Authors: Pablo Pérez Akaki, regional leader in CDMX for the FAIR Center of Business School of Tecnológico de Monterrey, y Martha Silvia Domínguez, independent consultant.
Fintech plays an important role within financial inclusion, as it constitutes a way for the democratization of finance in society.
Today, financial inclusion has become a very relevant issue, this is due to the role that finance plays in promoting the transformations of companies in any sector. In this paradigm, financial technology companies or Fintech (acronym for financial technology) have appeared as attractive solutions to serve those who are not yet part of the formal financial system. Therefore, this sector can increase financial inclusion, as well as greater well-being of society, derived from the prosperity of productive activities.
What does it mean to be financially included?
Financial inclusion is a concept that has been widely discussed in recent years, due to the recognized importance of the instruments and services offered in financial markets with the aim of promoting the development of societies. In other words, if we want to prosper as individuals, families and societies, it is necessary to have robust financial knowledge that allows us to use the products and services offered in financial markets to improve living conditions.
The evolution observed in recent years in the financial field has been characterized towards technological innovation guided by Fintech ventures.
From a more formal point of view, according to the National Banking and Securities Commission (CNBV), being financially included means having “access and use of formal financial services, under appropriate regulation that guarantees protection schemes for users.” and promote financial education to improve the economic capacity of all segments of the population.”
What the authority refers to is that there must be sufficient knowledge about the different financial products and services so that companies and people can use them (in the most appropriate way), while the providers can do so in a competitive and fair manner. for society.
Notwithstanding the above, the results of these public sector efforts have not been very encouraging, since, according to the results of the 2021 National Financial Inclusion Survey (ENIF), the number of people with at least one product financial, decreased proportionally compared to the references of 2018 and 2015, where magnitudes of 68.3 and 68.4% were reported (respectively), while, for 2021 it was 67.8%. This result, differentiated by gender, shows a divergent behavior, since for men it increased from 71.8 to 74.3% between 2018 and 2021; For its part, for women it decreased from 65.2 to 61.9% in the same period, which highlights the differences associated with gender.
The same report shows the differences that exist in financial inclusion in the regions of the country, having its highest level in the northwest: proportion of 77% of the population with at least one financial product; in the southern zone with 60.1%, as seen in the following table.
|
Región
|
Entidades
|
2021
|
2018
|
|
Mujeres
|
Hombres
|
Mujeres
|
Hombres
|
|
Noroeste
|
Baja California, Baja California Sur, Sonora, Chihuahua, Sinaloa y Durango
|
71.0%
|
80.7%
|
79.7%
|
85.0%
|
|
Noroeste
|
Coahuila, Nuevo León, San Luis Potosí, Tamaulipas
|
71.2%
|
83.1%
|
68.7%
|
82.4%
|
|
Occidente y Bajío
|
Nayarit, Zacatecas, Aguascalientes, Jalisco, Guanajuato, Querétaro, Colima y Michoacán
|
64.0%
|
74.9%
|
60.4%
|
73.5%
|
|
Ciudad de México
|
Ciudad de México
|
71.8%
|
77.1%
|
72.5%
|
71.7%
|
|
Centro Sur y Oriente
|
Hidalgo, Estado de México, Tlaxcala, Puebla y Veracruz
|
53.1%
|
72.6%
|
57.7%
|
63.3%
|
|
Sur
|
Guerrero, Oaxaca, Chiapas, Tabasco, Campeche, Quintana Roo y Yucatán
|
57.7%
|
63.0%
|
68.4%
|
66.8%
|
Source: own elaboration with data from the ENIF 2021.
On the other hand, when comparing financial inclusion in Mexico with other parts of the world, as well as its evolution in the last decade, it is observed that the levels are significantly lower than the references contained, including the average data in Latin America and the Caribbean, as well as like in the world. It is also highlighted that this behavior is improving over time, particularly between 2017 and 2021, derived from the boost that digital financial services had during the health contingency.
Proportion of people with a financial product in various parts of the world (2011 to 2021)
Source: own elaboration with the Global Findex Database 2021 database.
This health emergency was the perfect scenario for a boost to digital financial services, which had already begun to be present through the so-called “Fintech revolution”, which has meant an important transformation towards the creation of financial products and services based technological.
Therefore, it is highlighted that the emergence of Fintech services is considered a way for the democratization of finance in society, where historically there have been large groups excluded due to their vulnerable economic condition.
