While significant progress has been made across the globe to improve financial inclusion, it is estimated that about 1 in 3 adults still does not have access to financial services, representing 1.7 billion unbanked people.
Various commitments to this cause have been made by governments via initiatives such as the G20 High-Level Principles for Digital Financial Inclusion and the World Bank’s Universal Financial Access 2020 initiative. The current rallying around financial inclusion has been bolstered by the realisation that better access to financial products and services has far-reaching social and economic repercussions. In fact, it has been identified as an enabler for 7 out of the 17 Sustainable Development Goals set up by the United Nations. On a local level, the Inclusion Foundation estimates that inclusive services could unlock £500m for institutions in the UK and could help British customers save £1.8bn a year.
Alongside public efforts to improve financial education and service provision, startups have an interesting part to play in facilitating the usage of financial services and adapting these services to niche or underserved markets. This includes people with visual impairments, the elderly, independent workers but also women, who are often excluded or disadvantaged by traditional services. Through innovative approaches and new technologies, these startups are able to better address the specific needs of these audiences.
Below we explore some of the ways in which startups are serving the underbanked and contributing to making the financial sector more inclusive.
Solutions for the visually impaired
Testimonies shared by people affected by visual impairments reveal that many innovations brought by the fintech scene have had unexpectedly positive effects on their access to financial services. For example, Alex Man, a consultant in accessibility who has lost part of his sight due to glaucoma, shared that Monzo’s decision to make its debit card bright orange (or “hot coral” as the challenger bank brands it) was beneficial to him as it made it easier to see and find his card even with limited vision.
Overall, the advent of online banking and accessible smartphone applications have removed the need to travel to a physical bank branch and have therefore greatly benefited blind and visually impaired customers. Moreover, biometric authentication, such as Apple’s FaceID and fingerprint recognition which is now available on most smartphones, has also facilitated the payment and transfer experience for those individuals.
Beyond pure fintech services, image recognition technology is also empowering visually impaired individuals to take control of their finances. For instance, Envision has developed a mobile application that describes out loud the surrounding environment. Thanks to ultra-fast Optical Character Recognition technology, the user’s smartphone can read all kinds of characters and even scan barcodes. Low-vision users can, therefore, be more independent in their shopping experience as they are able to know the price and nature of the products in-store. So while not being fintechs per se, startups like Envision do contribute to the financial health of the visually impaired.
Financial innovation for the elderly
The elderly account for a large portion of visually impaired individuals, so naturally, the benefits of fintech solutions experienced by partially or fully blind customers (as described above) also extend to this audience. Beyond this, some startups are designing fintech products aimed at protecting older customers from fraud and financial abuse while helping them better manage their finances.
The WHO estimates that 13.8% of the elderly experience financial abuse in institutional settings (nursing homes, hospitals…). Meanwhile, Age UK claims that every 40 seconds, one older person becomes a victim of fraud. With an ageing population, Europe is bound to see the demand for safe and adequate financial services for the over 60 increase, and many startups are already taking on this opportunity.
For example, Kalgera provides an alert system that helps carers spot unusual activity in an elderly person’s bank account. Meanwhile, Touco (a startup rated by Early Metrics) is developing a card that allows nominated caregivers to do purchases on behalf of older and vulnerable people in a safe manner. Both startups recently received awards at the Open Up 2020 Challenge run by Nesta for their contribution to financial inclusion.
In May 2020, British fintech Contis also launched a “carer banking” service for vulnerable people and their caregivers to respond to the increasing financial pressure and risk brought by the coronavirus pandemic. All these solutions have in common the fact that they limit the amount of money and sensitive information shared with the carers or proxies, therefore reducing the chances of financial abuse.
By leveraging features such as real-time spending tracking and notifications, smartphone-enabled identification, in-app card freeze and other innovations, these startups can therefore allow the elderly to offload some of the burden of managing their finances to their carers. This way they can improve their financial wellbeing, while keeping safe from fraud and abuse.
Improving the financial inclusion of women
According to the Global Findex Report, globally 72 percent of men and 65 percent of women have an account, a gender gap of 7 percentage points. While the difference is more pronounced in developing countries, women across the world generally struggle more to access financing and be financially independent.
A study by Oliver Wyman found that retired women have 30−40% lower balances than men. It also showed that while women control 75% of household spending, they feel 25% less confident in their financial acumen. Furthermore, women are more likely to be uninsured and to be rejected for mortgages than men. All these factors make women more vulnerable than men to financial abuse and poverty.
Although not solely designed for female customers, fintechs for online or mobile saving and investment are making financial services more inclusive of women. For instance, startups of the likes of Oval Money and Goin (in the top 25% of rated startups) allow users to set up big or small financial goals and take steps towards these goals with payment round-up and automatic investment. With lower fees, more flexible investment options and the convenience of access from a phone, such innovative solutions are more suited to female customers who are often risk-averse and wary of taking charge of their finances.
Some companies, both large and small, have created services specifically designed to help empower women with financial education and dedicated funding services. On the startup side, we find companies such as Smart Purse (financial education), Basis (financing), and Ellevest (robo-advisor). On the incumbent side, we can cite Switzerland’s Bank Cler which has created the Eva range of products addressed to its female clients, entailing dedicated financial advice among other products.
From a financing perspective, it has been statistically proven that female business owners have fewer chances of securing funding through traditional routes such as bank loans and VC investments than men do. Hence, the emergence of micro-loans, peer-to-peer lending and crowdfunding have expanded the possibilities for female entrepreneurs and the growth of their businesses.
Fintech for vulnerable workers
There is one other population that has been repeatedly underserved by the financial sector and that englobes a variety of cases: vulnerable workers. These include self-employed individuals, small business owners, freelancers and zero-hour contract workers. With the emergence of the gig economy and the rise in entrepreneurship, the number of individuals with inconsistent income has boomed. The potential precarity of their working conditions, at odds with traditionally risk-averse credit assessment methods, puts these individuals at a clear disadvantage when it comes to accessing financial services.
Much like female customers, vulnerable workers have been presented with more suitable funding alternatives since the arrival of new fintech providers (in the form of micro-loans, crowdfunding, etc.). On top of this, some startups have brought more tailored approaches to meet the needs of these workers. For example, the highly-rated startup Myos provides growth financing to small merchants with flexible repayment plans and using the retailer’s products as collateral.
Another good example is Trezeo, also rated by Early Metrics and a winner of the MIT Inclusive Innovation Challenge 2018. Trezeo develops a mobile app to enable self-employed workers to even out their revenues. It provides them with a bank account, automated short-term and interest-free lending to top up dry months, and automated saving features when activity is up.
Startups that address the ever-changing needs of independent workers generally do so with a data-led approach to credit risk and place flexibility at the centre of their models. With leaner structures, these fintechs can also afford to offer their services at a lower price point than most traditional financial players.
All in all, it is uplifting to realise that smartphone technology, the digitalisation of financial services and the emergence of new fintech products have had several unintended benefits for individuals that were previously financially excluded. But while fintech has improved financial inclusion, there is still progress to be made to guarantee all individuals have equal access to financial services, regardless of their gender, health condition, age or line of work. We continue to believe startups in collaboration with financial institutions are empowering positive change and will continue to do so. With the economic uncertainty brought about by the recent pandemic, these efforts will be ever so needed to help vulnerable individuals protect their financial wellbeing.