6 Ways Tech Products Are Key to Accelerating Financial Inclusion

Financial inclusion is transforming, thanks to the intersection of technology and finance. Fintech tools and AI lending platforms are leading this change, making financial services more accessible and efficient for a wider audience, including those traditionally underserved.

These technological advancements are more than just conveniences — they are essential tools for financial empowerment. They streamline the customer experience and introduce innovative lending models, dismantling traditional barriers to financial access.

Discover six ways new technology supports financial inclusion and the implications for your lending business.

Defining Financial Inclusion

Financial inclusion in the lending industry is about making financial services like loans and credit accessible to everyone. This typically includes overlooked consumers, such as low-income groups and people in remote areas.

For example, offering microloans to small business owners in rural locations or personal loans to those with non-traditional income patterns empowers these consumers to participate in the economy. It also broadens your customer base, allowing you to help underserved communities and reach more borrowers.

This benefits your business and fosters a more balanced financial system where more people can access the financial resources they need to thrive and contribute to broader economic growth.

Six Ways Tech Accelerates Financial Inclusion

Financial inclusion is becoming easier for lending businesses with fintech tools and AI-powered lending platforms. These innovations accelerate financial inclusion with improved customer service, financial education, and faster, more accessible lending processes.

Technology’s influence on financial inclusion and its significance for your lending business include the following:

1. Customer Experience

AI-powered technologies improve the customer experience by fostering financial inclusion. For example, mobile banking and banking apps encourage accessibility by bringing banking services to consumers’ fingertips. Between 2017 and 2021, the use of mobile banking among banked households soared from 15.1 percent to 43.5 percent, making it the primary method of account access.

Technology enhances customer experience and financial inclusion through various innovations. These advancements are vital for lenders to attract and retain a diverse clientele in achieving their financial inclusion objectives.

  • Facilitating Financial Transactions. Mobile banking enables users to perform a wide range of financial transactions — from basic account management to complex operations — without the need to visit a bank branch.
  • Offering Tailored Financial Advice. Mobile banking apps provide customized financial guidance, such as savings plans for younger users and simplified loan options for small business owners in less accessible areas.
  • 24/7 AI Chatbot Support. AI chatbots in these apps respond instantly to queries about loan eligibility and assist users through the application process at any hour. This is useful for those who find traditional banking intimidating.
  • Empowering through Financial Tools. Features like real-time account tracking and interactive financial planning tools in these apps help users, particularly those with limited financial experience, to better understand and manage their finances.
  • Enhancing Accessibility and Engagement. These technological advancements make financial services more accessible and appealing to more people, fostering trust and confidence among borrowers.

2. Blockchain and Cryptocurrencies

Blockchain and cryptocurrencies make financial services more accessible and secure for users worldwide. A blockchain is a collaborative ledger that maintains transaction records in interconnected blocks. If data is altered in one block, the unique identifier changes, which can be seen in every subsequent block, making it tamper-resistant.

Cryptocurrencies, built on blockchain technology, offer reduced transaction costs compared to traditional banking, making financial activities more affordable, especially for international transfers. The decentralized blockchain framework opens doors for those traditionally excluded from banking systems and allows lending businesses to reach more customers.

Despite the relative newness of this emerging technology, major international banks and financial institutions are eagerly investing in its development. For financial institutions, this presents an opportunity to tap into a broader customer base and offer more transparent, secure services.

3. Artificial Intelligence and Machine Learning

Artificial Intelligence (AI) and Machine Learning (ML) are transforming the financial landscape by reinventing credit scoring and risk assessment methods. Traditional credit systems often exclude individuals with limited credit histories. However, AI lending platforms use alternative data and sophisticated algorithms to assess creditworthiness more inclusively.

This AI-driven approach enables a broader spectrum of borrowers to access funds. AI lending services analyze patterns and trends in large datasets, allowing for more accurate and fair assessments of loan eligibility and risks. AI democratizes credit access and improves the efficiency and accuracy of lending decisions.

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4. Digital Identity Verification

Digital identity verification technology simplifies the user experience by enabling a swift and secure process. It eliminates the need for time-consuming paperwork and in-person verification, making it easier for users to open accounts, apply for loans, and access other financial services remotely.

Using advanced methods like biometric verification, facial recognition, and secure encryption, digital identity technologies ensure high security and reduce the risk of fraud and identity theft. This streamlines access to financial services and encourages greater participation in the economic system.

5. Peer-to-Peer Lending Platforms

Peer-to-peer (P2P) lending platforms connect individuals who wish to invest money with those needing loans. Borrowers outline their loan requirements and purpose online, offering a transparent and personalized approach to lending.

These lending networks reduce barriers to borrowing by eliminating the need for traditional bank intermediaries and streamlining the loan process. They foster a sense of community as investors support the financial aspirations of individual borrowers and small businesses.

This method opens up credit opportunities for individuals and small businesses that might not qualify for traditional bank loans due to stringent criteria or lack of credit history. P2P lending empowers a broader range of borrowers to pursue their financial goals, giving your institution a wider net of customers.

6. Financial Education and Literacy Tools

Advancements in technology have spurred the development of financial education and literacy tools that contribute to better financial inclusion. From interactive online courses to engaging mobile apps, these products make learning about personal finance accessible and user-friendly.

For instance, consumers can access resources like the Consumer Financial Protection Bureau’s Financial Education for Adults page, which offers worksheets, handouts, and audio recordings that explain various topics. This and other tools on mobile apps or through your lending site can improve financial inclusion by helping borrowers understand their rights and responsibilities when choosing a loan or credit product.

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Accelerate Financial Inclusion with Fintech Solutions

Technology improves inclusion in the financial sector by reshaping access, affordability, and overall user experience. From boosting customer experiences with user-friendly interfaces to opening up new markets and opportunities for lenders, FinTech breaks down traditional barriers to financial inclusion. This helps create a broader, more diverse customer base for lending businesses and boost financial participation for a stronger economy.