The financial sectors of Bangladesh, Kenya, India, the Philippines, and the United States are taking steps to promote fintech innovation and improve financial inclusion.
In Bangladesh, the Bangladesh Bank is expected to approve the establishment of digital banks today. Two to five banks are likely to receive a letter of intent. However, some of the shortlisted applicants do not meet the criteria, such as lacking expertise in digital banking. The applications came from a diverse range of companies, including commercial banks, mobile financial service providers, and IT service providers. Digital banks offer financial services through online channels without physical branches. The approval of digital banks is seen as important for the country, but some experts suggest conducting proper assessments and waiting until after the upcoming parliamentary elections in January. The infrastructure of digital banks may require more capital than the current requirement of Tk 125 crore [a260f9d2].
In Kenya, the Central Bank has announced plans to issue licenses to fintech firms in an effort to promote innovation and competition in the financial sector. The licenses will be issued under a new regulatory framework that aims to ensure consumer protection and mitigate risks. Fintech firms will be assessed based on their capital, governance, and risk management structures. Once licensed, these firms will be able to offer a wide range of financial services, including payments, lending, and investment products. The Central Bank expects the licensing process to be completed within the next 12 months. This move by the Kenyan Central Bank reflects a growing trend of embracing fintech innovation in the African continent [a260f9d2].
Meanwhile, fintech startups in India, such as PhonePe, Cred, and Paytm, are seeking collaborations with non-banking financial institutions (NBFCs) to offer secured credit loans. These partnerships aim to provide consumers with access to secured credit options, leveraging the expertise and resources of NBFCs. Additionally, NBFCs are interested in working with fintechs to source prime customers through these platforms. This collaboration between fintechs and NBFCs comes after fintechs have established themselves as reliable sources for unsecured consumer credit. This trend highlights the growing importance of collaboration between fintechs and traditional financial institutions to meet the evolving needs of consumers [a260f9d2].
In the Philippines, open finance has the potential to transform the financial industry by democratizing access to credit for the unserved and underserved segments. John Januszczak, president and CEO of UBX, emphasized that open finance can unlock credit by leveraging non-traditional data to measure character and credibility. Traditional credit scores are insufficient in providing broader access to credit, and institutions could utilize AI to process alternative data for credit assessments. UBX is currently using AI to assess customer creditworthiness and extend business loans to those without traditional credit scores. Januszczak cited a P12 trillion business credit gap in the Philippines and emphasized the need for a mindset shift in the financial industry to prioritize financial inclusion. Embracing open finance could bring significant benefits to the Philippines. UBX has made progress in connecting Filipinos to the global economy since 2019 [f8853e90].
In the United States, the fintech market is thriving and evolving. The country has the largest national economy with a GDP of approximately $23 trillion. The US financial sector includes traditional banks, fintech startups, and tech giants like PayPal and Apple Pay. Fintech in the US has evolved since the advent of the internet and the digitization of financial services. Key figures in the US fintech sector include Elon Musk, Peter Thiel, and Max Levchin. The US government supports fintech innovation through initiatives and regulatory frameworks. However, the US financial regulatory landscape is complex, involving multiple agencies with overlapping jurisdictions. Fintech companies in the US face challenges such as cybersecurity, regulatory compliance, and market competition. The US fintech market is driven by segments such as digital payments, blockchain, insurtech, regtech, and wealthtech. The future of fintech in the US looks promising with the rise of decentralized finance, increased adoption of digital currencies, and integration of fintech solutions into everyday activities [4693e177].
These developments in Bangladesh, Kenya, India, the Philippines, and the United States demonstrate the efforts being made by countries to adapt to the changing landscape of financial services and leverage technology to provide innovative solutions to consumers. By approving digital banks, issuing licenses to fintech firms, fostering collaborations between fintechs and NBFCs, embracing open finance, and supporting the growth of the fintech market, these countries are paving the way for increased financial inclusion and economic growth.