Inclusive by design: how fintech innovation is supporting financial inclusion
UK fintech companies are blazing a trail for a more diverse and inclusive financial sector. PoliticsHome explores how Mastercard is supporting a new generation of fintech companies to open up access to financial services and close the financial inclusion gap.
A new generation of fintech companies has disrupted the traditional financial services sector, delivering products and services that meet the changing needs of consumers. Their growth has driven changes in the delivery of mainstream financial services and positioned the United Kingdom as a leader in a globally significant growth sector.
However, the impact of these innovative businesses extends far beyond improving customer convenience. They are also enabling inclusive growth by opening up access to financial services for underserved groups.
“The UK’s payments industry has been an engine of innovation for the past two decades,” Kelly Devine, UK and Ireland President at Mastercard tells PoliticsHome. “Home-grown fintechs are transforming finance, helping underserved groups and entrepreneurs, boosting the UK economy and helping businesses grow.”
The need for innovative solutions to accelerate financial inclusion has never been greater. Around 13 million adults in the UK currently face financial exclusion with over 1.2 million adults not even having access to a basic bank account.1
Tulip Siddiq MP, Labour’s shadow city minister, agrees with Devine that part of the answer lies with the pioneering UK startups that are reshaping the financial landscape. She told PoliticsHome that those fintechs have the potential to reach groups that have struggled for access in the past.
“The UK’s fintech sector plays a crucial role in providing new solutions to old problems – such as financial exclusion and poor financial wellbeing,” Siddiq explains. “That’s why Labour will champion the fintech sector, through our plan to make Britain the best place in the world to start and grow a business, to drive growth in every part of the economy.
To accelerate the development of products that tackle exclusion, Mastercard’s Start Path programme is working with fintech partners that address the needs of the underbanked and cater to consumers seeking products that fit their culture, beliefs, and values.
Start Path, which is part of Mastercard’s global commitment to bring one billion individuals into the digital economy by 2025, has already worked with 49 companies in the UK.
“The businesses supported through Mastercard’s Start Path programme have developed solutions in a range of areas, for instance making better use of data for credit decisions, giving individuals better visibility of their finances, and helping those on low incomes to budget,” Devine says. “With the right support in place, UK fintechs will continue to deliver growth, create prosperity, widen access and tackle exclusion.”
The foundation for fintechs to transform delivery is already in place with a vibrant and growing UK fintech sector that is leading the way when it comes to combining innovation and social purpose.
The UK receives more investment in fintech than all of the next 10 European countries combined and globally is second only to the US.2
Conservative MP Adam Afriyie, who chairs the Financial Technology APPG, told PoliticsHome that fintechs can play an important role in tackling exclusion and driving social purpose.
“The key to financial inclusion is a busy and competitive fintech sector where safe and authorised companies are actively competing for customers across the whole range of age, income, and technical know-how,” Afriyie explains. “We are number one in fintech today, but this is not our birthright, it is merely a head start."
The recent Future of Payments Review concluded that while the financial inclusion policy agenda has helped bring more people into the banking system, more must be done to assess whether digital exclusion is driving financial exclusion.
It is a recommendation that Mastercard and other leading voices such as the Financial Inclusion Commission support, having consistently argued for the link between digital and financial inclusion to be embedded in policymaking. They would like to see a National Financial Inclusion Strategy complemented by a national programme to equip people of all ages with digital financial skills. This would support the Future of Payments Review recommendation that the government updates its digital inclusion strategy with a specific focus on digital payments.
“The key to financial inclusion is a busy and competitive fintech sector where safe and authorised companies are actively competing for customers across the whole range of age, income, and technical know-how. We are number one in fintech today, but this is not our birthright, it is merely a head start.”
– Adam Afriyie MP
Alongside this, Mastercard would also like to see a National Fintech Strategy to provide focused long-term support for the next generation of fintechs, particularly those with a social purpose.
This could include an inclusion-focused regulatory sandbox and a review of access to funding to help social purpose fintechs start and scale. It’s vital that both strategies closely align with and link to the new national payments vision and strategy planned by HM Treasury.
“Innovation is opening up the opportunity to extend the reach of financial services to support customers that have struggled in the past,” Devine tells us. “Mastercard will continue to play its part but further innovation will also require action from government and regulators.”
With millions in the UK struggling to access financial services, the need for a clear strategy and coordinated action has never been greater. But if the power of technology is harnessed, there is now the opportunity to support consumers and close the financial inclusion gap.
How UK fintech firms are delivering inclusive finance
Innovation and technology have unlocked the creativity of a new generation of businesses that are agile enough to respond to the needs of a changing and diverse society.
One such business is Algbra, a UK fintech platform and technology company that is focused on delivering ethical and inclusive banking services. As well as allowing customers to track the impact of their spending on the environment and off set their carbon footprint, Algbra is also the only Sharia-compliant fintech that is fully FCA registered in the UK.
This opens up card payments to a wide range of groups that have historically struggled to access financial services that fit with their culture, beliefs, and values.
Another UK business leveraging innovation to deliver financial inclusion is Sibstar. Sibstar is a debit card and app which allows families living with dementia to safely manage their loved one’s finances. By setting spending limits and specifying where money can be spent through the associated app, the Sibstar card allows people with dementia to safely maintain their financial independence.
Partnering with Alzheimer’s Society, Sibstar’s card and app are designed to ensure those living with dementia and their families can maintain peace of mind without losing their financial freedom.
1. https://theinclusionfoundation.org/
2. https://www.innovatefinance.com/capital-and-investment/fintech-investment-landscape-h1-2023/
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