From Brexit to APEC, Globalization and FinTech as the Future of Inclusion

2016 is just shy of ending. To many observers, the year has been most characterized by rising anti-globalization sentiments, reflected in two big political events: the Brexit vote and the election of Donald Trump. As this Straits Times article notes, there is a “backlash against the rise in world trade, integration of economies, and freer movement of people.”

So what’s next for globalization? Is the anti-movement permanent and should we start adjusting to a new global outlook? Certainly there is more volatility in the world, and we need to prepare accordingly – keeping a close eye on your investment portfolio is one precaution.

Yet despite the retaliation towards globalization, this is an instance where the genie cannot be wished back into the lamp. It is more prudent to address the negative effects of globalization. The same Straits Times article quoted Singapore Prime Minister Lee Hsien Loong during APEC 2016. He said the key to moving forward is to “focus on supporting small businesses, digital trade, and services.” That way, the advantages of globalization will be spread more evenly and to more people. The answer is to put emphasis on financial inclusion – rather than a hindrance, globalization should be a catalyst for greater inclusivity, especially for SMEs. In tandem with proposed government efforts, the rise of FinTech platforms can also support financial inclusion.

Prime Minister Lee suggested three things: First, help SMEs by improving loan access and adapting small business owners to new technology. Second, educate workers with digital skills so they can adjust to a tech-driven world. Finally, improve “info-comm technology, logistics, professional services, and manufacturing-related services.” Other efforts such as economic restructuring, assisting declining sectors, and investing in infrastructure will also aid those disrupted by globalization.

The recommendations above highlight the active role governments need to take in supporting those disadvantaged by globalization. While its mishandling has pushed resentment for the concept, globalization can be a force for good, for all – especially the unbanked.

The Role of FinTech

Like globalization, financial technology (popularly known as FinTech) is disruptive. And like globalization, FinTech can both develop SMEs and create financial inclusion when utilized well. With more inclusivity, more people will have access to financial services. According to a World Bank report, there are two billion unbanked adults worldwide. In this context, unbanked means a lack of financial access and exclusion from formal financial systems – not even access to bank accounts.

Part of the reason why globalization became resented was because the most financially vulnerable like the unbanked became forgotten in the middle of international trade and free movement. Through FinTech and its innovations, financial services will be spread to those who need it most.

FinTech has many advantages. For starters, it simplifies financial services. Many platforms and services can be accessed via apps and smartphones, making transactions easy and quick from start to finish. FinTech has also created significant modernizations in the business world; we now have easier access to innovations like cashless payments and P2P Lending. Most FinTech platforms are also online-based. People in remote areas, very likely unbanked, can access FinTech products so long as they can access the Internet. Financial innovations are often more affordable and in a world rife with smartphones and wi-fi, more people will naturally be included into financial systems.

Some important inroads developed by FinTech include:
•    Money transfers (remittances) to simplify international transfers. Traditionally expensive, promising FinTech companies offer cheaper options, with mobile phone transactions.
•    Cashless payments, suitable for developing countries lacking secure digital payment methods. Carrying cash can be risky and cashless payments can be a great educative introduction into digital financing.
•    Crowdfunding and P2P Lending address the lack of small business loans. A collective group of people fund the financial needs of a person or a business entity. Crowdfunding often have a social dimension; people who fund crowdfunding campaigns sometimes accept gifts in return, but other times their money is simply donated. P2P Lending is closer to a loan format, but with products targeted to SMEs – offering short-term loans with competitive rates, a speedy process, and quick disbursement. P2P Lending, in particular, is often touted as a solution for the lack of SME financing. This business model has taken root in many countries, including Singapore.

With everything that has happened and changed throughout 2016, the future feels a bit uncertain. The future of globalization, in particular, feels uncertain. But innovations in financial technology are ready to support the creation of a more inclusive world for all.