Tuesday, September 27, 2022

Digital Financial Services in Developing Countries

Digital Financial Services in Developing Countries

The digital era has expanded its limitations of deliverance to reach financial services. The World Bank is implementing a strategy to enlarge the adoption of digital financial services in developing countries to answer poverty and suffering economies. The integration of technology and finance (Fintech) in countries where an economy based on traditional services is suffering matured into a beacon of hope where digital finance sources have the potential to transform their economies.

How Does Fintech Help Societies in Developing Countries? 

The concept of an absolute cashless society is not out of reach or even not comprehensible. In countries where the banking system is fractured in some aspects, fintech enters and serves as a mediator between the banking system and societies. Nevertheless, this does not mean the fruition of this plan will not come without difficulties.

Societies in developing countries face the most challenging issues regarding the essential services they need to conduct their finances. Many individuals do not have access to most basic standard financial services. A factor intensifying their reliance on physical cash and, in return, plummeting the opportunity of embracing financial inclusion.

As of 2017, an estimated 1.7 million individuals were classified as “unbanked” due to their restriction and inaccessibility to bank or mobile money provider accounts. Almost a quarter of the world’s population does not have access to fintech solutions.

As a fuel for economic maturation, the fintech industry is now perceived as the booster of countries’ annual economic growth. And this is mainly driven by the integration of digital banking solutions with the traditional ones. For emerging counties to pull themselves out of the cycle of the conventional bearing of the traditional approach – which is critically sinking their economies even further – they have to rely solely on digital payments—the formula to liberate a hastier economic growth.

Through broadened inclusivity, productivity, and infrastructural changes, fintech can deliver more perceptible and concrete financial outcomes to emerging countries. Digital solutions will not only minimize poverty but strengthen gender equality and heighten the capacity of the country’s workforce.

What are the Benefits of Digital Financial Services?

As unreasonable as it is, popularities in emerging countries are the ones suffering the most from financial exclusion. At the same time, beyond any doubt, these populations are in desperate need of inclusion. The fact that almost 80 percent of the global population does not have access to digital financial solutions from banks and financial establishments is creating a critical gap in the global economy. While rich countries make the drastic shift toward fintech-driven solutions, emerging countries as still heavily relying on cash payments, endorsed by the higher interest rates on their incomes going to banks.

To play a supportive role for emerging countries, fintech will have to provide the right financial ecosystem to deliver convenient, cost-effective financial services in order to protect and secure and effectively utilize their financial assets while simultaneously tackling an irregular cash flow and providing a contingency plan for any financial emergency.

For that to happen, fintech solutions must integrate their services with the telecom sector. With the modernization of means of communication, cellular phones and their signal coverage became a crucial player in the spread of financial inclusion. Digitalizing the financial system in developing countries will provide the private sector with the potential to release innovative products to a much more extended market.

How Can Digital Financial Services Help Develop Zambia?

Let’s take, for example, the case of Zambia. Zambia is structuring a plan to provide financial services in all economic sectors as one of Africa’s emerging countries. Similarly, with mobile phones exceeding landlines within the African continent, fintech services can establish the proper banking infrastructure for the country. From there, it would have accessibility to the public on a bigger scale, with a lesser cost and better connectivity, which could not have been fathomable had it not been for mobile devices and extended networks between financial agents.

While the plan is still in its early stages, it will only be successful if all the fintech solutions are developed to meet customers’ needs. Digital financial services in Zambia need to be based on the fusion of mobile operators and fintech companies’ capabilities and services dispatch to bring the country closer to financial inclusion.

Summary

If adopted and adequately implemented, fintech in emerging countries will be a tipping point in reshaping the financial system and the banking sectors by associating with mobile operators and furbishing the way for a new way of managing finances. For countries with timid economies with limited room for growth, fintech solutions will be an enabler of these companies’ entry into the digital era.


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