The Global Financial Literacy Survey conducted by the S&P Global Foundation found that only 33 percent of adults worldwide are said to be financially literate. Still, this figure drops to just 20 percent in the developing areas of Sub-Saharan Africa and even lower in their underserved rural areas.
Fintech, a methodical approach to traditional financial services, offers brilliant alternatives through technological scalability and digital accessibility in an efficient and cost-effective manner. While fintech has made its way up the phoenix amongst the tech-savvy urban populace, backward communities and low-income and unbanked sectors have yet to embrace these advances.
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The Financial Literacy Gap
Among the major bottlenecks that make it even more difficult for these communities to leapfrog the fintech solutions are the capability to run finances and financial literacy. Access to knowledge to manage finances, be adept in digital tools, and empower decision-making related to financial health is crucial for the continuity of knowledge amongst under-resourced populations. This is where the local promotion of financial literacy programs comes in. In this blog post, we will discuss the importance of financial literacy for low-income and unbanked communities to adopt fintech solutions and how fintech companies are…
Most of them are valuable in rural and low-income communities. The unavailability of any financial services not only supports the social system examination of economic development but also stops them from joining the entire financial ecosystem. Among low-income communities, one finds that the level of financial literacy has sunk to an astonishingly low point – people have no glimmers of insight into basic money management, credit score importance, or methods for preventing financial fraud.
Such an awareness gap is an important barrier to adopting fintech solutions. Without a reasonable basis for understanding how fintech works, people are less likely to trust and utilize these services for personal financial transactions. Many unbanked persons do not know what mobile banking, digital wallets, or online lending platforms are; thus, there is a lack of faith in their use.
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The Role of Fintech in Empowering the Underserved
Fintech has this power through approachable rates and accessibility of affordable financial services to lift all individuals so that they can successfully cross their thresholds of financial inclusion and build financial stability. However, building up financial literacy in underserved markets is vital for full ease of access of fintech to reach its highest potential. Without the necessary knowledge, the masses may fail to recognize and appreciate the most innovative fintech solutions. Under this circumstance, financial literacy programs become important.
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How Financial Literacy Programs Are Promoting Fintech Adoption?
When the progress of fintech and financial literacy occurs in tandem, there is an incredible opportunity for the two to propel the uptake of digital financial services by underserved populations.
Several fintech companies have begun to appreciate the need for financial literacy and have birthed partnerships with governments, NGOs, and institutions geared towards advocacy for financial education. Such partnerships strive to bring financial literacy programming for specific audiences within the scope of those on low incomes and unbanked, and so on, that will show them the importance of fintech and how it can be used in its full potential.
Partnerships Between Fintech Firms and NGOs
Fintech companies are increasingly partnering with NGOs to offer financial literacy programs to underserved populations. This partnership is sometimes region- and community-specific and aims to fulfill limited financial education and service community access.
For example, PayPal has partnered with the Global Youth Empowerment Fund to deliver financial literacy training to disadvantaged youth in developing nations. Through the partnership, PayPal empowers these youngsters with education about money management, investment strategies, and financial decision-making, besides giving them exposure to PayPal’s digital payment solutions.
Likewise, Mastercard partners with NGOs such as Accion to spread the word about financial literacy in low-income communities in Latin America and Africa through its Center for Inclusive Growth. Such programs aim to help understand personal finance fundamentals and introduce digital technologies such as mobile banking and e-wallets. The initiative has also seen Mastercard partner with small enterprises to boost their digital payment capabilities, improving financial inclusion on an even broader community scale.
Government Initiatives to Promote Financial Literacy
Governments are pivotal in promoting financial literacy and providing financial education for underserved populations. Many have recognized that financial literacy can drive fintech adoption, and in response, countries have initiated programs to promote financial education.
In India, for example, the RBI has launched the NSFE to improve financial literacy among the people. This initiative entails education in the use of digital finance tools and the provision of material information on already established safe means of usage. This is important in a situation where a small population of India has some constraining needs for traditional banking services.
Likewise, in Kenya, the Central Bank of Kenya works with Safaricom (the mobile network operator behind the mobile money platform M-Pesa) to provide financial literacy programs. Such programs teach people how to use mobile money services, save money, and access credit through M-Pesa’s digital platform. The success of M-Pesa in Kenya is a classic example of how fintech can spur financial inclusion, as supplied by relevant financial education.
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Collaborations with Educational Institutions
Many fintech companies have collaborated with universities and schools to offer financial education programs. Such initiatives usually target students, teachers, and parents in underserved areas to equip them with the knowledge they need to make sound financial decisions.
An example of such partnerships is the Visa and National Financial Educators Council (NFEC), which runs financial literacy programs in schools in the United States. Visa’s initiative focuses on educating students on budgeting, saving, investing, and using digital financial tools. Such programs aim at building lifelong skills in financial literacy that will assist individuals in making informed decisions with age.
Another example is Square, the fintech corporation Twitter co-founder Jack Dorsey owns. It has collaborated with educational institutions to ensure that small business owners operating in marginalized communities become financially literate. Square has classroom training sessions where entrepreneurs learn to manage their finances, process digital payments, and grow their businesses with various fintech tools.
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