How Fintechs Can Drive Inclusivity in Traditional Financial Services
Fintechs have long been at the forefront of innovation, reshaping banking and payment landscapes, as stated in The Fintech Times. They have also played a crucial role in advancing financial inclusion, developing solutions that support underserved communities. However, as the broader financial ecosystem remains dominated by traditional financial institutions, the question arises: Can fintechs influence these institutions to place a greater emphasis on inclusivity? To explore this, industry experts weigh in on the challenges and opportunities in making financial services more accessible.
Monika Liikamaa, co-founder and co-CEO of Enfuce, highlights the hesitance of traditional banks in adopting inclusive and sustainable practices, stating: “A better financial services industry starts with a braver one. Fintechs are defined by our innovation, our ability to move more quickly and take bolder, braver actions in ways that traditional financial institutions can’t.”
She criticizes traditional financial institutions for using what she calls the ‘holy trinity of ESG excuses’—compliance, budget, and security—to justify their lack of action: “Each of these excuses sounds different, but they all say the same thing – ‘not us, not yet, not us.’”
Liikamaa argues that financial institutions have the capability but lack the courage to tackle pressing issues such as climate change, inclusivity, and sustainable growth. She emphasizes that sustainable banking is not just ethical but also good business.
Huw Davies, co-founder and CEO of Ozone API, underscores the importance of collaboration between fintechs and banks: “The fintech industry perhaps started with a vision of David vs. Goliath; with plucky fintechs taking on the big traditional banks. The reality, however, is very different. It’s an industry of collaboration and partnership.”
He explains how open banking is enabling fintech innovation to reach underserved communities. For example, open finance solutions help small merchants in Latin America reduce transaction costs and settlement times, allowing them to transition from cash reliance to digital payments. This shift not only increases safety but also establishes a transaction history that can improve access to credit. “In fact, access to credit is arguably the biggest way banks can improve inclusivity.”
By leveraging alternative data sources, fintechs enable banks to conduct faster and higher-quality risk assessments, helping individuals without traditional credit histories access financing.
Meri Williams, CTO at Pleo, sees AI as a powerful tool for inclusivity if applied responsibly: “Fintechs are known for their role in technological innovation, and as part of this, they’ve highlighted the great potential tech has in improving inclusivity.”
She highlights AI’s ability to remove bias from hiring processes and improve access to financial services. However, she cautions that AI should not replace human decision-making entirely: “Technology, AI particularly, can develop biases based on the person or business that created it, so it should only be used alongside a human who can ensure fair decisions are being made.”
Philipp Buschmann, co-founder and CEO of AAZZUR, emphasizes the importance of regulatory reform: “Regulation is one of the most powerful tools we have, but it’s a double-edged sword. Regulation can kill innovation.”
He argues that blanket regulations often favor large financial institutions while stifling smaller fintechs. Instead, he advocates for a sandbox approach, allowing fintechs to innovate while ensuring compliance. He also encourages collaboration between fintechs and traditional banks to showcase the business advantages of inclusive practices.
Catharina Eklof, CEO of IDEX Biometrics, highlights the potential of biometric smart cards to improve accessibility for individuals with visual or cognitive disabilities: “Biometric smart cards can bridge this gap for people with visual or cognitive disabilities worldwide and who deserve to feel secure, included, and independent.”
She explains how biometric smart cards, which link identity verification to fingerprints, enhance security while eliminating the challenges associated with PIN-based transactions. This technology also incorporates tactile markers to assist visually impaired users.
Chris Chabot, VP Developer Relations at Shardeum, advocates for open-source fintech solutions to ensure inclusivity: “The key solution to ensuring underserved communities are empowered by fintechs is making their technology open-source.”
He argues that open-source technology allows entrepreneurs worldwide to contribute and benefit from fintech advancements, creating a more equitable financial ecosystem. “Open-source doesn’t discriminate against marginalized communities, it values the best contributions. It creates a meritocratic ecosystem accessible to everyone, everywhere.”
The path to greater inclusivity in financial services requires a multifaceted approach. Fintechs can lead the way by pioneering innovative solutions, collaborating with traditional banks, leveraging AI responsibly, advocating for smarter regulations, and embracing biometric and open-source technologies. As these changes take hold, traditional financial institutions may find that inclusivity is not just a social responsibility but also a significant business opportunity.