All FinTechs have the power to combat financial exclusion in Australia, helping people in low-income demographics to access assistance programs in order to become more financially secure.
The World Bank defines financial inclusion as ensuring that individuals and businesses have access to useful and affordable financial products and services which meet their needs – such as transactions, payments, savings, credit, and insurance. They should be delivered in a responsible and sustainable way.
The extent of the issue in Australia
While Australia likes to think of itself as the lucky country, we don't always do enough to ensure that everyone shares in that luck. More than three million Australian adults are severely or fully financially excluded, according to Good Shepherd Microfinance – one of the country's oldest not-for-profit organisations which was set up to support vulnerable Australians.
Financial exclusion places these people and their families at a higher risk of experiencing financial stress, hardship, poverty and vulnerability to predatory lending practices – all of which can lead to poorer social, emotional and health outcomes.
While Australia's level of financial exclusion hasn’t changed markedly over the last decade, wealth and income inequality have worsened along with financial stress and hardship.
Causes of financial exclusion
Unemployment and low incomes are the biggest causes of financial exclusion in Australia. Other factors which can exacerbate the situation include:
Mental or physical disability
Ethnicity
Education status
Geographic remoteness
Lack of access to the internet and technology
Women are also a greater risk of financial exclusion, due to higher under-employment rates and lower weekly incomes than men in Australia.
How FinTechs can reduce financial exclusion
Australia is committed to the G20 and United Nations' efforts to address financial exclusion. As part of these initiatives, the Australian Government appointed Good Shepherd Microfinance to develop the Financial Inclusion Action Plan (FIAP) Program.
A Financial Inclusion Action Plan is a commitment made by an organisation to take practical actions to improve financial wellbeing for its customers, employees, supply chain and community partners. This includes taking specific, targeted actions designed to provide early support for those most at risk of financial exclusion, helping to move them away from long-term welfare dependency towards financial stability, income generation and better wellbeing.
The FIAP Program provides an opportunity for Australian organisations to explore their current business operations and identify potential future actions to support financial inclusion and resilience. Joining the FIAP Program also provides opportunities to learn from and collaborate with leading organisations from diverse sectors.
To date, 40 Australian organisations have joined the FIAP Program, including a number of banks, superannuation funds, insurance groups and utility providers. Together they have trained more than 10,000 staff to improve their ability to support financially vulnerable households. As a result, more than 1.4 million Australians gained access to affordable financial products and services.
Economic modelling shows that as FIAP actions are embedded into business as usual practices over a 10-year horizon, the FIAP Program could contribute towards a per annum increase of $2.9 billion in nominal GDP and $11.8 billion in household wealth, along with a $583 million annual reduction in government spending.
Gen Advisory believes that joining the FIAP Program is the number one thing Australian FinTechs can do to help combat financial exclusion. For more information on further steps to take, contact us.