Photocredit: Care Danmark

Fintech in Emerging Markets Is Not Disruptive – It’s a Vital Change

The emerging markets have vast demographics, where many don’t have access to the financial services industry. However, at least a handful of Danish fintech start-ups have set a goal to change that using innova­tive fintech developments in these growth markets.

As cutting edge technologies, like blockchain and artificial intelligence, are gaining momentum in Europe and the Nordic region, things are different in emerging markets.

In many countries, the same fundamental, financial infrastructure is not even in place – or is too expensive for the masses to access. 1.7 billion adults don’t have access to bank accounts, which makes it almost impossible for them to enter the financial services market.
However, re-configuring and implementing existing solutions in new and smart ways can make them affordable for growth economies. At the same time, new technologies, like blockchain, brings grand promises for improving processes, preventing corruption, and building new low-cost platforms, ecosystems, and infrastructures.

While the traditional financial industry should not be held accountable for inequality across the globe, it does need to be introspective about this issue. Examples like m-Pesa in Africa, Alipay in China, and PayTM in India, and how they transformed payments landscapes through mobile platforms, show just how much of a difference technology can make. Since 2011, services like those have been a part of reducing the global levels of unbanked adults by 20 per cent.

Technology instead of foreign aid

Instead of investing in foreign aid, tech-companies have the potential to leapfrog emerging economies forward. And while financial inclusion through technology is started as a journey to reduce global inequality, it also represents a massive business opportunity for technology providers.

In the future of banking, banks can address an additional US$380 billion market in annual revenues by targeting micro-enterprises and bringing both unbanked and underbanked adults into the formal financial system, per a report from Accenture.
This is a challenge that banks should be more than happy to embrace in the coming years. And a handful of Danish start-ups are already taking on the challenge.

HiveOnline: Financial tools for small businesses based on trust

While most advanced economies take transferring and handling money for granted, it still represents a transformative way forward for many countries without the same financial infrastructure. Low-cost mobile banking represents an opportunity to make this happen and to achieve financial inclusion, along with supporting new business opportunities for developing countries where services are neither available nor affordable.

The blockchain start-up Hiveonline is building financial infrastructures from the ground up to serve the underserved – primarily in Africa. The Danish company’s blockchain infrastructure reflects modern thinking and is most likely how a banking system would look like if it was to be rebuilt today. With this infrastructure, Sofie Blakstad, founder and CEO of HiveOnline, is bringing financial inclusion through business management tools to one of poorest countries in the world, Niger, alongside the NGO ‘Care’.

The blockchain-based app Hiveonline has developed is taking the pain out of managing projects as a small business. Finding work, managing deliveries, and getting paid are all managed seamlessly with the app. What’s more, these are all implementable at a lower cost compared to infrastructure in advanced economies.

At the same time, the solution allows entrepreneurs to build a trust score to prove their reputation to new customers, partners, and stakeholders within the ecosystem. A trust score is kept on Hiveonline’s incorruptible blockchain, which encourages early payment and provides a guarantee of reliability to customers and potential partners.

GrowthBond: Hotwiring traditional ­capital market by funding advertising

It takes money to make money. And for digital companies, a lot of money is spent advertising on digital platforms like Facebook and Google. Ferdinand Kjærulf, the founder behind Growthbond, saw this first hand when he previously helped launch ‘Airhelp’, which first gained momentum when they got the funds to invest heavily in online advertising.

Moreover, worldwide, more than 70 million small- and medium-sized enterprises can’t access capital to fund their growth through advertising. Despite the fact that small businesses create the vast majority of jobs, 70 per cent of banking applications are denied and only a fraction succeeds in attracting investments from business angels or venture funds. Micro-loans have been added as a third way for small businesses – especially in emerging markets – but this solution is also time-consuming and only available for the lucky few.

In the end, the small businesses that succeed in raising capital spend a large portion of it on digital marketing. So instead of wasting time looking for capital to expand their business, GrowthBond has created a solution that allows business owners to skip the capital raising step and apply for 20,000, which can only be spend on digital advertising.

GrowthBond makes the process lean and fast by requiring businesses to connect their Facebook and Google accounts, along with their payment gateways to the platform. This allows GrowthBond to calculate the businesses return on advertising investment, which makes it easy for investors to assess their return when investing. And after raising advertising-capital through the platform, the small business is paired with an expert in online marketing to make the capital work more efficiently.

While the solution is aimed at every small business around the globe with an active Facebook page, emerging markets might be able to benefit the most from the platform. In some of those markets, Facebook accounts for 80 per cent of all internet traffic, and 60 per cent of the populations can be reached through the social platform.

The platform has already gained financing from both the UN and EU to enrol its service in Kenya, Gambia, and Palestine. Furthermore, the start-up has secured lending capital from 90 private investors through the crowd financing platform Lendino.

Ultimately this has the potential to create a better and more efficient capital market, where businesses’ marketing and sales data is available to investors in real time. Furthermore, it can make capital available for businesses in Africa, Asia, and the Middle East.