Countless articles online tout the role of fintech in promoting financial inclusiveness. Innovative startups have supposedly developed ways to make it easy for just about anyone to use financial solutions and be part of a national or international financial system.
However, until now not many new financial services make it genuinely easy for new users to use fintech products, especially those that involve blockchain or cryptocurrency. The steps to get and use an account are still not that simplified for those who are not accustomed to using mobile apps and web services.
“Being able to have access to a transaction account is a first step toward broader financial inclusion since a transaction account allows people to store money, and send and receive payments,” notes the World Bank in its financial inclusion micro-site.
However, even this first step is not that easy for many who are new to using modern smartphones and do not even have email accounts.
What an ideal fintech experience looks like
Ideally, using blockchain-driven fintech services should approximate the experience of using cash, wherein there is a universal or at least a national medium of exchange that can be used anywhere. A person only needs to get the fund then use it to buy items at stores or pay for services.
Most payment systems require a client or web app (e-wallet) that serves as the wallet through which transactions are made. To get one, a user needs to sign up for an account, which entails the need for an email address, social media account, or a mobile number. The signup process should be completed in a matter of seconds.
Once a user already has an e-wallet account, it should be easy to top it up (add funds to the account) by receiving fund transfers from others who use the same wallet or other e-wallets or bank accounts. There should also be an option to add funds through traditional channels such as remittance centres or kiosks.
Moreover, the cost of fintech transactions should be considerably lower than those of traditional financial services. Also, there should be no legal or regulatory barriers to worry about.
Overcoming the key challenges
Unfortunately, what’s ideal is virtually impossible to achieve. There are key obstacles that hinder accelerated financial inclusion, particularly usability, consumer distrust, and government regulation or prohibition.
Barrier: Usability
Many blockchain companies have already made the account signup process quick and easy. The newly launched Maiar e-wallet, for example, lets users sign up with just a mobile number. All a user needs is to download the app, sign up for an account with it by submitting a mobile phone number, and wait for the verification code. After entering the code, the account is instantly created.
Signing up for an account is only the first step, though. The actual process of receiving and sending funds can be too complicated for many who are not used to using mobile apps.
For one, there’s the problem of securely keeping wallet IDs. These IDs are long strings of random characters, so memorising them is out of the question. There’s also the issue of un-optimised apps that crash during transactions.
Solution: Simple and familiar systems plus consumer education
How can the use of blockchain-based e-wallet services be made simpler? Again, Maiar can serve as a good example. Aside from the quick signup, it improves usability further by making the process of sending and receiving money similar to using a messenger app.
Instead of dealing with lengthy wallet IDs, users can associate wallet IDs with contacts within the Maiar app. Some may not be comfortable with sharing their mobile numbers when doing transactions with strangers, so there’s the option to create aliases. In the case of Maiar, these aliases are called @herotags, which is powered by the recently-launched high-speed Elrond blockchain.
Also Read: Samsung backs Funding Societies to drive its vision of financial inclusion for SMEs in SEA
When it comes to adding funds, some Southeast Asian companies feature familiar schemes that can serve as a good starting point for enabling more convenient wallet top-ups. Globe Telecom of Philippines, for instance, allows users to convert their prepaid mobile load to Gcash (e-wallet) funds, which can then be used to top up blockchain accounts like Coins.ph.
Not everything can be simplified, though. There are steps in using blockchain-based accounts that require more than the familiarity with the process of buying prepaid load. As such, it helps to conduct education drives similar to what AMBERLab is doing in the Philippines.
Barrier: Regulation
Most e-wallets tend to impose limits on fund transfers and receipt right off the bat. Some limit the amount that can be kept in an account until a verification process is completed.
The typical verification requires the submission of at least one government-issued ID in compliance with Know-Your-Customer regulations for financial service providers. Regulations are usually driven by anti-money laundering laws and legislation related to terrorist financing prevention.
Solution: Public-private collaboration
Fortunately, Southeast Asia is already becoming more open to blockchain tech adoption. Many countries have started loosening regulations in support of the blockchain market. Regulation is not exactly an obstacle but a form of protection for consumers. Governments and blockchain companies would have to work together to make sure that regulation is supportive, not obstructive.
Barrier: Trust issues
It is not unusual for consumers to not trust new systems, especially when it comes to their finances. According to the Edelman, less than a majority of people trust FinTech products and services, with only 47 per cent saying that they trust P2P and digital payment companies, 49 per cent expressing trust in using robo-advisors and digital wealth firm services, and 48 per cent saying that they trust blockchain and crypto companies.
Also Read: Don’t break the bank: Enabling financial inclusion and equity through tech
Solution: Communication
Blockchain technology is already gaining traction in Southeast Asia, but it remains relatively new. It is understandable why many still hesitate to use financial services based on this tech. The main solution is to have campaigns to communicate a FinTech company’s commitment to security, compliance to regulations, and transparency when it comes to the pricing and benefits. It also helps to be aggressive in clarifying issues that associate blockchain tech with scams and failures.
The online wallet Skrill, for example, touts its PCI DSS (Payment Card Industry Data Security Standard) Level 1 compliance for all its services, which include the conversion of fiat currency to crypto. Additionally, this global digital wallet service provides enhanced fraud management and chargeback protection complemented by a multilingual customer service team to ensure positive customer experiences.
Regulation can also be viewed as a way to address consumer mistrust. “If regulators devise frameworks that strengthen public trust, they can inspire entrepreneurship and unleash the full creative energies of technology innovators,” says IMF Monetary and Capital Markets Department Director Tobias Adrian in his remarks at an IMF FinTech Roundtable. Private firms and governments need to work together to develop rules that strengthen trust without being unnecessarily restrictive.
Making blockchain more accessible to ordinary folks
“Blockchain technology can play a pivotal role when it comes to boosting financial inclusion toward the unbanked and underbanked,” writes a Deloitte report. This point is shared by many other studies. However, more work needs to be done to make this technology more accessible given all the regulatory, usability, cost, and trust barriers facing it.
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