FintechIndustry Contributors

[Opinion] The key to financial inclusion in a fintech world

The challenges of a cashless, contactless society

Over the past two decades, many financial technology (fintech) companies launched applications that provide niche services only to work backward – or be acquired – to expand into digital banking. While niche fintech companies have increased efficiencies with regard to specific services, challenges have become more apparent as technology continues to shift us toward a cashless, contactless society.

For example, community banks and credit unions are the primary financial institutions (FIs) that assist unbanked and underbanked populations. These individuals have historically relied mainly on cash and, therefore, lack digital finance fingerprints like credit history or even savings accounts.

However, at the start of the pandemic, these communities turned to smaller FIs for quicker access to stimulus checks and also to better manage their money, invest, save, and pay off debt. As the new age of banking gains traction, fintech can – and should – make a significant impact on holistic financial inclusion.   

Fintech and compliance  

Although underbanked individuals hold bank accounts, they rely on third parties for services like money orders and payday loans to fund purchases rather than traditional, more affordable methods such as debit or credit cards. Oftentimes this is due to either lack of access to traditional banking services or the need for quick access to funds.

Today, many consumer-focused apps offer capabilities like the ability to deposit checks or build savings. However, ease of use does not equal protection and security. Not only are niche fintech apps siloed offering just one or two capabilities, but they’re also not within the banking sector and don’t have necessary protections should something go wrong. For example, if an issue arises in the midst of a rent payment transfer where funds are taken out of one bank account but aren’t successfully deposited into the other, users will have to rely on the company to protect them. 

On the other hand, a fintech company that operates within the banking sector is FDIC-insured and is backed by processes that ensure customers their funds in such situations. Furthermore, fintech companies within the banking sector give FIs channels for customers to safely and directly transfer funds between accounts, clearinghouses, ACH operators, The Federal Reserve, and other financial institutions.

Fintech companies within the banking sector also have the ability to centralize historical banking structures for FIs, which provides account holders with a full suite of digital banking services in one location. This enables a cost-effective, streamlined platform that allows account holders to fully utilize modern capabilities – from automated savings to investment tracking to updated credit reports. What’s more, many end-to-end banking apps offer education features that explain the depths of personal finance, money management best practices, and news in the industry – further motivating and preparing entire generations for financial success in the long run.   

Digital with a human touch 

Personal finance has many layers and can easily become overwhelming. There’s an aspect of artificial intelligence that we’re used to; in fact, chatbots can be incredibly useful when it comes to reminders regarding deadlines to pay bills or even scoldings for purchasing, for example, an article of clothing that wasn’t in that month’s budget.

That said, the movement and management of individuals’ monetary assets affect their livelihood and shouldn’t be taken lightly. The pandemic presented a nuanced, complex realm of uncharted territory that forced individuals to take a step back and re-assess their assets. Many had questions regarding critical financial aid, which called for the ability to speak with a human being at a financial institution.  

Ultimately, today’s economic uncertainty has motivated individuals of all income classes to better understand financial management, and they’ve relied on their FI for advice and support along the way.

While it’s easy for apps to include digital updates, reminders, and even educational features, the drastic economic shifts experienced this year have shined a light on why the finance and banking industry will always require some level of human-to-human support.

Fintech companies create a good user experience, but small banks and credit unions know a good customer experience. When the two come together, we ultimately get closer to an ideal world of financial inclusion. 

This column does not necessarily reflect the opinion of FinLedger’s editorial department and its owners.

To contact the author of this story:
Kevin Olsen at

To contact the editor responsible for this story:
Mary Ann Azevedo at

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