Despite the technological advancement of this era, 1.4 billion people globally remain without access to basic banking services. This financial exclusion creates barriers to economic mobility, particularly in developing regions where traditional banking infrastructure is often inadequate or inaccessible. However financial technology stands as a catalyst for change, offering innovative solutions that are steadily closing this inclusivity gap.
The expansion of digital financial services has already demonstrated promising results, with bank account ownership in developing countries surging from 42% to 71% between 2011 and 2021. Yet the journey toward comprehensive financial inclusion remains incomplete, presenting both challenges and opportunities for fintech innovators willing to venture into underserved markets. In this article we will be examining how fintech is revolutionising inclusion through specific innovations that are reshaping the global financial landscape.
The Persistent Challenge of Financial Exclusion
Financial exclusion represents more than just the inability to access banking services, a systemic barrier to economic participation that disproportionately affects vulnerable populations. Those without financial access face obstacles in saving, investing, and ultimately building secure futures. The consequences extend beyond individual hardship, creating broader economic inefficiencies and perpetuating cycles of poverty.
The traditional banking model, with its reliance on physical branches, extensive documentation requirements, and profit-driven assessment metrics, has historically struggled to serve lower-income populations profitably. This has created vast "banking deserts" where communities remain entirely disconnected from formal financial systems. For fintech innovators, these underserved markets represent not just a social responsibility but a substantial business opportunity to develop new models that can profitably serve previously overlooked customer segments.
Digital technologies have dramatically altered this calculus, reducing marginal costs of financial service delivery to near-zero levels and creating business models for serving the financially excluded. This shift isn't merely incremental but transformational, allowing for entirely new approaches to financial inclusion that bypass the limitations of traditional banking infrastructure.
Real-Time Payment Rails: The New Financial Backbone
Perhaps no fintech innovation has had more impact on financial inclusion than real-time payment systems. These platforms enable instantaneous money transfers, operating continuously and making funds immediately available to recipients. Unlike traditional banking systems with their cumbersome processing times and limited operating hours, real-time payment rails offer unprecedented convenience and accessibility.
The United Kingdom's Faster Payment System exemplifies this transformation, processing 5.09 billion transactions valued at £4.2 trillion in 2024. However, the most revolutionary implementations have emerged in developing economies. India's Unified Payments Interface (UPI) processed ₹23.49 Lakh Crores across 16.58 billion financial transactions in October 2024 alone, marking a remarkable 45% year-on-year growth.
Similarly, Brazil's Pix system has become an integral component of citizens' lives and business environments, dramatically expanding financial access in a country with historically high banking exclusion rates.
What makes these systems particularly transformative is their ability to function as "on-ramps" to the broader financial ecosystem. Research consistently shows that individuals who engage with digital payment platforms subsequently become more likely to utilise savings, credit, and insurance products. This cascading effect amplifies the impact of payment innovations, creating pathways to comprehensive financial inclusion that extend far beyond simple transaction capabilities.
Understanding these dynamics isn't merely academic. It represents a blueprint for market expansion. Companies that can integrate with these real-time payment rails or develop complementary services stand to benefit from rapidly growing user bases and transaction volumes in previously untapped markets.
Biometric Authentication: Eliminating Access Barriers
As digital financial services proliferate, ensuring secure yet accessible authentication becomes crucial. Traditional authentication methods often create insurmountable barriers for certain populations. PINs challenge those with cognitive impairments or limited literacy, while physical ID requirements exclude individuals without formal documentation. These seemingly minor hurdles have historically prevented millions from accessing financial services.
Biometric authentication offers an elegant solution to these challenges. By using unique physical characteristics like fingerprints or facial features, these systems provide secure verification without relying on memorisation or documentation. The impact on financial inclusion has been particularly significant in South America, where financial institutions have successfully used biometrics to authenticate the identities of previously unbanked individuals seeking to open accounts.
India's Aadhaar system, the world's largest biometric identification program, demonstrates this potential at an unprecedented scale. By linking Aadhaar to bank accounts, the government can transfer benefits directly to beneficiaries, eliminating intermediaries and reducing leakages. This direct connection between identity and finance has created an infrastructure for financial inclusion that private companies can leverage to deliver additional services.
Beyond expanding access, biometric authentication enhances security and reduces fraud. In India, pension fraud has decreased by 47% since implementing biometric verification, demonstrating that inclusion and security need not be competing priorities. For individuals with disabilities, these systems offer particular benefits, allowing those with visual impairments or memory conditions to make payments independently without remembering complex PINs or passwords.
