Susan Lund is a partner at McKinsey and Company in Washington DC and an expert in digital finance in emerging markets. It was refreshing to hear her contribution to this week’s Analysis programme on Radio 4, where she reminded listeners that the digital revolution in finance doesn’t just benefit Western consumers, but is bringing better and cheaper finance to the developing world too.
She pointed out that it costs very, very little to give someone a mobile money or digital financial services account. Crunching the numbers she said that, where on average it costs traditional banks $100 a year to service an account, it costs just $10 a year to service a purely digital based account. The result? It becomes profitable for banks to attract people with much lower incomes. She said: “Financial inclusion is no longer just a philanthropic charitable activity, it becomes a profitable activity for financial institutions, telecommunications companies and other providers”. And for the 2 billion people in emerging economies who don’t currently have access to formal finance, this is very good news indeed.
Joining in the discussion Andrew Lo, Professor of Finance at MIT, was equally excited by the global benefits of digital financial services. “I think that financial technology is the one way that we can democratise the financial system for the world. We can actually do well by doing good and we can see that in areas of sub-Saharan Africa where micro lending through cell phone technology has become very popular. That’s going to change the face of economies through the world.”
It’s easy just to think about the ways our fintech industry is going to make life cheaper and easier for us, how its going to speed up processes, give us more control and insight into our finances. So, its good to step back and remember that for two billion people in emerging economies fintech isn’t just convenient – it can transform lives out of all recognition.
Our strapline at Castlight is “a safer financial world”. It’s good to be reminded that emerging economies are an important part of that world and that fintech solutions we develop in Glasgow can help ensure financial inclusion for millions of people.
You can listen to the full half hour programme, the Fintech Revolution, at http://www.bbc.co.uk/programmes/b096h77f