What is green finance, and how will innovations in financial technology (FinTech) impact the environment? The United Nations Environmental Program is banking on new financial technologies to address several issues where environmental stewardship and sustainable development align.
Sustainable development through new and innovative FinTech will, hopefully, address several issues that are keeping large groups of the world population living in extreme poverty and excluded from formal financial systems. The World Bank and other global development groups estimate that about half the world’s population, between 2 billion and 2.5 billion people, do not have bank accounts or access to formal financial services, such as credit, savings, or insurance. The goal is universal financial inclusion by 2020.
Financial inclusion is challenged by issues of identity, privacy, rural access to services, and cultural challenges such as women’s and children’s issues. The lack of infrastructure and financial inclusion for half the world’s population is seen as one of the primary roadblocks to sustainable global development.
FinTech – the slang name for innovations in financial technology – has, in many parts of the world with large unbanked populations, leap-frogged from a cash economy over credit and debit cards, to mobile money for both point of sale and bill payments. With strong internet use and smartphone technology, for instance, China is spearheading efforts at moving into a cashless economy. Estimates are that 60% of the population has internet access; the current population is 710 million. The developments have addressed issues of rural access, identity, and credit scoring using alternative variables. The majority of access to the mobile money system in China is through WeChat and AliPay.
Mobile money systems such as digital wallets are significantly less costly to run on average compared to traditional financial systems such as brick and mortar banks. There is a carbon footprint saving as well when moving from a paper-based to a digital system. For those in rural areas, transportation savings when accessing financial services can be significant. The significance of these individual small savings, though, needs to be multiplied by the global population who are currently unbanked. The increased access to formal financial services by half the world’s population will fuel both human development and a sustainable future.
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