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What Is Financial Inclusion and Why Do We Need It? – ReadWrite



What Is Financial Inclusion and Why Do We Need It? - ReadWrite

The future of finance can be brighter if it’s accessible to the widest swath of society. Broad-based financial inclusion is the enabler of the Sustainable Development Goals, and achieving it is of utmost importance today.

Digitalization spans the world across different industries and verticals. The financial industry is not an exception. We’re fast-moving to the cashless future and digital financial operations. We used to think it was for the better. Yes, it’s for the better indeed if speaking generally, but not for all. Whom does the existing financial system usually exclude? You might be surprised, but it’s hundreds of millions globally

All these people don’t have checking or savings bank accounts. Consequently, they can’t benefit from digital financial disruptions. The lack of documentation, high costs, long distances, and general distrust of a banking system are the most common obstacles to opening a bank account. While this problem feels sharper in developing and underdeveloped regions globally, it also exists in countries with higher living standards. For example, 7% of the population remains unbanked in the United States, and 4% of UK citizens still have no access to financial services. It negatively affects their lives and the economy in general.   

These people are out of the cashless society and out of the digital economy. Do those who are in want to leave hundreds of millions out? The majority would say no. A sustainable financial future should be for all, with no exceptions. Inclusive finance is a huge step toward this better reality, and fintech has tremendous potential to make it true.

What is financial inclusion and why does it matter?

Financial inclusion is the provision of equally accessible financial services for everyone regardless of their income level. It also means involving underserved individuals, entrepreneurs, and SMEs into the formal economy, in which they can prosper and integrate into a broader market. Both consumers and banks can benefit from it. Financial inclusion empowers people to build their wealth and allows banks to extend their customer base. Governments also benefit from inclusive finance since a more connected society can increase the velocity of money and economic growth.

Financial inclusion matters because it enables everyone to participate in the economy and improve their well-being by incorporating digital technology into daily money operations. All this creates a favorable environment for small businesses, allows individuals to reach their life and financial goals, and contributes to the country’s welfare. 

What happens to the financially excluded

There are four basic types of financial products that have dramatically changed in recent years: credits, payments, savings, and insurance. Almost everywhere globally, people with low income can’t access them due to a range of factors. However, we already have the necessary experience and digital technologies at hand to make these services affordable for broader categories of the population. Low financial inclusion leads to the following four negative causes interconnected with basic types of financial products. 

Limited access to credits

The lack of access to financial services means the inability to take credits and loans for small enterprise owners. It works like a roadblock for them and stops them from investing more and scaling their businesses. Further investing in small enterprises could make them more profitable, improve many people’s lives, and positively affect the economy. Also, banks miss these people as prospective consumers.

No means of making/receiving daily payments

According to The World Bank’s recent statistics, around 150 million people live in extreme poverty, mostly in rural areas. The majority doesn’t have access even to essential financial services, like receiving or making contactless payments. Most of these people are small-scale farmers that sell animal products and vegetables. Among them, many artisans produce and sell ware to local vendors.  

They are all stuck in a cash-based informal economy vicious circle with no access to credit/debit cards and online money transactions. Deprived of mobility, they are also deprived of the opportunity to build their wealth by using the privileges of modern technology.

Inability to make savings and build a financial safety

With no ability to save money on bank accounts and online wallets, people can’t also create their financial cushion and confidence in the future step by step. Savings are critical financial resources that can help people improve their lives in the long run, start their own businesses, and fund kids’ education. 

No access to insurance services

Another negative consequence of insufficient financial inclusion is that low-income individuals and small enterprises can’t access insurance services. Every business faces highs and lows. Taking risks is the entrepreneur’s required step, no matter the niche. Insurance could help them feel more confident in times of vulnerability and avoid financial shock during downturns. Moreover, it would allow them not to get to extreme poverty thanks to the continuity of the cash flow provided by insurance.

How to accomplish financial inclusion

Image Credit: august di richelieu; pexels; thank you!

Financial inclusion is often considered a key enabler of 17 Sustainable Development Goals and one of the ways to decrease the level of poverty in the world. Financial institutions can achieve it through these four approaches to modern finance. 

Increase financial literacy

Financial empowerment of individuals and small business owners is impossible without financial literacy. Educating underserved customers and youth can help them understand essential financial concepts and develop the skills necessary to manage money effectively and reach their financial goals. Finance hasn’t always been as complicated as today. While the economy has been based on cash operations earlier, it actively incorporates e-payments, credit cards, debit cards, and mobile transactions today. As a result, finance becomes more diverse, and understanding key modern financial concepts is critical for full-fledged participation in the economy.

Transparently communicate a service offering

Transparency should be a key value in the thinking of ethical banks, fintech startups, and other financial institutions. It means providing relevant information about the financial management strategy, policy, and assessments to the public in a timely, open, and clear manner. In addition, financial service providers have to prioritize transparency in their messaging to customers to build trust-based relationships and encourage their confidence. The language should be clear, transparent, and simple enough so that every consumer can understand it and trust the company.

Address age, gender, and racial wealth gaps

On the way to reaching financial inclusion, organizations should start targeting segments of society that have been excluded financially before. For example, banks can introduce age-friendly programs to increase the accessibility of financial services for older people and help them understand how they can benefit from specific services and products. 

Also, we should take steps to overcome the gender gap in banking. It is still difficult for women to take out loans or credit in many countries. It’s a significant barrier for many female entrepreneurs that look to get funding and start a small business. Racial wealth inequality takes place in existing financial systems as well. Race remains the main dividing line when it comes to taking credits and loans. 

Traditional banks and fintech companies can narrow gender and racial gaps by introducing new programs to stabilize consumer cash flow, build credits, and create financial resiliency. For example, bank accounts free of overdrafts, early payday services, and account maintenance can help smooth the income volatility. Fintech companies can assist customers in taking loans and credits by using machine learning and AI-enabled data analytics solutions. They can also help consumers boost savings by offering savings accounts, automated savings, and microinvesting features.

Embrace fintech innovations

Emerging technologies and digital innovations shape a new vision of more inclusive finance. E-wallets and mobile fintech applications that allow online peer-to-peer payments are excellent examples of digital products fostering financial inclusion. 

Many fintech startups emerge today with a mission to make personal financial management easier. As a result, we can see more and more startups that offer fintech solutions and services encouraging more mindful spending, saving, and wealth creation. What’s most important: they are designed with inclusivity in mind and aim to make financial services more accessible for different categories of society. 

Setting a new vision of the financial future

Financial inclusion matters. It’s a key direction traditional banks, financial institutions, and startups should take to reimagine a current system that misses a significant segment of consumers and contribute to a sustainable future in general. Emerging technologies like artificial intelligence, machine learning, and biometrics are our allies on the way to reaching this goal. We already have the necessary digital innovations at hand to make financial inclusion closer to reality. Now, just steps toward its implementation are required. 

Dana Kachan

Dana Kachan is the author, keynote speaker, marketing consultant, and startup advisor. She has been consulting tech startups and established companies in the United States, Singapore, Poland, Israel, and Ukraine. Dana has been a guest marketing speaker at the World Digital Weeks 2021 and European Digital Week 2020. She is also a co-author of the book “Business-Driven Digital Product Design.”


Fintech Kennek raises $12.5M seed round to digitize lending



Google eyed for $2 billion Anthropic deal after major Amazon play

London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs



Deanna Ritchie

As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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UK seizes web3 opportunity simplifying crypto regulations



Deanna Ritchie

As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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