Until recently, financial products and services were primarily accessible to large corporations and affluent individuals. This left small businesses and underserved communities at a disadvantage, especially in international trade. High transaction costs, limited financing options, and complex regulatory barriers made it nearly impossible for smaller enterprises to compete.
Fintech, the intersection between finance and technology, emerged reshaping global trade dynamics. By promoting equitable access to financial tools, It has become a catalyst for financial empowerment, enabling more businesses to participate in international markets and thrive.
What is Financial Inclusion?
Financial inclusion means providing for everyone, individuals and businesses alike with affordable and convenient access to essential financial services such as credit, payments, savings, and insurance. It is about bridging the gap for those historically excluded from formal financial systems, enabling them to grow and contribute meaningfully to the economy.
The World Bank describes it as ensuring that financial services are available and accessible in a way that responsibly and sustainably meets everyone's needs.In the context of international trade, financial inclusion empowers small and medium-sized enterprises (SMEs) to overcome barriers and thrive in global markets.
Key Ways Fintech is Promoting Financial Inclusion in International Trade.
Fintech tools such as mobile banking, digital wallets, and blockchain-based solutions are revolutionizing access to financial services. By reducing barriers, these technologies empower individuals and businesses in developing regions to participate in global trade. These includes:
1. Enhanced Access to Financial Services:
- Mobile Banking.
Accessing banking services in underserved areas has always been challenging, with traditional banks demanding physical branches and burdensome paperwork. Fintech-powered mobile banking eliminates this hurdles, by transforming smartphones into virtual banks. Entrepreneurs in remote regions can now transfer funds, pay bills, and save without stepping foot into a bank.
A World Bank report highlights that mobile banking has opened access to essential financial services for millions, especially in areas where traditional banks have limited presence.
- Digital payment
Digital payment systems now reduce cross-border transaction costs by up to 75%, making global trade more inclusive and affordable.
Fintech's digital payment tools, such as mobile wallets and digital currencies, are revolutionizing cross-border transactions by offering faster, more secure, and cost-effective alternatives to traditional banking channels.they enable SMEs to compete on a global scale.
- Microfinance.
Fintech is also empowering a new wave of entrepreneurs by offering platforms that facilitate microloans and microinsurance. Platforms, like 4Told FinTech, use artificial intelligence to streamline the microcredit process.
These platforms evaluate borrowers' financial data instantly, streamlining loan approvals and reducing operational costs. Small businesses, particularly those in emerging markets, now have easier access to the capital needed to expand.
2. Reduced Costs and Increased Efficiency:
- Lower transactions:
For SMEs, cost savings can mean the difference between surviving and thriving in international markets. Reduced fees free up resources that can be reinvested in growth, innovation, and workforce expansion.
Financial technologies such as real-time currency exchange algorithms and peer-to-peer payment networks cut out middlemen and streamline transactions. It automates financial processes reducing reliance on traditional banking infrastructure.
- Faster transactions.
Faster transactions mean quicker access to working capital, allowing businesses to pay suppliers, invest in growth, and meet operational needs without the stress of delayed payments.
With fintech accelerating payment speeds, businesses are no longer at the mercy of slow, outdated systems. They can move faster, compete stronger, and scale smarter.
- Streamlined process.
Fintech platforms automate tedious tasks such as recurring billing and payment reminders. For instance, a small exporter can seamlessly manage invoicing and payments through automated systems, allowing them to focus on scaling their business rather than administrative tasks.
Through automation and digitalization, fintech solutions are enabling businesses to manage their trade finance operations more efficiently.
3. Increased Transparency and Trust:
- Blockchain Technology:
Blockchain technology, often referred to as Distributed Ledger Technology (DLT) offers unparalleled transparency. Every transaction is recorded on an immutable ledger, reducing fraud risks and fostering trust between trading partners.
This technology also extends financial services to unbanked and underbanked populations. Through mobile wallets and decentralized finance solutions, businesses in underserved regions can now conduct secure transactions and access alternative financing without traditional bank accounts.
- Smart Contracts:
Smart contracts are self-executing programs stored on a blockchain that automatically enforce and execute the terms and conditions when predefined criteria are met. Unlike traditional physical contracts, smart contracts have three key distinctions:
- They exist purely in digital form, eliminating the need for physical documentation.
- Stored on a blockchain, they benefit from its security, transparency, and decentralization.
- They are written entirely in code, meaning the contract's execution is automated and immutable once deployed, removing the need for intermediaries and reducing the potential for human error.
Imagine a freelancer using Tela to manage invoices. With a smart contract, payment could be automated upon completion, simplifying the process and ensuring timely transactions.
Conclusion
The true essence of financial inclusion is being redefined as fintech reshapes the landscape of global trade, transforming once-exclusive markets into accessible opportunities for all. By breaking down barriers to cross-border transactions, fintech empowers both underserved communities and small businesses, making international trade more inclusive and achievable.