Digital technology enhances the role of business models and products, transforming the financial services value chain in the process and claims to advance financial inclusion.

FREMONT, CA: Financial inclusion has recently sparked as much enthusiasm and uncertainty as fintech. Financial services value chains are changing due to the endless variety of new businesses, business strategies, and products inspired by digital technology.

The link between particular innovations and financial inclusion is frequently inferred rather than established, although many fintech companies make this claim. Despite all the publicity around fintech, it is difficult for funders, investors, and social entrepreneurs to determine which technologies are essential for low-income, underserved consumers. As businesses have seen with digital credit in East Africa, the euphoria surrounding fintech can sometimes disguise vulnerabilities it brings to financial systems and low-income people.

According to research at the market level, technology-enabled disruptors are escalating competition for mass market consumers while dismantling vertically integrated value chains in the financial sector, potentially having significant ramifications for financial institutions and underserved consumers.

At the level of individual financial services, observes a variety of new business models emerging among fintech, digital banks, and platforms that allow challengers and incumbents alike to put practical, approachable, less expensive solutions into the hands of underprivileged customers so they can use them to improve their financial stature.

The overall effect of fintech innovation has been to unbundle value chains in ways that may be advantageous for low-income customers and the providers that serve them, even though some business models are more relevant to financial inclusion than others. On the consumer end, this implies that customers have access to a fast expanding selection of financial service providers, frequently with novel models that offer products in a unique form, at a lower price, with fewer prerequisites, and with less administrative red tape. On the back end, service providers can rely on an expanding number of independent fintech companies that provide highly specialised, value-adding, and affordable solutions to fundamental banking procedures. In both instances, bank operations are being redefined by highly scalable innovators.

Organisation views that significant changes will reshape the financial services industry and should increase inclusion. Many new, inventive business models are emerging in the current scenario, many of which are being led by individuals and organisations outside the traditional banking industry that do not identify with legacy banks, their business models, or their methods of providing financial services.