NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, January 14, 2016

By Alix Murphy

Senior Mobile Analyst at WorldRemit

It’s that time of year again. As a new year rolls on in, once again pundits are predicting the upcoming peaks and pitfalls for the FinTech industry in the year ahead.

Stifle that yawn. Yes, musings on the game-changing powers of Bitcoin, the cloud and contactless payments now seem as hoary as dry turkey, Slade and grandparents falling asleep after Christmas dinner, so here are three FinTech predictions for the year ahead you may not have heard before:

1. Financial inclusion will be taken seriously by big businesses.

Making serious money and reaching the unbanked have not always gone hand-in-hand. Serving low-value customers – particularly those with limited access to existing banking services like current accounts or card payments – just hasn’t been commercially viable for most businesses. The cost of dealing with alternative consumer payment processes often pushes margins too low, and lack of financing options has been the biggest barrier for small businesses to grow or meet large supplier demands.

We’re now witnessing a major shift in thinking as big-name players in payments and other industries are talking openly about the huge opportunity in reaching unbanked customers. No longer just a buzz-term, financial inclusion is increasingly a part of competitive business strategy. PayPal’s CEO Dan Shulman has talked about “democratising finance” in the same way as we’ve democratised long-distance communications – through technology.

Some may be sceptical of PayPal’s motives but I would argue this isn’t just a corporate social responsibility gimmick. There is business to be made out of low-value, high-volume transactions and in bridging the gaps that are leaving consumers and small businesses out of the mainstream economy. Walmart and Coca Cola are just a few other giants that have begun to pursue innovative financing mechanisms for small businesses and products targeted towards underserved consumers. And a swathe of payments start-ups have taken on financial inclusion as a business goal.

Technological innovation is certainly one reason for this shift. But another cause is broader recognition in government and policy circles that ‘digital’ isn’t just for the tech-savvy – digital payments are now being actively promoted by global policymakers as critical to economic stability and financial inclusion for the world’s poorest.

Which brings us to the second point: