The breakdown of financial inclusion and financial wellness

Guest post by Marija Petrushevska. Marija Petrushevska is a content writer at Shortlister. She enjoys writing SEO content, including articles and guest posts on HR, wellness, and benefits.

Technology is so omnipresent today that it shapes almost all aspects of our lives. With the constant innovations in the field, it can now even shape financial inclusion. 

But what does financial inclusion mean?  

As the World Bank puts it, “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.” 

Yet, even though technology has put nearly all kinds of services and products at the touch of a fingertip, a third of adults globally still remain unbanked, as stated in the World Bank’s latest Findex Report. 

The report also shows that the pandemic made a seismic shift in how many people from developing countries started using digital services. In fact, according to the findings, about 40% of adults in emergent nations made a digital merchant payment or digitally paid a utility bill for the first time. 

This demonstrates that through digital financial inclusion, individuals from all socioeconomic classes can now access more financial possibilities. 

 

What is Digital Financial Inclusion? 

In broad terms, digital financial inclusion refers to the digital access and use of digital financial services by people of all socioeconomic classes. Four key components are part of digital financial inclusion:  

  1. Digital transactional platforms allow customers to receive and transfer funds electronically. 
  2. Devices can be divided into digital devices such as mobile phones or instruments such as payment cards that connect to terminals. 
  3. Retail agents with a digital device that communicates transaction details and enables customers to convert between cash and electronically stored values. 
  4. Additional financial services are offered via a digital transactional platform. 

Digital financial inclusion can be transformational for people who lack access to formal financial services. The benefits of it include: 

  • Generally, lower costs of digital transactional platforms for both the customer and the provider. 
  • Lesser costs connected with cash transactions and informal providers. 
  • Reduced risks of loss, theft, and other financial crimes. 
  • Access to digital financial services to all individuals with access to technology. 
  • Fostering economic empowerment, especially for women account owners who are underrepresented compared to men, as the Findex Report shows. 

 

Financial Inclusion & Financial Wellness 

Making digital financial services accessible globally is essential, but it is also vital to promote financial wellness. Access to digital platforms will add no value to people’s lives if they aren’t financially literate. 

With financial issues impacting employees’ mental health (34%), sleep (33%), physical health (23%), and work productivity (18%), as PWC’s survey revealed, now more than ever, employers need to support their workers’ financial wellness. 

Even though there are many ways to achieve this, in today’s technological world utilizing digital tools in organizations can help employees make breakthroughs for their financial education and well-being. 

 

Improving Financial Inclusion in Organizations Through Technology 

Financial well-being is now becoming as important as physical or mental health. According to AON’s Benefits and Trends survey, 62% of organizations say financial wellness is the employer’s responsibility. 

With this in mind, it is clear that companies need to take steps to support their employee’s financial well-being and education, and a great way to do that is through technology. 

Today financial technology, also known as fintech, has advanced so much that almost anything is now digital. And that offers an array of opportunities to improve the financial inclusion of workers from all areas. 

So how can technology help employers improve the financial inclusion of their employees?  

 

A few solutions…

Firstly, fintech solutions now offer employees full digital banking experiences that provide various financial services for lower costs because of automation. 

By implementing AI into the solutions to automate searching, comparing, reviewing, and other activities, people can now better understand their finances. Additionally, some platforms offer insight for consumers to identify opportunities to reduce their expenses and maximize their income. 

Another major area where technology can have an impact is lowering the overall borrowing costs. Through finance apps, some companies support their workers by offering them a new kind of voluntary employee benefit that enables them to take out short-term loans without stepping foot in a bank. The loans’ interest rates are based on algorithms that allow everyone to borrow money, regardless of their credit score or paycheck amount. 

The algorithms that calculate interest rates combine AI and machine learning for credit scoring and risk assessment. This approach is more transparent because it doesn’t only rely on credit history but also considers other factors, such as payroll data provided by a company’s payroll software. TrueConnect is a great example of a program that offers fair interest rates, does not require a credit score and may actually help employees rebuild their credit through automatic payroll deduction repayments. 

Lastly, employers can support their workers’ financial education via online courses or training. There are many available learning opportunities, so employees can choose what they would like to extend their knowledge of based on their circumstances and financial goals.  

 

Conclusion 

 Technology is transforming the financial situations of millions of people worldwide. Fintech is constantly developing new solutions that enable access to financial services for people from all socioeconomic classes. 

And with their organizations’ support combined with technological solutions, employees can ultimately improve their financial wellness. 

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