Here is the truth: in the thriving financial industry of the United States, many individuals and businesses face a complex problem—they are unable to access traditional banking services either because they live in underserved areas or they do not meet the requirements for traditional bank accounts, cards, or financing products. These individuals often encounter economic difficulties, including the inability to obtain credit, establish savings, and even hinder their work, education, and livelihoods.

In this context, a number of financial technology companies, or the FinTech companies, has emerged: they provide technological solutions to customers while offering financial services to these underserved groups.

FinTech, a term derived from the combination of Finance and Technology, refers to the financial services industry that emerged in the 21st century. The earliest form of FinTech can be traced back to the 1990s when Citigroup established the Financial Services Technology Consortium. However, the history of inclusive finance in the United States dates back even further to 1904 when Amadeo Giannini founded the Bank of Italy with the aim of providing financial services to the general public.

After years of development, embracing FinTech and promoting inclusive finance has become a crucial opportunity that various financial institutions in the United States must seize. For ordinary people, especially during times of credit tightening and liquidity constraints, the existence of FinTech can be a powerful tool for them to navigate various uncertainties.

What is inclusive finance and why is it important?

Inclusive finance means that all individuals and businesses in society can access necessary financial services at an affordable cost. Services such as checking accounts, credit cards, insurance, and other key financial tools should be accessible to everyone, including low-income or marginalized groups. According to the United Nations, financial inclusion refers to the widespread access to a variety of financial services at a reasonable cost, provided by well-functioning and sustainable institutions.

Due to the potential of inclusive finance in promoting economic growth and improving welfare, financial inclusion has become a top priority for global policymakers. Inclusive finance aims to expand opportunities for individuals and micro, small, and medium-sized enterprises to access financial services.

Globally, the rise of financial technology aligns with the increased inclusiveness of finance. As of 2021, 76% of adults worldwide have a bank or mobile account, compared to only 51% in 2011. This means that over the past decade, billions of people have gained access to bank accounts, with the majority in developing countries. This growth is closely related to the contribution of financial technology to financial accessibility.

What are the benefits of inclusive finance?

Expanding opportunities to access traditional banking services.

Providing access to traditional banking services to those who previously had no access or limited access is one of the core principles of inclusive finance.

Expanding opportunities to access credit.

Many Americans, around 19%, have no credit score, which directly impairs their ability to obtain loans. These individuals are referred to as “credit invisible assets” and may include many people who are unbanked or underbanked.

FinTech leverages technology to reduce operating costs and improve the efficiency of financial services. By using alternative data sources beyond traditional credit scoring, FinTech aims to provide credit support to underserved populations. By collecting and analyzing data such as paycheck stubs and rental payment history, lenders can assess “non-traditional” credit histories. This enables them to make informed decisions on providing funding to small businesses, offering credit cards, or providing funds for personal loans.

Providing broader service channels through financial technology applications.

FinTech has transformed the way customers interact with financial services. The rise of mobile phones and applications has allowed billions of people worldwide to gain access to bank or mobile accounts.

In the United States, numerous leading FinTech products have emerged, covering sectors such as online payments, lending services, wealth management software, cryptocurrency trading, and financial customer behavior analysis. These innovations have greatly enriched the financial service channels for low-income populations and fundamentally changed the landscape of the US financial services industry.

Promoting economic growth and social progress.

When more people are included in the inclusive finance system, society as a whole benefits. Financial inclusion can be a powerful indicator of the next generation of capital and wealth markets worldwide. Markets with high financial inclusion often perform well in other social factors such as food security, productivity, economic and social resilience, living standards, and climate change adaptation.

Unlocking the Benefits of Financial Inclusion with EZ Capital

At EZ Capital, we are dedicated to empowering every entrepreneur with reliable access to smart financing solutions by actively exploring and participating in innovative activities in collaboration with various industry partners. Leveraging our powerful platform and technological capabilities, we remain committed to providing small business owners with smart, fast and flexible financing options they need to thrive, no matter the challenge.

Ready to grow your business? Contact EZ Capital today and unlock the benefits!