Between 2011 and 2021, the number of adults with a bank account grew 50% and in developing countries, bank account ownership jumped 30%. Clearly global financial inclusion is fast moving up the agenda, meaning neglected markets hold immense potential for fintech startups looking to make an impression. By leveraging their agility and desire for positive impact, these startups can achieve success for themselves as well as bring new economies into the fold.

Importance of financial inclusion

Underserved markets are characterised by limited access to financial services, predominantly cash and cheque payment methods and restricted digital infrastructure. These regions also often have extremely limited access to global financial markets which presents further challenges, particularly for communities that rely heavily on tourism.

For example, the money earned from expenditures by foreigners are crucial drivers of economic development which in turn contributes to increased employment opportunities for marginalised communities.

However, in remote or financially underserved regions, opportunities to exchange to the local currency are limited and can often only be provided by a local banking branch. These additional barriers for tourists in accessing capital puts a drag on tourist spending, stunting overall growth for businesses which eventually impacts the wider economy.

During the pandemic, we saw how communities who were able to fall back on existing technology were also able to continue with financial and commerce transactions against a backdrop of lockdowns and mobility constraints. Unfortunately for those regions which didn’t have the infrastructure already in place, it meant they fell behind their competitors and are now faced with an uphill struggle in order to catch up.

However, the opportunity for fintech companies is not about pressuring consumers to engage in the digital marketplace, although there are advantages for both sides, it’s about being able to offer a suite of financial services products to businesses and individuals for whom this has traditionally been out of reach.

Access to financial services like loans, savings accounts, payment solutions, and insurance plays a crucial role in the advancement of local businesses and the overall prosperity of economies. Firstly, it minimises transaction expenses for households and local businesses which aids financial planning and eases investment in essential sectors like housing, healthcare, and education. It also enhances resilience against detrimental economic downturns, such as the pandemic, particularly for disadvantaged and vulnerable communities.

Unlocking the potential

So why are these markets a goldmine for younger fintechs? Essentially, the bigger players can’t or won’t spend the time laying foundations required for digital payments. Access to global financial markets requires a basic level of digital infrastructure and it can be too time consuming for too small a return for the larger firms.

However, successful fintech startups possess several key qualities that enable them to unlock the potential of these underserved regions. First and foremost, they can leverage technology to provide cost-effective and scalable solutions that can overcome the challenges of operating in resource-constrained environments.

They are also much more flexible than larger organisations. This means they can adapt and create innovative solutions tailored to suit the needs of the locality. Startups that prioritise research and spend time understanding the local environment gain a competitive advantage.

Finally, a customer-centric approach is crucial, as building trust and establishing relationships with key stakeholders in the local community is make or break. Using their knowledge of the environment, startups can engage with local stakeholders, including governments, regulators, financial institutions, and of course, the people. By embracing localisation and investing in user-friendly interfaces, startups can create accessible and inclusive solutions that resonate with the target market.

What does success look like?

Once startups have embedded themselves in the region as a trusted provider, they can tap into the latent demand for financial services which will both contribute to growing the local economy as well as their customer base.

Success is also measured by the social impact created, as these startups uplift communities, reduce poverty, and contribute to overall financial inclusion. Moreover, this is a great way to win attention from investors, paving the way for further growth and expansion into new regions.

The potential for fintechs in serving underserved regions is a win-win for everybody involved. These startups can work with emerging economies to establish themselves as a respected player in the market while also making a lasting impact on global financial inclusion, empowering individuals and communities around the world.