more than the rich, some of whom cannot employ fintech services. Technological hurdles like these are the primary cause of financial exclusion. For fintech to be an inclusive technology, these barriers must be overcome.
Today’s rapid digitization has changed how people from varied backgrounds use technology. Finance has been changed by “Fintech” and its digital methods that reduce transaction time and cost. Fintech, one of these companies, wants to contribute to sustainable development and is driven by consumer well-being, making it more relevant.
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Key Challenges for Financial Inclusion in the Digital Age
Limited Internet Connectivity
A reliable internet connection is needed to use several fintech services like mobile payments, online banking, and digital lending platforms. Many impoverished and rural communities lack internet access, especially in emerging nations. According to the ITU, 37% of the world’s population—2.9 billion people—has no internet connection. Rural and distant regions may have a higher number. This lack of connectivity has greatly limited access to digital financial services for underprivileged areas.
Smartphone Penetration
Smartphones are the leading means of accessing fintech tools, particularly among the regions where desktop computers and laptops are not very common. Somehow, even the acquisition of an affordable basic mobile phone has remained unattainable in various underserved communities. A 2020 GSMA report showed that in low-income regions the percentage of smartphone ownership was less than 50%, and in some areas of Sub-Saharan Africa, less than 30% of the people had access to smartphones. In the absence of a smartphone, people won’t be able to use mobile banking apps, a digital wallet, or other fintech solutions to better their financial lives.
Digital Literacy
Despite having smartphones and the internet, many people do not have the skills to interact with digital financial platforms. Digital literacy is about being able to use digital tools effectively and safely. Furthermore, people are so scared to use fintech services because they have little knowledge of the various languages and are not familiar with the platform to understand the service. According to Google, more than 40% of the people in the developing world are not digitally literate, while knowledge about fintech services is very limited in the said communities of the world.
The Role of Fintech in Bridging the Digital Divide
In the context of financial technology, for fintech to be fully engaged in the matter of financial inclusion, companies must be productive and try their best to tackle these technological barriers. The fintech sector is playing a decisive role in tackling the demographic digital divide by creating solutions tailor-made for the needs of the underprivileged members of society. These solutions include innovations in digital infrastructure, mobile accessibility, and educational initiatives aimed at improving digital literacy.
1. Developing Inclusive Digital Infrastructure
The first thing all the users need to do so that the digital divide no longer exists is to build an inclusive digital infrastructure that covers everyone. Fintech enterprises are putting their effort into improving the access to their services using reduced diets to work on slower internet connections, and their applications are also supported on low-end gadgets.
One of the strategies that have been used in this case by the popular Indian mobile wallet and payment platform Paytm (launched by One97 Communications) claims to have focused on the development of services that are “workable” when internet connectivity in the area is very limited. Having a Paytm Mini App Store as well, they host very lightweight applications, and they are compatible with low-bandwidth conditions that enable users to get access to financial services without having to use many data bits.
2. Expanding Internet Access
Indeed, fintech companies, together with the local governments, telecom companies, and NGOs, are involved in projects aiming to connect underserved areas to the internet. Facebook Connectivity and Google’s Project Loon serve as typical examples of initiatives aiming at connecting the unconnected remote by using satellite and high-altitude balloon technologies, respectively. By expanding the reach of the internet into rural areas, these initiatives provide a suitable environment for the development of fintech applications.
Revolut, for instance, and Stripe as fintech companies, are attracted to operations with the data carriers, ensuring the most remote areas are attached to the mobile network, subsequently offering the cheapest data that allows cardless transactions for subscribers. This has the impact of reducing the price for users in rural areas. As they cannot spend so much money on data, they finally benefit by taking advantage of digital financial services that they otherwise would have avoided.
3. Promoting Digital Literacy and Education
To ensure that individuals in underserved communities can take full advantage of fintech solutions, digital literacy must be a priority. Fintech companies are increasingly investing in educational initiatives to help users learn how to use digital platforms securely and efficiently.Visa and Mastercard work with NGOs and schools to provide financial literacy in underprivileged communities. These programs help people manage their money, use financial services, and transact using mobile apps. Visa and Mastercard want people to make informed financial decisions and confidently use digital financial services through these collaborations.
Ant Financial’s Fintech for Good program educates rural Chinese about finance. Online courses and interactive seminars teach digital skills, online banking, and mobile payments, allowing even those with less formal education to engage in the digital economy.
Conclusion
The digital divide is one of the most significant obstacles that must be surmounted in order to attain global financial inclusion. In contrast, fintech companies are more than capable of addressing the challenge by offering innovative solutions that address the technological limitations of internet connectivity, smartphone availability, and digital literacy. Financial technology companies are instrumental in establishing partnerships with governments, non-governmental organizations (NGOs), and other pertinent groups to bridge the divide between underprivileged populations and digital financial services.
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