Financial technology (Fintech) has been a buzzword in recent years. The emergence of Fintech has led to disruptive changes in the financial industry by offering greater convenience to the general public in accessing and using financial services. A typical example is the use of online or mobile banking. However, the applications of Fintech go way further. Among them, one important role is to promote “inclusive finance”.   

Inclusive finance or financial inclusion refers to efforts to improve the range, quality and availability of financial services – such as savings, lending, payment facilities and insurance – to people who are underserved or financially excluded, covering but not limited to those living in rural areas, marginalized communities and small businesses. Previous studies have shown that there is a positive link between financial inclusion and sustainable economic growth.  

One exemplar of inclusive finance is Grameen Bank in Bangladesh, which has aimed to alleviate poverty and empower the marginalized poor in the country through micro-credit since 1983. It empowers women and involves them in economic activities by lending them money to start up their own businesses and move on to better lives. Another familiar example is Alipay in China.  It has been providing financial services through mobile payment platforms to people living in rural areas without good access to traditional banking services. By using mobile phones, people can access basic financial services, such as savings, loans, and payments without the need to visit a bank.

Although Macau is a very small place and most people can access a bank easily within walking distance, Fintech can still contribute significantly to inclusive financial development in the city. With collaboration between the government and different financial institutions, there has been rapid development of automatic banking services and e-payment services, such as mobile banking, stored-value cards and e-payment apps. This was especially critical during the 2019 COVID pandemic when there were social distancing policies to minimize physical contact among people. One of the benefits that we have experienced in the past three years was the government’s distribution of electronic consumption vouchers. Obviously, this has been a great help to the underprivileged, such as the elderly; they could simply use the stored-valued card to get the subsidies and make payments without carrying a lot of cash. However, it is believed that inclusive finance can be promoted even more than that in Macau.

The small-and-medium enterprises (SMEs) have played an important role in the Macau economy, but it has been difficult for them to borrow money from the banks at favorable interest rates over the years. The reason is that they can hardly provide the financial data required by traditional banks as proof of their capacity to repay, which leads the banks to rate them with a higher credit risk.

In this regard, the use of Fintech can perform the function of inclusive finance by smoothing the way for SMEs to better and more convenient access to capital. If banks can provide a comprehensive cash management digital platform to their SME customers to manage their banking and daily trading transactions efficiently, they are able to collect all the essential data regarding the performance of their SME customers. By deploying more sophisticated data management and analytics, banks are able to improve credit risk assessment processes. Moreover, if the SME customer database held by each bank is large enough, the bank can even combine the data to analyze the performance of different industries which can further enhance credit assessments of each SME customer. However, it is very common in Macau for SMEs to use more than one bank to perform their banking and trading transactions. In the long run, it would be ideal if all the parties, including the government, financial institutions and SME customers, could reach an agreement on incorporating all the banking and trading transaction data of SMEs into a centralized platform similar to the individual credit data platform. The banks could then obtain sufficient data to perform credit assessments leading to more confidence in granting loans to SMEs at a lower cost, which will encourage SMEs to flourish.

In conclusion, Fintech has great potential to play a transformative role in promoting financial inclusion for different business sectors and individuals. Financial institutions in Macau can continue to make use of Fintech so that even marginalized communities are able to enjoy essential financial services. This will certainly assist in promoting and sustaining economic growth in the city.  

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