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“FinTech to favour financial inclusion: is digital an opportunity or a threat for financial inclusion? A look at the under-banked and under-served populations & regions” was the topic of the last afternoon of the ICT Spring’s FinTech Summit on September 15th.

The master of ceremonies, Nancy Thomas, Director IMS Luxembourg, started this last afternoon session with a presentation of her organization. Inspiring More Sustainability (IMS), for more than 10 years, has been the leading network of Luxembourg companies involved in Corporate Social Responsibility (CSR). IMS explores new solutions and concretely tests sustainable alternatives, thanks to working groups and pilot projects with positive impacts. Through these projects, IMS facilitates innovative initiatives by mobilizing all stakeholders (private, public and associative).

The first speaker was Martha Mghendi-Fisher, Founder & Executive Board Chair, EWPN, African Women in Fintech and payments, who made a speech based on the question: “Can Fintech Make the World More Inclusive? Exploring opportunities and challenges”. Like Olusegun Adeniyi said in the morning, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services. Worldwide, 1.7 billion adults lack access to basic financial services, mostly in Asia and Africa and more than half are women. Martha Mghendi-Fisher then highlighted FinTech's opportunities for growth. Mobile phone data is the key to promote financial inclusion. Out of 1.7 billion unbanked, 1.1 billion own a mobile phone. Islamic FinTech is also a tool for financial inclusion as the unbanked population is dominated by Muslim-populated countries that comprise almost 50% of the world’s unbanked population. Women consumers are also a huge untapped opportunity for financial service providers with a huge potential and business case of serving women.

The organizers then welcomed (virtually) Gayatri Murthy, Financial Sector Specialist, CGAP, for a talk about “Financial Infrastructure and Inclusive Markets for Low Income Communities”. “The pandemic disproportionately affected the poor”, Murthy stated. The impact has been particularly felt by women and small businesses, that are a livelihood for the poor, hit hard. In this context, the pandemic has been a test for how well government payments can reach people with key issues such as eligibility, reach and adequacy. In emerging markets, Covid arrives at a time of massive digitization of livelihoods, income and finance. “The future is digital but you have to take everyone along”, Gayatri claimed. People require access to four things to engage in the digital economy: a phone, a data plan, a financial services account and a cash-in/cash-out point. Women, rural populations and the elderly face gaps in access to digital tech and skills.

Felix Macharia, Co-Founder & CEO, Kotani Pay, then presented (virtually) his company in a study case. Kotani Pay allows to send money without the need of internet or a bank account. The company’s technology stack connects blockchain protocols, decentralized apps, and blockchain Fintechs to local payment channels in Africa. The Kotani Pay’s technology can provide access to the 57% of the 770 million mobile phone subscribers in Africa who are using feature phones, not smartphones. “Today’s blockchains are built with a smartphone user in mind, locking out millions of people from the benefits of blockchain technology”, Macharia explained. With Kotani, payment’s transfers are made via SMS.

Apricot Wilson, Deputy CEO, LMDF, Jurgen Hammer, Managing Director, SPTF Europe and Simon Schwall, Founder & CEO, OKO Finance, then took the stage for a roundtable moderated by Manon Loison, Head of Marketing, Luxembourg House of Financial Technology (The LHoFT), entitled “How Fintech can drive the future of social impact finance?”. Firstly, the three participants teamed up to say that there is no clear definition of “social impact finance”. Schwall even warned that “it can be a marketing trick sometimes. It’s more the intention of the investment that matters”. You need objectives that you can measure. Secondly, social impact finance is not philanthropic, there’s a financial return in the long term. FinTech has a strong impact on social development and “investors are seeing that and seeing big opportunities for funds”, Schwall said. “Social impact investments are good business”, Wilson summarized.

FinTech, by reducing the cost of financial services, can help to reach excluded people. “We need a push for a shift in traditional finance which is made for easy clients. For instance, the smallest loans are the most expensive”, Hammer explained. But to reduce the costs, you need to increase the scale of FinTech’s solutions.

Anne Connelly, Blockchain for social impact speaker, co-author of “Bitcoin and the Future of Fundraising", then delivered a speech titled “Blockchain and the future of decentralized societies”. According to Connely, blockchain technology will not only have an impact on the financial sector but this technology will lead to a real revolution in the organization of societies. “99% of the blockchain impact is about to come”, she declared. The key words for this evolution are trust and decentralization. For ID, payments, money transfer, you need a centralized authority (government, bank) that links two strangers. With the blockchain, the future is decentralized: blockchain is public to all users, immutable and power proof. Blockchain is a single source of truth for every person on the planet: “You can trust information in a blockchain because we know that this information is accurate.” For instance, people living in a refugee camp, who lack access to a centralized intermediary to identify them, will be able to access a decentralized identity. Blockchain enables peer-to-peer transactions at a global scale without centralized players.

The FinTech Summit ended with Simon Schwall, Founder & CEO, OKO Finance, who presented “The business opportunity in serving the least included”. Schwall noticed that traditional finance goes after the wealthy few clients with a high purchasing power. Doing so, traditional finance neglects a huge number of potential customers who don’t have much to spend but who are the majority of the world population. And for them, it’s not a question of convenience but it’s a necessity. To create business opportunities in serving the least included, the issue is scalability: How do you bring financial services to millions of new customers at a low marginal cost?” The answer is technology. Schwall then introduced four start-ups that are leveraging advances in technology such as blockchain, AI or mobile payment to provide loans (Tala), insurance (OKO), investments (ejara) and payments’ services (wave).

Article by Nicolas Klein, photos Dominique Gaul