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Fintech for Humans - Digital wallets boost financial inclusion in developing economies

Africa has a youthful and tech-savvy population with mobile phone penetration at 75%. The flip side of the coin is that more than half of the population do not have a formal bank account. So, what’s the best way to reconcile these numbers? If you ask any number of fintech-preneurs, it is by creating digital wallet apps that allow these connected but economically disempowered individuals access to financial services.

What is a digital or e-wallet?

A digital wallet refers to software, an electronic device, or online service that allows individuals to make electronic transactions. A digital wallet alleviates the need for a physical wallet and a multitude of cards, in that it stores all the user’s payment information in a single secure and compact form. Once an app has been downloaded, the user is ready to go!

What functions does a digital wallet have?

Digital wallet apps allow for a wide range of transactions that are associated with a traditional bank account with credit/debit cards and online banking. This means that users can make payments, transfer money, withdraw cash and make cross-border payments, all on their cell phones or mobile devices.

What are the benefits of digital wallets for emerging economies?

Benefits for individuals

On a continent with a large rural population that don’t live near a brick-and-mortar bank branch, being issued with banking cards, paying bills, and sending money to family across borders is almost impossible. This restricts people to cash only transactions and excludes them from the mainstream economy. In addition, banking fees are high, and levels of financial literacy are low in many parts of Africa, making those that can get to a bank reluctant to open an account.

Digital wallets are therefore opening opportunities for many more people in emerging economies to enter money markets, buy, sell, and support their families in the diaspora. The latter function is especially valuable to both individuals and by extension communities and countries as it then brings in other digital wallet users as recipients of money, and the virtuous cycle of economic inclusion and the reduction of economic inequality continues.

Benefits for fintech companies

Digital wallet apps open the fintech market for technology companies to do banking in the same way that Uber is a tech company that does taxi rides. They also allow service providers to gather more information on their customers’ needs and therefore to develop their online offerings in line with demands.

Whether through necessity or convenience, through choice or need, many more people are beginning to use digital wallets. The number of services is set to grow as is the complexity of their function and whilst it is certainly true that e-wallets are boosting economic inclusion for many, they are simply a part of the massive digital migration of everyday functions for others.


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