While discussing with Matthew Ledvina, he explains the contribution and growth of Fintech in emerging markets. The revolution that a mobile phone can bring especially to the emerging markets was pretty much clear when it gained wide recognition in the late 1980s. At the same time, it was assessed that a mobile communication system requires approximately 18 months for setting it up, which is very less as compared to the 20+ years required for establishing a landline network. In addition, the mobile network can be up and running in no time and allows communication both within the country and at the global level.
Many tech geniuses like Bill Gates have emphasized the role of connectivity in speeding up the economic growth of the nations. Various countries of the world have witnessed huge developments in recent decades. Furthermore, it’s the financial sector that has benefitted the most due to the advancements in mobile communication technology.
Millennial Boosting the Fintech in Emerging Markets
Looking at one of the biggest emerging market in the world, China, its mobile payments have hit a massive $5.5 trillion mark for the year of 2016. Moreover, estimation was made for China that it will contribute 50% of the world’s total digital payments in the year of 2017. But what’s the reason behind it? Is it fintech that contributed towards such massive changes in the country’s payment system or is it something else? To be honest, the role of fintech is imperative when it comes to online and mobile payments, but what made it enormous is the Millennials residing within the country.
The Millennials were the first ones who adopted technologies that accomplish cashless transactions and the other generations followed them soon after. As a result, only within a couple of years, China has made a huge transition from being a cash-dependent country to a global mobile payments leader. Moreover, according to the sources, the Millennials are responsible for 75% of all the mobile transactions that happen within China. As a fact, the Millennials residing in China are greater in the number as compared to the whole population of the US.
Many companies that offer online financial services in China claim that the significant portion of their daily active users comprises of Millennials who were born between the 1980s and mid-1990s. Alibaba’s financial division, Ant Financial, claims that while developing the products, they usually focus on the young generation’s demands and requirements.
According to one of China’s Fintech analytic, people use financial technologies not as a mean to manage their finances but as an integral part of their lives. It is due to such popularity that the fintech is witnessing huge developments.
Switching to India, which is another Asian country, the Millennials are widely adopting fintech to carry out their financial transactions ranging from food payments to taxi fares. When Google launched its mobile payments service Tez in the country, it took just 4 months for it to process the same number of transactions as the leading banks of the courtiers were processing. According to a report by the RBI (Reserve bank of India), the Unified Payments Interface (UPI) that allow service providers and retailers to get payments directly to their bank, it has recorded transactions in February 2018 that were almost half the value of all the credit and debit card transactions.
Scenarios in Other Emerging Countries
According to a study, almost 90% of the individuals who are currently under the age of 30 are living in emerging countries. Consequently, the scope of fintech for further development and adoption is very large. Some countries that share almost the same demographics as that of India and China include Brazil, Malaysia, South Africa, and Turkey. The financial markets of these countries are already utilizing fintech and it will not take much time for them to become the preferred choice for performing financial transactions.
Talking about Southeast Asia, already 90% of people in Southeast Asia have access to the internet via Smartphones. It is due to the aforesaid fact that the e-commerce market in Southeast Asia alone is estimated to hit $88 million by the year 2025.
The development of fintech and its adoption is somewhat difficult in certain countries due to the lack of infrastructure and strict regulations. However, in the upcoming years, it is most likely that the fintech will have a broader reach than what it has today.
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