How a new wave of fintech firms are bringing access to the world’s unbanked
The post-pandemic economy is seeing mobile operators come of age as global fintech players. In Central and Eastern Europe, Middle East & Africa (CEMEA), what role are they playing in increasing access and financial inclusivity amongst the underbanked and unbanked?
The fintech sector experienced a surge of growth in 2020, recording its second-best year of funding, and raising more than USD 70 billion in investment in H21. In the MENA region alone, investment grew to USD 1 billion2 – a new high for the blossoming sector.
Fintech’s meteoric recent rise has not been a quirk or accident. It can be attributed to decades of slow-burn progress and innovation that emphasized, and addressed, barriers to access and inclusion. As the world went into lockdown, fintech firms across CEMEA became perfectly placed to offer consumers, businesses and communities platforms to help shop, sell and send money, securely.
The new era of commerce, propelled by safety as much as economics, opened the market to payment enablers such as Shopify, Stripe, Paga, Doroki, Paysky and Portmone who were able to support businesses of all sizes in remaining open while much of the world was closed. As the fintech sector proliferated, governments improved licensing and regulation, further accelerating growth.
“This perfect storm of soaring demand meeting supply, balanced out by evolving regulation, has accelerated the digital onboarding of consumers for financial services, enabled online and digital commerce, and sparked consumer interest and appetite for new payment models such as microloans, instalments and Buy Now Pay Later,” said Otto Williams, Head of Partnerships, Innovation & Digital Solutions for CEMEA at Visa. We’ve also seen service providers - such as telecom companies - expanding their financial services offerings from closed loop to open loop models, addressing the needs of consumers and sellers more comprehensively to enable global commerce at scale.”
Access and Inclusion through Open Loop Wallets
In emerging markets across the globe – from Latin America to South-East Asia - telecom companies have a proven history of increasing access for the unbanked and under-banked through digital services.
In the Middle East, a survey conducted by McKinsey3 saw 30 percent of respondents select telecom-company-backed wallets, as the institution with the greatest impact on the future of payments.
In markets such as CEMEA, with over 500 million mobile subscribers in Africa alone, and where mobile phones and internet connectivity are ubiquitous, telecom companies are naturally stepping in to help those without a traditional bank account. By leveraging a global open loop network like Visa, telecom companies are able to expand access to financial services for their subscriber base and accelerate financial inclusion.
“Through partnerships like these, consumers can buy not only from the thousands of agents on the telecom network but from 70 million merchants that Visa has globally. In return, small businesses and retailers in emerging economies will gain access to millions of Visa consumers, helping them drive significant economic growth,” said Otto Williams, Head of Partnerships, Innovation & Digital Solutions for CEMEA at Visa.
This economic impact has spurred telecom companies such as STC in Saudi Arabia and Beeline in Kazakhstan to establish standalone fintechs to meet growing needs. In partnership with Visa, STC has transitioned from a close-loop to an open-loop model, driving expanded offerings to its consumer and merchant base, facilitating financial inclusion, extending its network, driving collaboration and accelerating commerce.
Government and regulatory authorities are another part of this ecosystem, setting up common-sense checks and balances. For instance, digitally enabling Know Your Customer (KYC) processes in the market can accelerate onboarding of the unbanked and under-banked and reinforce the soundness of identity and verification systems. Additionally, establishing and adopting proven global standards can ensure that there is a consistent user experience, which continues to benefit from global innovation and evolving digital capabilities
Charting a path forward through collaboration
As Fintech providers, telecom companies expand access and inclusion for both consumers and small businesses, a critical task in any economy. Programmes such as Visa Ready and Visa Fintech Partner Connect help telecom companies access curated Fintech Enablers with ease and benefit from reduced pricing, and faster launches.
In CEMEA alone, Visa is enabling over 130 partnerships and is engaged in creating a robust platform for further growth.
Visa also acts as a connection between 16,000 financial institution partners and telecom companies, establishing scaled banking relationships for payments and acceptance. “As a financial technology company, Visa is well suited for these partnerships, being a network of networks that spans the globe as the engine of commerce, conducting billions of transactions each day, while delivering advanced cybersecurity capabilities and an extensive suite of Visa APIs to ensure that telecom companies can harness cutting edge technology today and in the future,” stated Otto Williams, Head of Partnerships, Innovation & Digital Solutions for CEMEA at Visa.
The natural synergy between telecom companies and financial services has played a vital part in creating a more robust financial sector – one that powers commerce and provides access to all. As the global economy recovers, the role of telecom companies in empowering consumers, small businesses and the underbanked will be critical for the sustainable success of tomorrow’s post-pandemic world.