The business implications are substantial: companies implementing biometric authentication can simultaneously expand their addressable market while reducing fraud-related losses. This alignment of social impact with commercial incentives creates a cycle that accelerates adoption across the financial ecosystem.
AI-Driven Personalisation: Tailoring Finance for the Excluded
Artificial intelligence represents perhaps the most promising frontier in fintech's push for inclusion. By analysing vast datasets in real-time, AI systems can deliver personalised financial services that address the specific needs and circumstances of diverse user groups, including those traditionally excluded from the financial system.
For the unbanked and underbanked, alternative credit scoring stands out as AI's most valuable application. Traditional credit assessment relies heavily on formal credit histories, creating a catch-22 for those without banking relationships. AI-driven models can evaluate creditworthiness using alternative data sources like mobile phone usage patterns, utility payments, and even social media activity, opening new pathways to credit for individuals who may be financially responsible despite lacking conventional credit histories.
Companies like Personetics are pioneering AI solutions for personalised banking experiences. These platforms analyse spending patterns and financial behaviour to deliver advice and product recommendations, increasing customer engagement by 20-30% while significantly reducing attrition rates.
Similarly, Kasisto's conversational AI platform, KAI, offers language processing capabilities that transform raw customer data into actionable insights, improving cross-sell opportunities and creating more intuitive user experiences.
The business case for AI-driven personalisation is compelling. Organisations making significant AI investments typically see an ROI uplift between 10% and 20% on their sales efforts. This alignment of financial inclusion with commercial objectives creates momentum for continued innovation and outreach to underserved markets critical consideration for fintech companies seeking both impact and profitability.
Global Case Studies: Inclusion Innovation in Practice
The transformative potential of fintech for financial inclusion is perhaps most evident in developing economies, where innovative solutions have leapfrogged traditional financial infrastructure to reach previously excluded populations.
M-Pesa in Kenya represents the quintessential success story. Launched as a simple mobile money transfer platform in 2007, M-Pesa has evolved into a comprehensive digital ecosystem integrating banking, commerce, and lifestyle services. The impact has been profound-Kenya's financial inclusion rate has soared from 27% in 2006 to over 83% in 2023, with more than 1.4 million previously unbanked Kenyans now participating in the formal financial system.
M-Pesa processes over $314 billion annually in transactions and handles 61 million transactions daily, making it one of Africa's most utilised payment platforms. This widespread adoption has transformed how individuals and businesses operate, creating a more seamless, cashless economy that benefits even the most marginalised communities.
In Brazil, the microlending platform Prospera demonstrates how fintech can streamline access to capital for underserved entrepreneurs. By leveraging digital processes, Prospera reduced credit approval time from 10 days to just 10 seconds and has provided $2 billion to more than 700,000 business people, a quarter of whom live below the poverty threshold. This acceleration of credit access enables small businesses to seize opportunities and navigate financial challenges with unprecedented agility.
China offers another compelling case study, where mobile payment platforms have achieved near-universal adoption. These services have transformed everyday transactions, from purchases at modern shopping centres to payments at street food vendors, demonstrating how digital financial tools can become embedded in the economic fabric across all income levels and geographies.
Regulatory Frameworks: Balancing Innovation with Protection
As fintech reshapes financial inclusion globally, regulatory frameworks play a crucial role in determining whether these innovations flourish or falter. Effective regulation must balance enabling innovation with protecting vulnerable consumers and maintaining financial stability, a complex equilibrium that varies significantly across markets.
Based on work in 10 countries across Africa and Asia, CGAP (Consultative Group to Assist the Poor) has identified four essential building blocks for creating an enabling digital financial services regulatory framework. These include providing a legal basis for diverse providers to serve the underbanked, establishing mechanisms to address digital financial service risks, accommodating innovation while ensuring safety, and implementing proportionate regulation that avoids imposing undue compliance costs on often low-margin providers.
India's regulatory approach to UPI offers an instructive example of this balance. The system has made rapid strides in advancing financial inclusion while simultaneously preserving consumer protection and financial stability. This success suggests that well-designed regulation need not impede innovation but can instead provide the foundation for sustainable and inclusive growth.
