Can Digitalization Help Asia Finally Solve its Financial Inclusion Challenge?

Thursday, May 19, 2022

Financial technology applications need to go beyond payments systems to provide a wide array of services, from lending to insurance, to new and existing banking customers, write Pamela Mar and Barbara Meynert of the Fung Group. To promote financial inclusion, they argue, policymakers should address the challenges of digital literacy and quality of access.

Can Digitalization Help Asia Finally Solve its Financial Inclusion Challenge?

Getting banked: Fintech needs to go beyond mobile payments to provide access to savings, loans and other financial products that are the backbone of gaining financial security and moving up the economic ladder (Credit: NEERAZ CHATURVEDI /

Not a week goes by without more news about technology as a driver of financial inclusion. A cursory check through Google found close to a thousand stories about “fintech and financial inclusion” in 24 hours and several thousand in a week. It is not hard to understand why. Financial services are all about the cost to serve a customer and eliminating risk. Technology and automation drastically reduce the cost to serve by bridging physical distance, while enabling financial institutions to amass and process an increasing amount of data to address more risks than ever before.

Fintech mergers and acquisitions reached a new high of US$348 billion in 2021, while private-equity investment in fintech also climbed to a record level. In the sector in Asia, banks are big dealmakers, often through a dedicated venture or innovation. In China, over 92 percent of the population use either WePay or Alipay as their primary means of payment, with mobile purchases accounting for over 83 percent of total transactions. The government has allowed the development of advanced digital financial infrastructure, notably outside the control of the Big Four state banks. The launch of the e-RMB is the ultimate tool to achieve complete financial inclusion.

These trends suggest that fintech could finally resolve Asia’s deep deficiencies in financial access. The region is full of contrasts, however. There is significant progress, even outside China, in the payments space. Over 42.1 percent of Asians have a mobile wallet and have used it to make payments. Growth in mobile payments is in the double digits, and forecasts expect over 2.6 billion mobile-wallet users in Asia by 2025.

But the ability to make mobile payments does not guarantee that one has access to savings, loans and other financial products that are the backbone of gaining financial security and moving up the economic ladder. In fact, it is often the absence of access to formal finance that will drive users to seek other financial products. Hence, it is no surprise that half of the population of Southeast Asia is unbanked, giving rise to this region having some of the highest mobile-wallet penetration rates in the world: 81 percent in Indonesia, 68 percent in the Philippines, and 84 percent in Thailand.

Bakong bonus: Launched in 2020, Cambodia's national payment system shows how a digital currency can promote financial inclusion by addressing the challenges of poverty, analog systems, and low digital literacy (Credit: National Bank of Cambodia)

Bakong bonus: Launched in 2020, Cambodia's national payment system shows how a digital currency can promote financial inclusion by addressing the challenges of poverty, analog systems, and low digital literacy (Credit: National Bank of Cambodia)

In Cambodia, the Better Work program of the International Labour Organization (ILO)  reports that only 18 percent of citizens have a bank account, and the majority of wages in factories that are a primary source of employment continue to be paid in cash, with all the problems of transparency, theft and waste that entails. In Indonesia, despite the progress made by mobile payments, 50 percent of the population remains unbanked, while in India, the unbanked rate has fallen drastically in recent years due to extensive government efforts, but some 190 million (out of a population of 1.4 billion) are still excluded. India has the second largest pool of unbanked citizens in the world after China’s estimated 287 million people.

Despite these numbers and the rhetoric about financial inclusion, fintech thus far has largely been about mobile payments, which is where the profit lies. Indeed, of the top 10 fintech unicorns, eight are payments platforms.

Stark differences in financial access persist. A woman in Bangkok can make purchases at the market and can send money to her family and friends and upcountry through her mobile phone. But she cannot borrow money to buy a car house or use financial products that would help her save smartly. Fintech has only made it easier to pay, but her economic prospects remain unchanged. A Filipino domestic helper in Hong Kong is in the same boat: She may use a mobile-payment system to send cash home but will anyone lend her money? Not a chance.

As fintech and digital banking open up more services to those who are already banked, Asia risks an ever wider socioeconomic divide. The old adage that you must have money to make money rings ever true.

Of course, it takes time to build the necessary physical ICT infrastructure to support richer digital financial services. But in a region with rising wealth and falling costs of technology, financial institutions are more able than ever to serve more and more new and existing customers without taking on inordinate amounts of risk.

What can be done?

Our experience working across social development, finance and technology for the public good has shown us how we might begin to bridge the financial inclusion gap.

First, enabling digital access to financial services begins with basic digital literacy. In Asia as of May 2020, 55 percent of the population had access to the internet, but simple access does not guarantee the other two components of bridging the digital divide – literacy and quality of access. Literacy is about possessing basic digital skills. The International Telecommunications Union (ITU) estimates that there are over 40 countries in the world where over half the population do not know how to attach a file to an email. Quality of access means that the users know how to tap the opportunities the internet offers.

