After years of hypergrowth, fintechs began to realize that developed economies markets have reached a certain level of saturation. Now it’s high time to switch to emerging countries and the Global South.
If you are the owner of a fintech business or actively interested in the topic, you may have heard of firms like M-Pesa, Lenddo, or Bima.
Unlike most fintech companies focused on middle-to-high-income consumers from developed nations, these “inclusive fintechs” open up new opportunities to people living in countries where financial inequities run deep and who are outside the established financial systems.
The distinctive feature of these innovators is that they are not solely focused on financial returns. Right from the start they consider social impact as their primary objective.
This stance is reflected in a range of their financial products — reliable, worthy of trust, and targeted to human needs that are lower on Maslow’s hierarchy.
Still, the presence of inclusive fintechs in third-world countries surely is not motivated solely by humanistic ideas. Fintech startups in emerging markets can be real, profitable businesses, and an increasing number of tech leaders worldwide are starting to grasp this.
Global fintech revenue growth by region, 2021 to 2030
Source: Technext
Africa is an example here. Fintech on the continent is booming. Experts and industry observers predict the African fintech market will hit $65 billion by 2030, representing a 13-fold increase over 2021.
Another striking example is Brazil, where the number of fintechs has soared over the past years. In 2022, the country had 855 active fintech companies, which was 20 more than the previous year.
Actually, it may take a long time to list the emerging markets where fintech is thriving but, eventually, we come to one question: what stands behind such success? Or what are those opportunities emerging economies and the Global South can offer those intending to serve the poorest customer base?
Let’s explore the most meaningful ones.
The Opportunities for Fintech Companies in Emerging Markets and Global South
Vast Untapped Customer Base
A recent World Bank Report says, more than half of the world’s unbanked adults live in seven emerging economies, including India, China, Pakistan, Indonesia, Nigeria, Bangladesh, and Egypt.
If we go deeper into the search, we’ll find the above-mentioned Africa is projected to account for more than half of the growth of the world’s population between 2022 and 2050.
Obviously, these demographic changes and earning-power increases will further underscore the importance of financial inclusion.
Fintechs have the potential to make financial inclusion a reality by offering affordable products to these underserved markets.
% of unbanked and underbanked adults across major global regions
Source: Global Fintech 2023 Report
Widespread Use of Mobile Payments
Mobile payments are booming in emerging economies, where traditional banking infrastructure may be limited.
In fact, most people in developing countries first interact with the financial services sector through their smartphones.
Equally important is that emerging markets are worldwide leaders when it comes to time spent using smartphones.
Number of smartphone users by leading countries in 2022
Source: Statista
Specifically, in Indonesia, people spend the most time on smartphones daily, spending 6.05 hours on average, followed by Thailand (5.64 hours) and Argentina (5.33 hours).
Thus, there is a clear opportunity here for companies to provide financial services access for individuals in remote areas through their smartphones and expect early positive results.
Government Support to The Evolution of the Fintech Sector
Governments in emerging markets acknowledge the rise of financial technology as a way to achieve social and economic goals more efficiently and take steps to drive adoption.
Initiatives like:
- Vietnamese National Strategy for Development of Digital Economy and Digital Society to 2025, orientation to 2030,
- India’s Unified Payments Interface,
- Philippines’ 2020-2023 Digital Payments Transformation Roadmap, and
- Quick Response Indonesia Standard are just a few examples of efforts governments of developing nations make to promote fintech adoption.
Now that we’ve covered the main reasons why fintechs should pay attention to emerging economies and the Global South, let’s look at the nimble players who have already made significant inroads into the markets.
Top Inclusive Fintech Companies in Emerging Markets
M-Pesa
One of the largest mobile money services in Africa which became an integral part of life for millions of locals is M-Pesa.
Mobile money, a service enabling the storage and transfer of money via mobile phones using text messages, has seen widespread adoption among Kenyan households. Research revealed that access to M-Pesa raised per capita consumption levels and lifted 194,000 households, equivalent to 2% of Kenyan households, out of poverty.
Currently, M-Pesa is used by about 96 percent of Kenyans. 75% of the country’s GDP flows through the app.
Destácame
Destacame, a Santiago-based fintech with operations in Chile and Mexico, provides a range of products to help consumers better manage their financial lives. Their offerings include past-due debt repayment, graduation loans designed to build or improve credit history, consumer loans, free financial health tools, etc.
The company’s overarching mission is to assist millions of people in Latin America in enhancing their financial well-being.
Destácame currently serves approximately 5 million users and aims to expand its reach to 10 million users across Chile and Mexico by 2025.
WorldCover
Launched in northern Ghana in 2015, WorldCover operates at the crossroads of fintech and insurance, aiming to offer natural disaster insurance to smallholder farmers in developing nations.
The platform links investors with rural farmers, offering peer-to-peer investments that greatly enhance food and income security.
ToGarantido
ToGarantido was built to cater to the pressing requirements of the new Brazilian middle class by providing them with digital access to high-quality and affordable insurance products from four different insurers.
An online microinsurance broker claims 95% of its customer base is accessing insurance for the first time.
Bima
The leading mobile microinsurance and mHealth provider, established in 2010, serves 26 million people where 93% live on less than USD10 per day and 54% live on less than USD2.50 per day. 75% of Bima’s customer base has never had insurance before.
This inclusive fintech has operations in 16 countries across 5 continents. Remarkably, in under a year, the Bima team, in partnership with Telecom operator Smart Axiata, has become the leading provider of life insurance in Cambodia.
Lenddo
Initially launched in the Philippines in 2011 Lenddo operates with a goal “to promote financial inclusion around the world to as many people as possible”.
Lenddo uses both traditional and non-traditional data (social media activity, browsing behavior, geolocation and other smartphone data) to help consumers across Southeast Asia, Africa and South America with a limited or no credit history build a credit profile.
Since its launch, the company has enabled financial institutions in over 20 emerging countries to run more than 12 million assessments for individuals with limited credit history, leading to the disbursement of over USD 2.5 billion in credit.
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