From 13th to 17th of November, Singapore was thrown under the spotlight as the city-state hosted its second Fintech Festival. Bringing more than 7,000 people in 2016, this year’s edition has brought more than 25,000 people to the EXPO Convention Center in Singapore. Corporates, startups, experts, regulators and investors were invited to share and build the future of finance and technology. Many topics were covered during the week, ranging from the blockchain opportunity to financial inclusion and open-banking. We have spent our week roaming around the festival, meeting startups and attending conferences to paint the most recent picture of the Fintech industry.

On the third day of the festival, three different panels were dedicated to financial inclusion. This issue has even more resonance and importance here in South-East Asia, which has around 60% of its population unbanked. From bankers to blockchain evangelists and credit card providers, we have been able to know more about where the industry is headed to be more inclusive.

The market opportunity for financial inclusion is huge

According to the world bank, there are still 2 billion people without access to financial services in the world today and while we think regions like Europe may be spared, there are an estimated 186 million people without a bank account in Europe. These figures are definitely making the Fintech players drool over the huge opportunity. But when it comes to the unbanked, the challenges are not the same. First of all, there must be an efficient and secure infrastructure to allow onboarding as well as services. Justo Ortiz, CEO of Union Bank and invited to the panel, pointed out the “need to build enabling infrastructures such as regulations, identification and technology, for customers and merchants”. Ann Cairns from MasterCard followed by praising the use of biometrics as a mean of inclusion. She was referring to the Indian Aadhaar system that has enrolled more than a billion citizens into its database (including biometrics and iris scan). This giant database has enabled Indians to have facilitated access to financial services (KYC) and even biometric payment. This kind of government initiative, even if it raises privacy concerns, is one of the examples that show how technology can enable inclusion in a secure and scalable manner.

Go-Jek, the Indonesian ride-hailing company, has recently acquired three Fintech startups to focus on payments in Indonesia

Finding relevance is key

When governments are able to sort out the infrastructure issue, financial institutions still have to find the way to address the needs of a population that doesn’t have the same needs nor the same expectations. The unbanked “don’t need an account in the way we think of” said Taavet Hinrikus, CEO of TransferWise. Becoming visible to the eyes of an authority is an issue for certain categories of people who have spent their life using cash, thinking of staying under the radar. Technology must be able to ensure data security and privacy for these people.

The services also have to match the needs of new categories of population. Juan José Güemes from IE Business School (Madrid) boasted initiatives such as MyCash Online which offers an online marketplace for financial services intended for migrant workers in Malaysia, Myanmar, Indonesia, Singapore, Nepal and Bangladesh. Henri Dommel, Director of Financial Inclusion Practice at UNCDF (United Nation Program) highlighted how the Kenyan mobile money service M-Pesa has enabled 185,000 Kenyan women to switch from subsistence farming to business or sales job and has conquered approximately 96% of households outside Nairobi, lifting an estimated 2% of total households (194,000) out of extreme poverty. He also pointed out that financial inclusion in countries like Bangladesh has increased the gender gap over the years. This insight emphasizes the need for relevance for all the population if mass inclusion is the objective.

M-Pesa has profoundly changed the way Kenyans manage their money

Alternative payments and blockchain can act as enablers

In the past few years, the financial world has been getting more and more involved with the blockchain technology. This technology has brought to life Ripple (real-time gross settlement system), R3 (private distributed database for transactions) or Coins.ph (decentralized alternative to banking in the Philippines), among many others. Mark Jamison, SVP of Innovation at VISA, stressed the fact that “Fintechs are customer-centric, unlike banks”. Indeed, blockchain has emerged from the resentment of a rigged financial system with the goal to decentralize (bypass central banks and even banks themselves), put back the data ownership in the hands of the users, and hence bring back the trust. Change Bank, for example, focuses on aggregating fintechs (robo-advisors, peer-to-peer lending, etc.) giving the opportunity to anyone to access financial services. The blockchain enables greater efficiency, cost and friction reduction to money transfers (both domestic and cross-border) with no need for physical branches. This is where the technology meets the unbanked demand opportunity.

Kristjan Kangro, CEO of Change, is well determined to give a new future to banking

While these services promise more transparency and efficiency for financial services, blockchain enthusiasts may have trouble convincing people that don’t want to be visible. Full digitalization incurs security and privacy concerns as well as scalability unknowns.

Banks are looking at burgeoning startups, they can drag their feet but will face the consequences (Tim Grant, CEO at DrumG Financial Technologies)

Overall, we have felt that a real change is coming to the financial services industry. Led by driven entrepreneurs willing to make a difference, it appears that transparency and openness are the keywords for the new era of finance. With about a third of the world population unbanked, technology will definitely play a role in financial inclusion from onboarding infrastructures (identification, regulation and technology accessibility) to democratized services (blockchain). It’s up to the traditional players to join the party or not.