These 3 fintech trends are key to building an inclusive future

Michael Schlein will be speaking at TNW Valencia 2023 about How fintech innovation can drive inclusive growth. Check out this discussion on the Impact stage on Thursday, March 3oth.  

The world has changed so much over the past few years. The global pandemic, the war in Ukraine, worsening climate change, widespread social unrest — all these challenges have had major consequences for families, small businesses, and communities globally. For the first time in our lifetimes, global poverty and hunger are on the rise, and the economic environment remains uncertain and unstable.

As challenges evolve, so do solutions. While today’s challenges seem overwhelming, we’re also seeing powerful opportunities to build a fair, inclusive, and resilient economy. According to the 2021 Findex, more than a billion people gained access to formal financial accounts over the past decade — thanks to a digital revolution accelerated by the pandemic. This is very encouraging progress.

But 2 billion people remain excluded from the global financial system — and they will be much harder to reach. They are smallholder farmers, micro and small businesses in remote areas, and, more often than not, women.

As more people gain basic financial tools, they can use them to improve their lives — and access a broader suite of tools to build resilience. A farmer can purchase insurance to protect against climate disasters, a small business owner can access revolving credit to manage supply chain issues, and an aspiring software developer can save money and gain new skills to boost her income.

Inclusive fintechs are uniquely positioned to maximize these opportunities — and respond to challenges. Accion helped pioneer the field of inclusive fintech by launching one of the world’s first global fintech funds for the underserved, and by nurturing innovators with funding and support, we’ve seen how they can disrupt the status quo to deliver meaningful social change.

Today, we’re particularly excited by three fintech innovations with the potential to facilitate this momentum, and address the challenges disproportionately affecting underserved communities globally:

1. Embedded finance

While traditional finance often requires customers to jump through hoops, embedded finance makes it possible to offer services to customers upfront, using their data to anticipate their needs and credit risk.

For example, Accion’s seed-stage inclusive fintech investor, Accion Venture Lab has invested in Cashinvoice in India, which leverages data on small businesses to embed supply chain financing products in large platforms that small businesses already use, like suppliers of inventory for fast-moving consumer goods stores. This innovative practice has the potential to seamlessly equip millions of underserved people with the financial tools they need to improve their lives.

As more financial tools integrate with every aspect of the digital economy, we’re seeking to scale innovations that create new entry points for embedded finance in platforms that our end clients already use, like retailers selling seeds to smallholder farmers. We believe embedded finance solutions focused on reaching farmers, small businesses, and women have great potential to advance resilience and inclusion.

2. Agtech finance

Two thirds of the world’s working poor make a living through agriculture, and they are increasingly vulnerable to climate change. By equipping farmers with new financial tools and digital capabilities, we can help them build resilience. And in the relatively new field of agritech, we’ve seen exciting innovations emerge over the past few years that have great potential to generate social impact.

We’ve already seen encouraging results through our work with agtech fintechs like PULA and Apollo Agriculture that leverage technologies including satellite imaging and mobile apps to equip smallholder farmers across sub-Saharan Africa with crop insurance, customized advice, and credit. Through digital transformation and fintech integration, we’ve also deepened the impact of microfinance providers like Fundación Génesis Empresarial in Guatemala and Dvara KGFS in India that provide credit and other financial services to farmers.

As agtech finance continues to evolve, we’re particularly interested in targeting other service providers within the agricultural value chain, including aggregators, farmer-allied intermediaries, and distributors, to help them serve farmers and their communities more effectively.

3. Future of work finance

Increasingly, people are earning a living through non-traditional employment models, including gig or informal work, and they are particularly vulnerable to financial shocks. By nurturing financial service providers focused on these populations, we can help them gain a stronger foothold in the economy and strengthen their resilience.

For example, our fintech partner MyRobin has created a digital platform that provides blue-collar workers in Indonesia with access to fair employment opportunities, training, and financial services that strengthen their resilience and advance their careers, and our partner UGAFODE in Uganda is helping refugees start businesses and access financial tools.

In the short-term, we’re exploring opportunities to support workers shifting from informal to formal work through gig work platforms, prioritizing those that cater to women. In the long-term, we may also consider the global implications of automation, migration, and displacement on the workforce —and how solutions like cross-border payments and upskilling can help these workers build their financial health.

Accelerating change through knowledge and collaboration

Sharing our knowledge is critical to creating systemic change. Convenings like TNW Valencia are essential to share insights and explore the impact of new innovations — including those in embedded finance, agtech, and the future of work — to better gauge the effectiveness of our own work, and promote demonstration models that enable providers to better serve their clients.

I’m excited to work with our team — and with partners across the public, private, and social sectors — to scale our impact. The future is uncertain, but the challenges of the past have granted us new lessons, powerful tools, and greater resolve to support people with the most urgent needs.

Interested in learning more about inclusive fintech and Accion’s work in this field? Come check out Michael Schlein’s FT Power Hour talk on How fintech innovation can drive inclusive growth at at TNW Valencia 2023 on Thursday, March 30th from 13:05-13:25 on the Impact stage.