Fintech for Financial Inclusion
Issued on: Tue, 23rd Feb 2021
By: Bishakha Chaudhury (Edited by Dr Dominic Chalmers)
Dr. Dominic Chalmers from Adam Smith Business School hosted a session with Clyde Gateway on the 21st of January for understanding the challenges and opportunities for research and knowledge exchange with Fintech industries with a focus on financial inclusion. Clyde Gateway is a regeneration program that aims to accelerate social, economic and physical change in the east end of Glasgow.
Dr. Chalmers opened by introducing the term “fintech” as digital solutions that help in the financial undertaking of a business in terms of automation, security, speed, decision-making, predictive decisions and customer experience. The fourth industrial revolution which includes technologies such as block-chain, cryptocurrency and artificial intelligence are disrupting current ways of conducting business. In the fintech sector, these innovations are largely benefiting high net worth individuals and the benefits have not trickled down to those who are more financially vulnerable.
It is anticipated that digital products may pull people away from the big banks and credit advice organization, perhaps even pushing them towards exploitative products (e.g., allowing people to take up credit which they cannot afford). Felix Honecker, who is doing his PhD at Adam Smith Business School, clarified the technical meaning of “financial exclusion” and what it encompasses. He defined financial exclusion as processes where people find it hard to access or use the mainstream financial products that are appropriate to their needs and enable them to lead a normal social life. The basic financial products according to World Bank that everyone needs access to are – Banking, Credit, Savings and Insurance. Exclusion can be complete where a person has no access or have only marginal access to these. A significant part of UK population falls in this category with 1.23million financially excluded and 11million have marginally access only. The effect of financial exclusion on normal social life can be significant. Felix gave the example of how unbanked individuals can struggle with everyday activities. For example, they can experience difficulty accessing high quality housing or being paid for work as employers need to pay by bank transfer. They can even find it challenging to access education when tuition fees need to be paid online. One can only imagine how the current pandemic, which has witnessed an almost complete shift to digital payment, might be disadvantaging some individuals even further.
Nicola Anderson, the Chief Executive at Fintech Scotland pointed out how Scotland is in a unique position to take leadership on the issue. The universities bring in the area expertise and the extensive ecology of fintech companies in Edinburgh, Glasgow and the other major Scottish cities is the perfect environment for growing community-focused, research-informed digital products for the social economy. Fintech Scotland is raising important considerations around the regulation of new financial technologies, with Nicola herself previously working for the Financial Conduct Authority. Nicola emphasised that financial inclusion is not just access to financial products but also increased transparency and provision of financial literacies so that people can manage their personal finances better.
We had Andrew Duncan the founder of Soar – a Glasgow based SME which develops apps and broader systems architecture for use by Credit Unions. Andrew marked out a number of challenges ranging from access to investments in the sector, reaching audiences over different types of device, competition with other SMEs, larger fintech and banks when hiring from a limited pool of people with IT/programming skills to working with legacy software systems of some clients and providing the right client support so that their client is not in breach of data regulation laws. Though credit unions are moving to be digital-first by 2025 however the market is considered to be only at an early stage of adoption.
In the open discussion, some questions were raised about the Skills Development Plan for Fintech and an idea of “grow our own” technical skills. Andrew Duncan mentioned a need to encourage school-leavers especially girls to engage more with programming and IT so that they add to the employable pool. References were made to the Logan Review and the recommendations made there. There are several coding clubs and tech clubs in Glasgow and there is enthusiasm among young people in taking those up. But a challenge is when these budding tech enthusiasts don’t engage enough with school and therefore do not finish their formal education enough to be added to the workforce.