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Driving Financial Inclusion: The Synergy Between Fintech and Govtech for Access to Finance

Over the past two decades, the financial services industry has witnessed a significant transformation driven by the emergence of financial technologies, commonly known as fintech. Fintech has democratised as well as revolutionised the way we manage and access financial services, empowering individuals and businesses through innovative solutions.

Mustafa Baltaci is the co-founder of KOOP Ventures, a diverse consulting boutique with a focus on financial technologies as well as Web3. Here he discusses the interplay between fintech and government technology (govtech), highlighting how govtech solutions facilitate access to finance through initiatives such as regulatory sandboxes, KYC requirements, e-invoicing services, and digital platforms for loans and credit scoring.

Mustafa Baltaci, Co-founder of KOOP Ventures
Mustafa Baltaci, co-founder of KOOP Ventures
20 years of financial innovation

In a historical context, the early 2000s marked the rise of fintech as a disruptive force in the financial sector. Enabled by the deployment of automation and integrated infrastructures, banks released early editions of internet banking and mobile apps.

E-commerce led to a massive need for payment gateways that were naturally unfilled by banks. Online payment platforms like PayPal laid the foundation for a new era of financial innovation.

The second wave of fintech saw the introduction of brand-new solutions that had not been offered previously by banks. Peer-to-peer lending platforms, such as Lending Club, facilitated direct lending between individuals, bypassing traditional intermediaries.

The inception of Bitcoin in 2008 brought a new paradigm into the very discussion of decentralised finance in a world where centralised structures dominate all walks of financial business. Despite its debatable nature, cryptocurrencies have carved a niche in lending, trading, asset management, and payments across the world. In some countries where access to finance is a challenge, peer-to-peer crypto payments have provided an alternative to merchants and individuals.

As digital onboarding of users became mainstream, the proliferation of digital data has become prevalent. Artificial intelligence practices helped train the growing data of users with banks and financial institutions through smart insights and personalised financial services. Credit scoring, fraud detection, robo advisors, and algorithmic-driven insights are the products of such programs.

In the last five years, governments acted proactively to introduce groundbreaking regulations for sharing banks’ user data with third parties. Open banking, as it is called, set out increased collaboration and integration between financial institutions and fintech firms towards innovative services such as account aggregation, budgeting tools, and personalised finance tools. KYC and AML requirements prompted startups and service providers to compete on agility, reliability, and cost efficiency for their solutions.

Govtech has eclipsed with financial technology solutions

Fintech has a solid interplay and convergence with government technologies. India, for instance, has implemented an e-government service called the ‘Unified Payments Interface’ (UPI), which allows individuals to make digital payments and transfer funds directly from their bank accounts using their mobile phones.

Govtech refers to the employment of technologies to improve public services. By appealing to digital solutions, governments can offer a wide range of services to their citizens in an efficient, fast, and scalable way. Online portals, sandboxes, mobile apps, and digital platforms have been developed to streamline processes such as tax reporting, e-invoicing, license applications, and benefit payments, making government services more accessible, efficient, and user-friendly.

Regulatory sandboxes

A sandbox is a controlled environment where developers, researchers, or businesses can experiment, test, validate, and iterate their ideas, products, or services. Specifically, within the financial sector, regulatory sandboxes offer an isolated testing platform where fintech companies can experiment with their innovative products or services, benefiting from relaxed regulatory conditions during the testing phase.

Banco Central do Brasil is running a Sandbox that aims to foster innovation as well as the diversity of business models. The Central Bank of Nigeria has built a testing environment for financial innovation that indicates multiple objectives, including increasing competition, widening consumers’ choice, and lowering costs.

KYC requirements

Compliance is a broad term in finance referring to observance of regulations and sectoral norms in relation to financial practice by both institutions and individuals. As part of the statutory compliance services, KYC stands for the verification of the identity of customers by financial institutions.

A typical KYC service procedure includes ID checks, contact details, as well as proof of address. As finance becomes digital, online KYC has emerged as integral to onboarding users and processing applications for banking, payment, brokerage, and insurance products.

The eGov-KYC service of the Greek government offers credit unions and financial institutions a secure, digital, and accessible process of ID verification for their customers. Bahrain’s eKYC platform (BENEFIT) provides a national database for banks to securely verify the identities of their customers and validate their information. The Turkish Directorate of Population and Citizenship Affairs provides financial entities and businesses tool to verify a customer’s residential address.

e-invoicing services

Gaining popularity across governments in the last two decades, e-invoicing is a process digitising traditional paper invoices. Government e-invoicing platforms enable a stronger and more transparent tax collection process, empowering tax authorities to monitor transactions, identify potential fraud, encourage compliance, and ultimately enhance tax revenues.

Digitising invoices also enables SMEs to access alternative finances. E-invoicing integrated with fintech platforms enables businesses to receive funds quickly. M1xchange of India, Figo Para of Turkey, Awan Tunai of Indonesia are three of the many emerging fintech startups in invoice financing and digital marketplace business.

Loans and credit scoring

Through their digital platforms, governments enable their citizens to access loans and credit history. Integrated with credit information bureaus and banks, e-government platforms offer online one-stop-shops, allowing individuals to apply for loans digitally.

The Australian government has an online portal called Services Australia where citizens can apply for selected loans. The National Housing Finance and Investment Corporation (NHFIC) of the country administers online mortgage applications for eligible first-home buyers. of Kazakhstan introduced online registration of mortgage agreements using Blockchain technology. Recently, Freedom Finance Bank launched a digital mortgage, making it possible for Kazakhstan citizens to apply for a digital mortgage in one day.


Mustafa Baltaci, co-founder of KOOP Ventures:


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