Fintech disruption
A fintech is defined as follows: “It is a nascent industry in which companies use technology to provide financial services in an efficient, agile, convenient and reliable manner.” Given the large number of initiatives that, in recent years throughout the world, have been emerging with this concept, it has been considered that they can represent the means to drastically promote financial inclusion, since in its report entitled State of financial inclusion after of COVID-19 in Latin America and the Caribbean: new opportunities for the payments ecosystem, Mastercard notes the following: “They are offering consumers new digital user experiences, lower fees, access to e-commerce and digital financial education. In the last five years alone, digital wallets have democratized access for more than 115 million people.”
Financial inclusion has become a very relevant issue due to the role that finance plays in driving the transformations of companies in any sector.
The wide variety of needs for financial products and services that societies have has allowed the promotion of these financial companies throughout the world, finding opportunities to generate value for society in digital payments, virtual assets (cryptocurrencies), platforms for investment in markets, financial advice for investment and credit, collective financing (crowfunding), platforms for acquiring insurance (insurtech), among others.
The success of these organizations has been so important that it has motivated traditional financial entities to develop significant efforts for their digitalization, which led, in some cases, to building alliances between traditional entities and Fintech, as well as significant investments by the former. , for the creation of what is now known as digital banking.
But perhaps the most important result of the emergence of Fintech has been the inclusion of large sectors of the population ignored in traditional financial systems, offering a vehicle to approach digital financial products and services, as reported by FinTech Mexico in its 2023 report, indicating that 42% of the users of this technology had no prior experience in financial markets.
In the same study, it was found that 9% of the clients of these companies are micro (less than 10 workers), 25% are small (less than 50 workers) and 32% are medium (up to 250 workers), which shows the important orientation towards segments that are not traditionally included financially.
In this way, the number of people and companies that are financially included is growing and contributes to productive development. That is why it is important to establish a regulatory framework that allows them to grow in society, while offering guarantees for participants, since it is worth remembering that these entities work with third-party resources, therefore, poor functioning or perverse incentives They can generate major economic problems.
Likewise, it is important to highlight the effort that governments must make for the transparency and profitability of social investments, since without a doubt, one of the biggest fears of digitalization is the traceability of financial operations and, with it, oversight. of people and companies that, by not accepting the way in which public resources are administered, decide to stay outside the formal financial system.
Financial inclusion is a concept that has been widely discussed in recent years due to the importance of the instruments and services offered in financial market
Conclusions
The evolution observed in recent years in the financial field has been characterized towards technological innovation guided by Fintech ventures, which generally start from innovative ideas that solve unmet needs of society in financial matters. But this type of innovation is not exclusive to finance, therefore, we must be attentive to the way in which businesses are changing in the industry so as not to be left out of competition in the markets.
Just as the term Fintech was coined, others have appeared under the same spirit, which do not necessarily talk about finances, but are closely related to the way in which they evolve and the way in which resources are funded to make the company grow. the companies. Now we hear about Agtech, Foodtech, Insurtech, Climatech, Innovatech, Proptech, Edtech, Femtech, Biotech, Retailtech, Healthtech and more and more terms, which are based on technological innovation to promote society's solutions in their respective areas. sectors.
It is time to open the antennas and study how evolution is taking place in the economic sector to begin to consider innovations and not be left out of them, as this would mean the loss of competitiveness, as well as a serious threat to the survival of the business. To innovate requires resources that Fintechs are interested in offering, as well as accompanying these transformation processes in any sector.
________________________________________
References
• CNBV, 2020, Inclusión Financiera, 2024, de Gobierno de México: https://www.gob.mx/cnbv/acciones-y-programas/inclusion-financiera-25319
• Inegi 2021, Encuesta Nacional de Inclusión Financiera (ENIF) 2021, 2024, de Inegi: https://www.inegi.org.mx/programas/enif/2021/#documentacion
• Banco Mundial, 2021, Global Findex Database 2021, 2024, de World Bank: https://www.worldbank.org/en/publication/globalfindex/Data
• Mastercard, 2023, Nuevo estudio de Mastecard revela el impulso de la inclusión financiera en América Latina y destaca las brechas que faltan por cerrar, 2024, de Mastercard: https://www.mastercard.com/news/latin-america/es/sala-de-prensa/comunicados-de-prensa/pr-es/2023/junio/nuevo-estudio-de-mastercard-revela-el-impulso-de-la-inclusion-financiera-en-america-latina/
Originally published in Veritas.