While Asian governments need to continue to build the hardware and install the networks to support the widening array of digital services, more should be done to promote soft skills that will boost literacy and quality. Public education systems should ensure that children leave school with the capabilities necessary for living in the digital economy.

For those in the workforce, business should be involved in delivering solutions. Factories, warehouses and even construction sites could be part of the infrastructure for educating workers about digital skills. Our own experience is that when workers receive life-skills training at a manufacturing plant, for instance, there is a documented rise in loyalty, worker retention, and communication, all of which are positive for the facility’s productivity and competitiveness.

As smartphone penetration rises, mobile learning opportunities will only grow. Policy could help by providing subsidies or tax incentives for worker education on certain topics. Continuing professional development (CPD) programs are held up as a tool for people to adapt to the new world of work, but there is no reason to limit them to white-collar workers.

Mobile money: Digital transaction in Zhongshan, China (Credit: Freer /

Mobile money: Digital transaction in Zhongshan, China (Credit: Freer /

As fintech applications become more deeply embedded across society, the challenge for service developers and providers is to apply their innovation capabilities, understanding of network dynamics, and the mounds of data that they are amassing to address exclusion. Adjacent and bundled services could vastly increase the amount of data that is the real source of advantage, while giving the unbanked and financially constrained SMEs a cushion to grow safely, with limited risk. Ultimately, these platforms will need to address interoperability including cross-border payments and data transfers. For now, the focus should be on lowering the entry barriers to inclusion in the emerging fintech system. Policymakers will play a critical role through licensing and compliance regulations.

Indeed, policy matters. No market today is truly free. Policy constrains, directs or frees up technology to achieve its potential as a problem solver. In particular, many countries are considering digital currencies which have huge potential to drive efficiencies, inclusion and cross-border connectivity. This potential should not be taken lightly. The launch of Bakong, the blockchain-based nationwide payment system launched by the National Bank of Cambodia in October 2020, provides rich experience on how a digital currency can be used to overcome the challenges of poverty, analog systems, and even low digital literacy with the aim of financial inclusion.

Of course, we can wait for the market to inch towards coming up with solutions to financial inclusion. But the social consequences of leaving people behind are too great, especially given that the tools to act are already in our hands. Economists have estimated that increasing financial inclusion can provide a 14 percent boost to growth in the emerging markets. This may seem high but even in increase of a few percentage points would have a significant positive impact as the region recovers from the pandemic. There has been much talk about building back better and the need for sustainable inclusive growth. Boosting fintech for financial inclusion is a practical way to make this a reality.

An abridged version of this article was published in the South China Morning Post on May 13, 2022.

Opinions expressed in articles published by AsiaGlobal Online reflect only those of the authors and do not necessarily represent the views of AsiaGlobal Online or the Asia Global Institute


Pamela Mar

Pamela Mar

Fung Academy, Fung Group

Pamela Mar is executive vice president, knowledge and applications, at the Fung Academy, which supports the Hong Kong-based Fung Group’s strategic response to disruption driven by the rise of sustainability, geopolitical risk and the changing nature of consumption. Current explorations include trade finance, sustainable finance and the global supply chain’s evolution after Covid-19. Prior to her current role, Mar ran the Academy’s programs that support sustainable, competitive advantage in the supply chains of Fung Group companies, including the use of mobile and Internet of Things (IoT) technologies, as well as direct supplier training. Until 2019, she served as the Fung Group’s director of sustainability and was instrumental in growing sustainability beyond compliance and into a competitive advantage for the Group. In 2019, she was named one of the 10 Eco-Business A-List of Asia-Pacific sustainability leaders. She continues to teach sustainability as an honorary visiting lecturer in the MBA program of the Hong Kong University of Science and Technology. She was previously based in Shenzhen as a director in the Global Finance Center of TCL Multimedia Technology Holdings, and prior to that, in Geneva as the World Economic Forum’s associate director for Greater China, where she built the Forum’s key relations with the Chinese government and businesses. Mar studied philosophy and East Asian studies at Yale University, graduating summa cum laude, and then went on to obtain an MSc in management with honors from the London School of Economics and Political Science.

Barbara Meynert

Barbara Meynert

Fung Group

Business and thought leader Barbara Meynert has executive expertise in Asia and internationally across a range of commercial, financial and regulatory sectors. She is senior advisor to the Fung Group, member of the Executive Council of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Sustainable Business Network, adjunct professor at The University of Hong Kong, vice-chair of the Hong Kong-ASEAN Economic Cooperation Foundation, member of the Hong Kong Cyberport Advisory Panel, and a former board member of the Asia Global Institute. With her expertise and network, Barbara is helping to build back a better and inclusive world. She is a co-founder of FreeFlow Finance, an interoperability infrastructure company that works to unlock the power of regulated digital currencies for financial inclusion in digital commerce, cross-border transactions, and global trade. She holds a master’s degree from the London School of Economics and Political Science (LSE) and is based in Bangkok.

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