Digital economy to pave way for financial inclusion and social protection.

Byline: Ahsan Nisar

Globally, 69% of adults - 3.8 billion people - now have an account with a bank or mobile money provider, according to the World Bank's Global Findex database. While in some economies account ownership has surged, progress has been slower in some countries often held back by large disparities between men and women and between the rich and poor. The financial sector is witnessing a significant transformation due to technological progress and the role it has played. Over a span of decades, various technological innovations have lead to new business models and products including new methodologies to conduct financial transactions such as invention of ATMs to Core Banking Systems to Peer to Peer Lending. In the recent decade, technological progression has exponentially increased as compared to past decades. The race of innovating a financial product equipped with technology having more efficiency and more customer centricity has led to introduction of new business models.

Account ownership is almost universal in high-income economies where 94% of adults have an account. In developing economies, the share is only 63%. Approximately two billion people worldwide do not have a bank account or access to a financial institution via a mobile phone or any other device. According to Ericsson, out of two billion unbanked people, 1.7 billion hold a mobile phone.

Fintechs are one of the main factors for increase in financial inclusion in developing countries. The conventional brick and mortar model of banks is not cost effective due to higher fixed and maintenance costs. However, the cost effective innovative solution used by the fintechs have made it possible. One of the prime examples is DFS amalgamated with mobile phone technology. The amalgamation paved the way for speedy financial inclusion for the under banked and even unbanked in the emerging economies.

Between 2011 and 2014, 700 million adults have become account holders bringing a steep decline of 20% worldwide in the unbanked population. One of the major driving factors is the total cost of ownership of mobile phone utilization which is observing a declining trend. Moreover, the perception of poor people has changed regrading mobile phone ownership from "luxury" to "necessity". Keeping in view the emerging trend, fintechs were quick to...