1. Background
Financial inclusion is the next step in the evolution of financial systems and has played a key role in the development of
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2. Practices
There are four main drivers of digital financial inclusion in
Implied in its name is the dependence of digital financial inclusion on digital technologies, such as cloud storage, big data, cloud computing, artificial intelligence (AI), and blockchain. These reshape the traditional concept of financial inclusion services, dramatically enhancing digital capabilities and reducing costs. Specifically, the Internet facilitates data transmission, cloud storage and big data technologies expand data storage, while cloud computing and AI improve data processing and usage. Typically, financial inclusion is unsustainable as a business model, lacking a positive cost-benefit ratio. However, these technologies enable digital financial inclusion by reducing overall costs, transmitting data faster, collecting more types of data, and enriching the economics of micro-finance. This happens both online and offline, so financial institutions continue to see return on investment.
At the same time, the Chinese government is strategically focused on extensive planning for digital technology, which is speeding up updates and transformations in digital inclusive finance. For one, the industry's development depends on comprehensive infrastructure. To this end,
One of the key digital technologies in this entire process is mobile payment. Today, anywhere you go – rural or urban – in
In general,
In addition to reshaping financial inclusion, digital technologies also encourage numerous business model innovations, which in turn facilitate financial inclusion. One typical example of innovation is customization. In fact, the biggest difference between digital and traditional finance lies in the transformation of financial services from single static products to dynamic tailored solutions. Essentially, this means that providers design bespoke financial services and products based on customers' individual requirements.
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3. Outlook
"The only constant in life is change", said Heraclitus. Looking ahead, there are three clear trends in
First, focusing on customer needs is key to digital financial inclusion. Ensuring that everyone has access to financial services requires tailoring services to a diverse group with complex requirements. A single service or product cannot suffice for everyone. To ensure that low-income customers have access, financial products and services need to address their unique needs and requirements.
Second, financial services need to be customizable. Digital financial inclusion emphasizes access to financial services for all and financial institutions are not required to provide full-scale services. Instead, it is more appropriate to determine the specific customer needs and offer tailored professional services. Therefore, the market needs to create space for customized digital financial services.
Third, digital financial inclusion will be closely integrated with other types of services. One example is bike-sharing, which has grown rapidly thanks to and in turn has encouraged the growth of mobile payments. Today, mobile payment has already become popular in transportation and shopping, and will likely penetrate other aspects of daily life very soon.
4. Implications
The discussed practices and trends signal four implications for other countries.
First, focus on developing and applying science and technology at the national strategic level; particularly, there should be a focus on FinTech and digital technologies. These will reduce the cost of digital financial services, enhance service efficiency, improve customer experience, and satisfy emerging customer needs.
Second, it is important to address long-term infrastructure in education, healthcare, transportation, utilities, energy, and communications. These will facilitate financial service outlets, payment services, and credit systems, driving digital inclusive finance.
Third, there needs to exist an inclusive and stable regulatory climate.
Fourth, it is key to continue encouraging business model innovation in financial inclusion. The integration of technology and finance has already given light to many new business models, which create feasible solutions for sustainable digital financial inclusion. Apart from being guided by the government, financial institutions should also pursue this type of innovation in terms of finance systems and governance.
5. Conclusion
Facing the continuous growth of technologies and innovation, we need to constantly consider the significance of financial inclusion. First of all, financial inclusion is the result of adjustments in the financial system, offering low-income groups access to financial services. Financial inclusion also signals macro economy re-balancing. Inclusive development urges financial institutions to serve the real economy and speed up technological innovation to achieve sustainable macroeconomic development. Last but not least, finance leads to a positive society. The call for financial inclusion is actually an aspiration for growth and development in the financial field amid social transformation. Beyond commercial values, financial inclusion also brings us long-term social benefits and human-centric development.
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