I remember brushing off the idea of fintech as just another fad. It definitely was because I didn’t understand what the term ‘fintech’ meant but also because I had been exhausted by the development of products and services at the intersection of finance and technology. And I felt like I couldn’t keep up. But it took me watching just a few videos on YouTube and reading a few detailed blog pieces to understand the range of possibilities that ‘fintech’ could generate.
If I were to explain what ‘fintech’ meant to someone who had never heard of the word before, I would say ‘any technology that aims to make finance easier.’A simple definition, isn’t it?
We are all familiar with the idea of ATMs, aren’t we? Well, they were a cutting-edge fintech development for its period. ATMs allowed users to perform quick financial transactions, especially during periods of crises and urgencies.
In recent times, fintech innovations that have shaped financial systems across the globe include mobile payments, crowd-funding sites, and automated stock portfolio managers among others. These innovations have helped foster an environment of financial convenience while also promoting global collaboration and information exchange.
Learning more about the field is what got me interested to work in the field. This is why I joined Aloi Technologies back in 2021. Aloi Technologies is a social enterprise that aims to use its loan insight software to make green financing more accessible to entrepreneurs, especially women entrepreneurs and entrepreneurs working in rural areas. Aloi disseminates digital tokens that can be accessed via one’s electronic devices to make loan payments and purchase required raw materials for one’s businesses. This business model ties up financial institutions that provide the funding, vendors that supply the required raw materials, and entrepreneurs who require the funding and resources for running their businesses more effectively. I had joined as a grants writer at the organization but I did get to be involved in the workshops and core projects later on.
Working at Aloi helped clear a lot of misconceptions that I had about the field of fintech and blockchain technology. I was also made aware of the financing gap that exists in countries like Nepal where women entrepreneurs are denied financing because of their lack of access to collaterals, lower credit scores, and lower financial expertise. And I also got to learn how fintech had been able to successfully bridge this gap in nations in Africa and other Asian countries.
The rise of fintech has been supported by increasing smartphone ownership, expansion of internet facilities in the developing world, social inclusion efforts, and rapid urbanization. A major shift in the industry was caused by the Covid-19 pandemic which caused health crises, global lockdowns, and supply chain disruptions. This exacerbated the need for the use of fintech
to continue daily business operations. This trend was clearly visible in the massive rise in the use of digital wallets and QR codes for payments in Nepal, with a transaction of more than Rs. 6 trillion being conducted digitally in the fiscal period 2021/22 [1]. This number is expected to increase heavily in the next fiscal period.
Despite the rise of fintech tools in Nepal, internet penetration in Nepal lay at around 38.4% at the start of 2022 [2]. This means that the vast majority of the country is still lagging behind in terms of technological and digital advancement. Added to that, the vast majority of Internet users reside inside the Kathmandu Valley. People living in more rural parts of the country lack access to proper internet services.
This gap is further amplified if we look at it from a more intersectional perspective. According to a 2021 report by Digital Reportal, only 0.9% of women in Nepal have ever made a digital transaction [3]. This number will further reduce for disabled women, queer women, Dalit women, and women belonging to other marginalized backgrounds. Thus, this is something that we need to draw our attention towards.
Even if we look at the global trends, only 1.6% of all fintech firms are run by women and gender-diverse populations [4]. This presents a worrying dichotomy wherein a tool that should be used to bridge existing gaps is building a bridge of its own.
It is important to tackle this gap because it presents a number of social and financial opportunities for nations in the developing world like Nepal.
One of the biggest obstacles to running successful entrepreneurial ventures in Nepal has been the rampant corruption prevalent in public offices that tend to lengthen the legal processing involved in running an entrepreneurial venture. With the use of fintech applications, it becomes easier to register one’s businesses, pay taxes, keep track of the changes in financial laws, and so on. This reduces the need for the intervention of public officials.
Fintech allows automation and prediction. The use of fintech can help in robotic process automation of repetitive and time-consuming tasks like data entry and analysis and consumer services. This creates opportunities for undiverted attention towards further innovation. Fintech can also assist predictions for the trading and risk management industries allowing better financial returns.
All these opportunities can allow people from marginalized backgrounds to better participate in the financial industry. The use of fintech allows cost-cutting in human resources costs, daily maintenance costs, legal operations cost, and so on which suits the development of ventures led by people belonging to those communities.
Making the most out of the range of possibilities guaranteed by fintech can be difficult, considering the infrastructural gaps and research gaps that exist in firms around the world. But making the technologies more accessible and inclusive in their development and operations, continued research and development to make said technologies more environment-friendly, further global collaboration, and focus on integration with existing devices and technologies could allow for a more diverse and sustainable development of the ‘fintech’ industry.
