One of the cornerstones of Oval’s mission is to promote and improve financial inclusion, and it plays an important role in the way that we operate and develop our app.
Financial inclusion is instrumental in reducing economic disparity, and in lifting people and nations out of poverty, but what does this statement really mean? What is financial inclusion and why is it so important in today’s financial world?
Financial inclusion defined
All financial inclusion means, is the ability of individuals and businesses to access the financial products they need to function and grow, regardless of their size or individual wealth. These products range from everything from a simple bank account, to accessing secure lines of credit and being able to invest their money as they wish.
The World Bank reported that between 2014 and 2018, 515 million adults opened bank accounts. However, just to illustrate the sheer scale of the problem, it estimates that a staggering 1.7 billion adults globally are still unbanked.
Why financial inclusion is important
There are many complex reasons as to why financial inclusion is so important. For instance; many individuals find themselves stuck in a vicious circle where lack of access to a bank account means they are not able to apply for a job – as there is nowhere for wages to be paid into – and are not able to rent accommodation – as landlords require credit history and a bank account before tenants are able to sign a lease. However, often without either a job or accommodation, banks will not permit an individual to open a bank account.
Financial inclusion is also crucial for the protection of many workers in the so-called “informal economy”, ie. workers who are not regulated or protected by the state. It is well documented that job insecurity can have “undesirable macroeconomic and social effects”, as not only does this type of work leave them vulnerable to unscrupulous employers, but it also means they often work without basic rights such as pension or illness payments. This leaves them financially vulnerable, especially in the long term.
Finally, on a wider scale, many small business owners who lack reliable access to secure credit – especially within developing economies – find themselves unable to expand and invest in their own enterprises. Without small-scale growth like this whole economies can stagnate and even shrink, as with economic growth comes affluence and increased disposable income. With disposable income comes the ability to save money, and to reinvest it back into the economy through consuming goods and services. Consumerism is, after all, key to economic growth. (Think about George Bush Jr’s speech to the USA after the 9/11 attacks, where he entreated the American public to “go out and shop” in order to ensure economic growth in the wake of the tragedy).
How fintech is improving financial inclusion globally
Financial inclusion is about the removal of long held barriers that do not permit certain individuals to participate in, or gain access to, the financial sector. It strives to increase availability to these products and to tailor them so that they are of use to all individuals in all circumstances.
In this way, Fintech has been instrumental in making great strides towards better financial inclusion. Companies such as Oval allow users access to a personal savings account, free of charge, which they can use to accumulate wealth at a speed and in a manner which suits their lifestyle; this is in sharp contrast to the established big banks whose use of savings accounts are usually highly prescriptive and oftentimes come with many exclusionary requirements (such as needing to have a current account with the same bank, or to earn a specific income).
Furthermore, through the Opportunities section, Oval also enable users access to investments; allowing them to choose products and services that suit their investment needs best. At the same time the Oval Coach provides further financial education, providing users with the information they need to begin taking control of their financial future.
Financial inclusion is a long and steady path, but through innovative advances in the fintech sector, more and more adults are being given access to the financial tools they need to succeed.