Fintech Sector Continues to Grow Due to Contribution From Third World Economies
The fintech domain has grown tremendously within the past decade with specific emphasis to developing countries. This surge is driven by various factors, including the proliferation of mobile technology, increasing internet penetration, and the necessity for affordable financial services. Because of small-scale money transaction oriented fintech applications the access to money movements has now been turned into a useable option within many developing nations that offer millions of heretofore economically inactive individuals with an economic lifeline. Not only are these apps rapidly improving but they are changing the financial society but there are also challenges that make it difficult to fully utilize these apps in integrating the third world countries with the global economy.
The Boom in Small Transaction Fintech Apps
In the recent five years, there has been rapid growth in the use of small transaction enabling fintech applications, especially among the underdeveloped nations. New fintech applications have changed the way people handle their funds with instant and affordable low volume transactions where previously it was hard or too expensive.
This growth can be attributed to several factors. First, the proliferation of smartphones and mobile networks has permitted the usage of digital financial services by many people who were not able to access these services previously. In Sub-Saharan Africa, South East Asia and Latin America, mobile money services have also grown and it is relatively easy for the user to send or receive funds, pay bills and borrow money with few touches on the phone.
Mobile money services such as M-Pesa in Kenya, Paytm in India and Tigo Money in Latin America have heralded a fresh wave of the activity in the world of financial technology. These platforms have been contributing positively towards achieving the goal of financial inclusion where persons in the farthest places can engage in the formal economy without necessarily being banked. Already, the gratefully easy access and the safety of these services have resulted in their acceptance, with billions of transactions carried out every year.
In addition to this, fintech app development services have become more ubiquitous and streamlined than everbefore. The apps these services build do not only allow peer-to-peer transfers only; they also help the micro enterprises to receive payments in electronics and to manage and grow their businesses. This has transformed the informal sector whereby small businesses and street traders can now leverage financial services which have been beyond them. Consequently, it makes the economy more vibrant because the smallest of transaction can also participate in the development of the economy.
How the Cosmetics Industry has Benefited from the Use of Fintech Apps
Utilization of fintech apps for development has reached the lowest price, least level of complexity, and most expansion in the past years. This addition of ease of use of developing or building applications locating and managing the apps has emerged as the primary reason for the growth of this sector in the third world countries. Other factors such as cloud computing, open-source software, and low-code development tools were majorly the ones attributed to the new business in the fintech industry.
Previously, a lot of finances and technologies were necessary to invest in a project of developing a fintech app. However, this picture has changed a lot in the last couple of years. Now, it is rather easy for business creators in newly developing countries to create and execute such solutions using many tools and services available at a very low cost. For instance, there are now cloud computing services, for instance, Amazon Web Services (AWS) and Google’s cloud, which make it easy to establish a wide range of fintech activities without hardware costs.
In addition, the emergence of white-label payment processing services has also simplified the tasks of integrating payment methods into mobile applications since app-developers do not have to build their own payment systems. The appeal of building such customer-facing applications has encouraged most fintech ventures to focus on these features. This has resulted in the rapid growth of applications in the fintech industry targeting local needs, ranging from mobile payments and P2P lending to digital beam.The increased accessibility in fintech app development can also be linked to the increasing number of new accelerators, incubators, or venture capital investors existing in various emerging markets that focus on fintech investment. Such agencies are not only concerned with investment but do involve technical assistance, mentoring, and networking, all important in growing Kiva’s microfinance offerings. This, in turn, is leading to the development of an active fintech hub in areas previously considered technologically stunted.
The Transition of Fintech Applications to the Combination of Traditional Currency with Cryptocurrency
One of the hottest trends in the area of financial technology over the last few years was the emergence of applications incorporating both cryptocurrency and traditional money features. In 2021, such an application spoke about the boom market because of the wave in favor of digital currencies and the advent of the technology of blockchain. In 2024, such a trend is resurfacing as there is a rejuvenated move to pursue cryptocurrencies as a tool for financial access and economic growth in third-world nations.