Regulatory sandboxes are controlled environments where fintech companies can test innovative products under regulatory supervision before wider release and have emerged as a tool for managing innovation and protection. These frameworks allow regulators to observe new technologies in action, identify potential risks, and develop appropriate oversight measures without stifling beneficial innovation.
For fintech companies operating across multiple jurisdictions, navigating this complex regulatory landscape requires sophisticated compliance strategies and proactive engagement with regulators. Those that can effectively partner with regulatory authorities to shape inclusive frameworks stand to gain significant competitive advantages in emerging markets.
Digital Financial Literacy: The Missing Link
Even the most innovative and accessible financial tools will have limited impact if potential users lack the knowledge and confidence to utilise them effectively. Digital financial literacy represents a crucial component of any comprehensive inclusion strategy, one that is frequently overlooked in technological discussions.
AI-based virtual assistants and personalised financial education programs provide valuable insights into budgeting, saving, and investing, helping users make more informed decisions about their finances. This democratisation of financial knowledge is essential for empowering underserved communities and fostering long-term economic growth beyond mere access to services.
Effective financial literacy initiatives require partnerships between fintech companies, educational institutions, and community organisations. These collaborations can create targeted training programs that address specific barriers faced by different populations, from language limitations to technological unfamiliarity. The investment in these educational initiatives often yields substantial returns through increased product adoption, higher transaction volumes, and improved customer loyalty.
Infrastructure Investment: Building the Foundation
Underlying all fintech-driven financial inclusion efforts is the fundamental need for robust digital infrastructure. Without reliable connectivity, even the most innovative financial solutions remain inaccessible to many potential users, particularly in rural or remote areas.
Telecommunications companies and technology providers are making significant investments to address this challenge. For example, e& recently pledged $6 billion to provide accessible and affordable network connectivity and digital services across 16 countries in the Middle East, Africa, and Asia between 2024 and 2026. In Pakistan alone, e& has brought fibre broadband to over one million homes with plans to connect millions more in the coming years.
These infrastructure investments create the foundation upon which inclusive fintech ecosystems can flourish. Companies that strategically align their product development and market entry with infrastructure expansion can gain early mover advantages in rapidly digitalising markets, establishing brand presence and customer relationships before competitors arrive.
Collaborative Approaches: The Path Forward
Achieving comprehensive financial inclusion requires collaboration across sectors and stakeholders. No single entity, whether a fintech startup, an established financial institution, a telecommunications provider, or a government agency, can address all dimensions of financial exclusion independently.
Public-private partnerships offer particularly promising pathways to scale inclusion initiatives. Government agencies can provide regulatory frameworks and public infrastructure, while private companies contribute innovation, capital, and customer insights. When aligned around shared inclusion goals, these collaborations can deliver solutions that neither sector could achieve independently.
Cross-industry partnerships between fintech startups, traditional banks, and regulatory bodies will accelerate innovation in personalised financial services. These collaborations leverage complementary strengths: the agility and technological sophistication of fintech companies, the scale and regulatory expertise of established institutions, and the policy perspectives of regulatory authorities to create more comprehensive and sustainable inclusion solutions.
For fintech businesses, identifying strategic partnership opportunities represents a critical component of successful inclusion strategies. Companies that can effectively collaborate across sectoral boundaries position themselves to access new customer segments, leverage existing distribution networks, and navigate complex regulatory environments more effectively.
Conclusion: The Business Case for Inclusive Finance
Financial inclusion represents not only a moral imperative but also an extraordinary business opportunity. As billions of previously excluded individuals gain access to digital financial services, they create massive new markets for everything from payments and lending to insurance and investment products.
The fintech companies that will thrive in this environment are those that effectively combine technological innovation with human-centred design and responsible business practices. By developing solutions that genuinely address the needs of underserved communities while building sustainable revenue models, these organisations can simultaneously drive shareholder returns and positive social impact.
Forward-thinking fintech professionals should be asking how their organisations can participate in this inclusion revolution. Whether through developing new products for underserved segments, partnering with established players in emerging markets, or advocating for enabling regulatory frameworks, there are numerous entry points for businesses seeking both purpose and profit.
The next frontier of financial technology isn't merely technological, it's fundamentally human. By focusing on removing barriers that prevent full financial participation, fintech can fulfil its transformative potential, creating truly inclusive ecosystems that empower individuals, strengthen communities, and build more resilient economies worldwide. This isn't just good ethics, it's good business, opening vast new markets while addressing one of our era's most pressing socioeconomic challenges.
