Fintechs

As per the table, this is why Fintechs are disruptive: they couple speed to convenience to service a larger customer base compared to traditional banks.

1. Fintechs have more room to onboard customers compared to traditional banks.  Their customer centric approach that focuses on the customer experience through streamlined complex processes make their services user-friendly therefore resulting in fast onboarding. 

2. Additionally, the  absence of a regulatory environment and the leverage of data allows them to constantly  make changes in their business model to reach the masses. 

Fintech has had a tremendous impact on the financial industry. That is undeniable. However, the impact differs depending in which regions of the world Fintechs perform. This is due to the fact that all regions in the world do not experience the same financial inclusion. 

According to the Global Findex Database of the World Bank Group (The Global Findex Database 2021 (worldbank.org)), there is a great disparity between regions.  In Europe & Central Asia Regions, up to 90% of the population above 15 years hold a bank account as of 2021. This high financial inclusion is also true for East Asia and Pacific Region with 83% of the population holding an account and Latin America & Carribeans with a rate of 74% as per 2021.

Whereas in the South Asia Region, this inclusion dropped to 68% and in the Middle East and North Africa it barely passes the 50%  bar with only 53% of the population above 15 holding a bank account. Regarding Sub-Saharan Africa, it is not much different from the Middle East and North Africa Region with a financial inclusion rate of 55%.

Given the above information about the level of financial inclusion, it is clear that regions do not face the same challenges to increase it. Therefore Fintechs’ focus on banking aspects will differ from one region to another.

When it comes to regions with financial inclusion above 70%, Fintech focus is not on how to onboard more people to use financial services but rather on how to keep them engaged with them. For example in the case of Europe, according a recent survey of McKinsey in France, Germany, Italy, Netherland, Portugal, Spain and UK (Europe’s fintech opportunity | McKinsey), showed that  bank account owners engage with Fintechs seeking better services when it comes to services pricing, ease of access, speed, quality and improvements. For these European account owners, services pricing matters as much as ease of access with 32% of customers engaging with Fintechs because of a positive difference in these aspects. Whereas 30% of customers engage with Fintechs because of speed of service while services’ quality matters for only 22% of the customers and improvements for 17%.

For the Middle East and Africa, Fintech focus is still on how to onboard as many people as possible to use financial services. That is because transactions in these regions are still very ‘liquid’ with up to 90% of transactions still happening in cash. This is especially true for Africa (Fintech in Africa: The end of the beginning | McKinsey). 

Although Fintechs applications differ from one part of the world to another, the sector still have beautiful days ahead with a CAGR of 74.16% by 2025 (Global Fintech Market - Size, Outlook, Trends and Forecasts (2019 – 2025) (envisioninteligence.com)).