Credit card and transfer companies that include a facility to store, transfer and trade cryptocurrencies and traditional currencies are being used more widely within third world countries. They should also appeal to users in the area of transfer of funds, as they bring the concept of currencies in both systems closer. This is critical especially in areas where the local currency is prone to depreciation or access to other currencies is restricted.
For countries like Nigeria, Venezuela, and Zimbabwe whose local currencies have been rendered worthless because of hyperinflation and currency over-exchange, cryptocurrencies are a safe haven. Fintech apps such as BitPesa (now AZA Finance) in Africa and AirTM in Latin America, have come up with this need in response to users’ needs of the very same market.
Instead of being another fancy addition to the fintech apps enabling users to hold fiat currencies and virtual currencies, this also brings in new channels for sending money often raised by families in developing countries. Existing remittance systems tend to be expensive and time consuming but fintech apps using cryptocurrency have the potential to offer cheaper, quick, and more secure systems for remittances. This has been beneficial to those living abroad and especially members of the family who have to remit money back home.
However, such applications have some limitations. One main challenge is regulatory risk, especially around crypto assets, which still exists in most of the developing countries. The authorities are primarily concerned about these types of currencies, holding the view that they may disrupt the established with money policies or promote unlawful activities. As a consequence, numerous laws have been enforced, which tend to be hard for the financial technology businesses to comply with.
The Limitations in Attracting Foreign Investment
Yet, despite impressive expansion of fintech in the third world economies, there is little evidence that this has led to improved foreign investment inflows or deeper economic integration into the world economy. In spite of the new financial services and rise of the potential for financial service, sub saharan economies remain peripheral in terms of foreign direct investment which is crucial for economic growth.
This is primarily due to the fact that there is a negative perception of risk when it comes to investing into emerging nations. Due to political risks, economic risks along with a lack of intellectual property rights makes foreign investors hesitant regarding these markets. Furthermore, many of the emerging markets in fintech deploy a developmental, rather than growth, stage of financing, so numerous start-ups do not have the proven success or scale in order to get large investments.
A further challenge rests in the fact that there are few opportunities for developing countries’ fintech platforms to interoperate with those of developed economies. While in the app dominated by financial technology in a third world country there have been significant changes in extending financial services to the non-banking population, the application works in isolation. The environment does not allow them to penetrate wider markets and enjoy the benefits of economies of scale associated with global integration.Moreover, several fintech applications utilized in countries with emerging economies do not seek to make global products, but instead focus on addressing local issues. While this is important in bringing about fin inclusion and even meeting the demands of the neglected segments, it equally implies that such apps are unlikely to be of interest to foreign investors who seek for application monetization across various markets.
Moreover, in the majority of developing countries, institutional structures represent a strong hindrance to foreign direct investment. Although some governments have attempted to promote 'fintech empires' around the globe, most of them still do not have the proper governing laws that would allow the investors to spend their money. Insufficiency of proper legislation may prevent investment and slow down the development of the branch of industry.
In Summation
In the countries of third-world economies, the expansion of fintech sectors is indicative of the extent to which technology can be used to enhance financial accessibility for marginalized groups. The growing availability of mobile money, ease of accessibility to developing a fintech app, and the increase of apps merging fiat and crypto markets are all leading to a change in the finance landscape.
Nevertheless, there are still significant challenges that need to be addressed. The emerging fintech innovations in these developing economies have yet to draw in sufficient levels of foreign direct investment or better connect these economies to the global marketplace. In order to fully tap into the possibilities offered by fintech in third-world countries, there is need to remove the regulatory, economic and operational challenges which still stifled their growth and attraction to foreign investment.
In the following years, the priority should be given to the strengthening of linkages between fintech environments in the developing and developed economies, to the regulatory policies that will promote such linkages and to innovations that are globally sustainable. It is only then that the fintech sector in the third world economies can realize its full potential and on which impact the development of the economy on a global scale.
