The concept of financial inclusion is increasingly easier to grasp in Asian countries.
In the past, those who were geographically isolated and did not own bank accounts had no other choice but to remain unbanked, leaving cash as the sole means of transactions.
But as mobile phones allow them to gain access to the world, those unbanked are being nudged into convenience that the digital financial services provide.
“Access to information gives them access to what they need to know so that they can use smartphone technologies to transfer funds -- not just for payments but for remittances to their home country or remote areas,” Rosy Khanna, regional industry director for financial institutions group Asia-Pacific region at the International Finance Corporation, said in a recent interview with The Investor in Seoul.
“Fintech is an enabler, particularly in emerging markets to reach the underserved population. People are becoming more literate in terms of internet and mobile penetration. Affordability of financial services, ease of making financial payments and financial transactions is becoming very important for people in the world today.”
Rosy Khanna, regional industry director for financial institutions Asia-Pacific at the International Finance Corporation
Key takeaways from IFC’s ‘Connecting Korean Fintechs with Asia’
Khanna cited data from the Global Findex Database 2017 by the World Bank Group, of which IFC is a member. Almost half of the total 1.7 billion unbanked population came from eight Asian countries: China, India, Indonesia, Vietnam, the Philippines, Bangladesh, Myanmar and Pakistan.
In the meantime, half of the world’s mobile phone subscribers are in Asia, while two-thirds of unbanked adults own mobile phones globally. By countries, over 50 percent of the unbanked Indians have mobile phones, while 82 percent do in China.
“Marrying the two is an important opportunity for us,” she said.
“The unbanked are sometimes uncomfortable with going to bank branches. They are not familiar with the process. But they are familiar with the mobile phone. So the connectivity that comes from that is really enabling for consumers.”
Such an opportunity is hard to miss for South Korea’s fintech players, she said
“The opportunities are immense,” Khanna said. “It is about merging them, enabling the connection and finding the right fintech services to address the needs of specific needs.”
With almost three decades of experience at IFC financing and investing in projects in the world’s emerging markets, Khanna is now a fintech evangelist. As IFC’s regional industry director, Khanna is committed to the organization’s goal to bring in the technology for financial inclusion by matchmaking financial intermediaries with fintech players. At the same time, from end-users’ perspective, Khanna said she is dedicated to closing the financial literacy gap, coupled with IFC’s impact investing principles such as “Responsible Investing in Digital Financial Services.”
Rosy Khanna, regional industry director for financial institutions Asia-Pacific at the International Finance Corporation, speaks during an interview with The Investor.
In this regard, Khanna is in search of fintech startups to partner with. It could be from Korea, where the financial regulator has swiftly introduced regulatory sandbox environments for fintech players and where open banking API pilots for startups have just begun.
“(Regulatory) sandbox is a great idea. In a controlled environment you are testing innovation, which might be a good thing,” Khanna said.
“You put them together with fintech players in a sandbox and let them try and find the sweet spot,” she said, adding the sweet spot can be created when fintech is applied to help solve a problem under the controlled environment. “It is really about matchmaking.”
This supportive environment, from the Korean fintech players’ perspective, appears to be a blessing and allows them to have a competitive edge against those of other countries.
“One of the progressive types of banks in one Asian country said it wanted to create its own sandbox and incubator to bring ideas, test them out in a safer environment, because from the regulators’ perspective, they don’t want anything to disrupt the financial system.”
Khanna also said fintech in such emerging markets does not necessarily have to be visible to the unbanked.
“Microfinance providers have realized that they really need to reduce the operating cost. They use technology to do that. Technologies can be very simple. Some has to bear the costs. Therefore, microfinance has not been profitable because of the high costs, so they charge high interest rates. High interest rates are not helpful for the population,” Khanna said.
“It is important to identify the right opportunities in the market and find the right partner. These are ingredients for the success for fintech players who want to expand overseas.”
By Son Ji-hyoung (firstname.lastname@example.org)