FINANCIAL TECHNOLOGY AND INTERNET ACCESSIBILITY IN RURAL AREAS.
1.0 LITERATURE REVIEW
1.1 FINTECH
Financial technology, or FinTech, is the use of technology to supply financial services, otherwise
known as alternative finance. Alternative finance refers to a variety of innovative funding models
that are arising outside of the conventional financial system and that use digital platforms or
websites to connect fundraisers with funders and investors directly; in other words, they utilize
digital technology to deliver financial services. Such models include digital payment systems,
crowdfunding, peer-to-peer (P2P) consumer lending, peer-to-peer business lending, and invoice
trading (UK Alternative Finance Industry Report, 2014). OJK defines fintech products as a system
created to run certain financial transaction mechanisms (Manan, 2019). Financial Technology is
also defined by Hiyanti as the use of digital technology to solve financial intermediation problems
(Hiyanti et a l., 2020). Thus, it is possible to conclude that Fintech is a service that provides
financial services in the form of financing by utilizing information technology or internet of things
in providing services to deficit and surplus units in the financial ecosystem.
Fintechs have been categorised into numerous fields, mostly functioning in banking, insurance,
and asset management (KPMG UK 2017). According to Gregorio (2017), there are five broad
areas where fintech firms are active. Finance and investment (venture capital and crowdfunding),
internal finance operations and risk management, payments and infrastructure (electronic
payments and OTC derivative trading), data monetization and security, and customer interface.
In order for an economy to grow inclusively, it must have inclusive financial systems that assure
the accessibility, availability, and use of formal financial services for the entire population (Fanta,
Makina 2019). According to the United Nations (2006), financial inclusion has two primary
dimensions: (1) a customer's access to a variety of formal financial services, ranging from simple
credit and savings services to more complex services such as insurance and pensions; and (2) a
customer's access to more than one financial services provider, guaranteeing a variety of
competitive options.
The use of financial technology (fintech) is now a requirement while it was not an option in the
past. Consumers can have all the banking services available at their fingers through smart devices
and this creates a good user experience (Manaf and Amiruddin, 2019).
FinTech companies use online and mobile networks to distribute formal financial services,
increasing financial inclusion and financial stability in underdeveloped nations (Arner et al., 2015).
The consequences of fintech as part of the larger transformation to a digital economy are only now
becoming apparent, however the potential is enormous as the pace and scope of private-sector
innovation are both increasing.
1.2 INTERNET ACCESSIBILITY AND RURAL AREAS
It is especially challenging to extend the Internet to rural parts of developing countries due to
severe price and expertise constraints. However, a number of interesting options are emerging.
These are primarily intended to introduce the Internet to non-users, or people who do not have
direct interaction with the technology. In most developing countries, such people constitute the
majority of the rural population. While the literature refers to a wide range of national contexts
that cannot be applicable to all rural settings, certain elements stand out. For example, Hudson
(2013) discovered that, despite high expectations for internet use for entertainment, education,
video chats, and telecommuting, cost was the primary reason for non-use (67%) among indigenous
communities in remote Alaska. Privacy and technology dependability concerns were also raised.
People with low levels of education, as expected, were among those who did not indicate an
intention to get online, as were those who were concerned about a lack of digital skills and limited
access to equipment.
New technologies and changing times have transformed what was once considered insignificant
(rural communities) into critical production areas. Ghana's current population is estimated to be
31,072,940, with approximately 56.7% (17,625,567) of the population living in urban areas and
43.3% (13,447,373) living in rural areas as of January 2020, compared with 56.1% (17,067,171)
in 2019 (Siaw, Twumasi and Agbenyo, 2020). This means that around 0.6% (558,396) of persons
in rural areas have moved to major cities because they are poor and desire a better life.
Lack of disposable financial resources makes purchasing devices and gaining access to digital
services challenging. "Income levels are a fundamental barrier to internet access," according to a
Deloitte report, "and internet penetration is generally lowest in nations with the lowest GDP per
capita." These people will be unable to reap the benefits of the technological revolution unless
they can use free or low-cost products (West, 2015).
1.3 FINTECH AND RURAL AREAS
Although Ghana has been trying to catch up to other countries in terms of Fintech development, it
is clear that it is significantly behind them. Ghana has the second largest economy in West Africa,
with approximately 31 million people (GSS, 2020), indicating tremendous growth potential in this
sector. Other factors impeding the growth of this sector include low internet access in rural areas,
access to bank accounts, a lack of funds, and accessibility to remote areas, among others.
According to (Ryu 2018), the barriers to Fintech adoption include financial risk, legal uncertainty,
security and privacy, and insufficient operational systems of Fintech companies. People can reduce
the risks associated with adopting new technology by embracing innovation. (Dermody, 2019).
Notwithstanding the fast expansion of fintech, research on its impact on financial inclusion has
been limited. Investigations on how Fintech has narrowed digital divides across gender, income,
and rural areas are even more scarce (Tok & Heng, 2022). This is mainly due to a scarcity of
extensive data on Fintech parameters and indicators of digital financial inclusion. Traditional
financial inclusion indicators fall short of capturing digital financial inclusion, and analyzing the
impact of Fintech on financial inclusion may lead to incorrect inferences if financial inclusion is
not properly assessed.
Since 2009, the public and private sectors in India have collaborated to create an ecosystem that
allows low-income households in urban and rural areas to access digital financial services
(Badruddin, 2017). Rates of financial exclusion are higher among the poor, less-educated, and
those living in rural areas (Loo, 2019). He continued by stating that in the Association of Southeast
Asian Nations (ASEAN), only half of adults have a bank account, and 264 million adults keep
their money to themselves and borrow from "loan sharks" at high interest rates. FinTech, according
to Coffie et al. (2020), has a positive impact on financial inclusion by increasing overall financial
accessibility in the subregion. Consequently, given the sub-economic region's characteristics,
mobile-based FinTech services provide a reasonable alternative for financial products to reach
areas where traditional financial institutions are not prevalent (Coffie et al 2021).
2.0 CONCLUSION
The study is relatively related closely to existing literature examining the impact of fintech in the
financial delivery ecosystem in developing countries focused on rural areas. Consequently, our
work focuses on how to bridge the gap of access to fintech products between people living in urban
areas as well as those in rural or remote areas.
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