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As fintechs are raising millions to address 1,6 billion unbanked people in emerging countries, they need to adapt their products to local infrastructure and culture in order to make their services really work for people.

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Have you ever considered what your life would be without a credit card or even a bank?

Well, about 1.6 billion people across the globe are considered as unbanked [1] and do not have access to any form of financial services, which result in social exclusion. This thrilling topic had its own dedicated talk at Money2020, the largest fintech event in Europe, which took place in Amsterdam last week. Let's have a further look!

The new hype over Central Bank Digital Currency (CBDC) in China shows how critical financial inclusion is for emerging countries. This represents therefore a massive opportunity for banks, fintechs and governments to think of a brand new financial system powered by the most recent technologies. No opportunity without challenges: expanding the financial system to emerging countries means addressing different users with their own needs and new constraints.

3 key challenges to build the right products for these new markets:


  • Adapt to existing infrastructures to build usable products

    The European financial system cannot be literally transposed to emerging countries. For instance, African countries do not have the necessary banking infrastructure, and do not operate in the same way: credit cards do not exist! Frédérique Slevin (VP, Head of Retail Payments Product Management at ACI Worldwide) did mentioned : even though European people are replacing cash & credit cards by credit cards & mobile payments, African population is jumping straight from cash to mobile payment.

    In order to adapt to this high take-up of mobile payments, fintechs need to rely on the massive use of smartphones. The question of authentication (KYC), one of the main problem for the unbanked, is solved by using the mobile camera rather than physical means of identification.

  • Ensure transparency to protect customers

    Trust cannot be built by leaving the customer in the dark. Emerging countries do not have the same technical knowledge as Western countries: they do not necessarily know how their data is stored and used. Thus, GAFA should not take advantage of this difference and remain transparent about the use of their new customers' personal data. On the contrary, they should enable them to make informed decisions about the use of this data. As Marcus Hughes (Managing Director, Coinbase) said: "If you lose their trust, you lose your business".

    A way to ensure this transparency would seem to rely on the introduction of ethics and transparency clauses. This climate of trust and honesty between fintechs and customers appears to be critical in developing countries and would lead to rapid and massive consumer support. Nevertheless, these clauses are not sufficient on their own: consumer education on finance is essential.

  • Educate customers to build trust and spread knowledge

    To quote Wim Mijs (CEO of the European Banking Federation), the population likes Google but does not trust it, the population does not like banks but do trust them. Many companies base their business model on the monetization of personal data, which frightens consumers.

    Trust might be the most critical aspect of tomorrow's finance. As pointed out by Marion Laboure (Senior Economist at Deutsche Bank / Professor of economics at Harvard), the lack of financial education in those countries puts a brake on economic development. Only a small part of the elite has access to financial literacy and knowledge, while the rest of the population remains in the dark.

    Therefore what used to be done through complex literature now has to be offered through intuitive and user-friendly applications.

However the thorny question of accountability remains, especially in Africa where some populations have very little confidence in their government. The urgency of regulation must not hold back development for sure, but how do you protect consumers while promoting innovation? Should regulation apply equally to start-ups, scale-ups and banks?

The answers to these questions remain unclear and do not allow for serene progress. Thus, future discussions will have to focus on establishing clear and well-defined rules of the game to best protect end-users.

[1] https://www.gfmag.com/global-data/economic-data/worlds-most-unbanked-countries