Fintech Startups Help Bank 1.4 Billion Unbanked Adults

The trend began with pioneers like M-Pesa, which launched in Kenya in 2007 and demonstrated the viability of mobile-based financial services. According to the Bank for International Settlements, the adoption of mobile money was responsible for reducing Kenya’s unbanked population by 45% between 2007 and 2021.

Several distinct but overlapping business models have emerged to address the needs of the unbanked, each leveraging technology to overcome traditional barriers to entry.

• Mobile Money: This model uses a network of local agents, such as small shop owners, to handle cash deposits and withdrawals, while transactions are conducted via mobile phone. The GSMA reported that in 2023, there were 1.75 billion registered mobile money accounts globally, which processed $1.26 trillion in transactions. M-Pesa alone serves over 51 million active users across seven African countries, processing $314 billion annually.
• Digital Banks: A new generation of app-based banks offers zero-fee accounts and other services directly to consumers. Brazil’s Nubank serves over 90 million customers, many of whom previously lacked access to credit. In Africa, companies like Kuda in Nigeria have acquired 7 million users in four years, while South Africa‘s TymeBank has surpassed 9 million customers. According to CB Insights, African fintech startups raised $2.1 billion in 2024, with a significant portion going to inclusion-focused ventures.
• Micro-lending Platforms: To address the credit gap, fintech lenders use alternative data sources—such as mobile phone usage and transaction history—to assess creditworthiness. Tala has disbursed over $6 billion in small loans, averaging $50 to $500, across Kenya, Mexico, the Philippines, and India. S&P Global noted that default rates on such platforms in East Africa average 4-7%, which is comparable to traditional microfinance institutions.

The success of fintech in promoting financial inclusion is rooted in economics. According to analysis from McKinsey, a traditional bank branch costs between $1 million and $3 million to establish and another $500,000 to $750,000 annually to operate. These high overhead costs make it unprofitable to serve customers with low average balances, such as the $50 cited in the analysis. This economic reality led traditional banks to concentrate their services in affluent, urban areas.

In contrast, fintech models eliminate the need for costly physical infrastructure. With mobile phone penetration reaching 85% even in low-income countries, the primary delivery channel is already in the hands of potential customers. The cost to maintain a mobile money or digital bank account is near zero for the provider, making it economically feasible to serve millions of customers with small, fluctuating balances.

Partnerships between governments and fintech companies have accelerated financial inclusion on a national scale. India’s “JAM trinity” initiative linked Jan Dhan basic bank accounts, the Aadhaar biometric ID system, and mobile phones to create a robust digital financial infrastructure. This system, which has opened over 500 million accounts, was used to disburse over $350 billion in direct benefit transfers between 2014 and 2024. The country’s UPI payment system processed 117 billion transactions in 2024 from over 350 million users.

Similarly, Brazil’s Central Bank developed the Pix instant payment system as a public utility, ensuring interoperability and access for its 150 million registered users. In the Philippines, the central bank has partnered with digital wallet providers like GCash and Maya to pursue its goal of bringing 70% of adults into the formal financial system by 2025.

While the growth is significant, the long-term profitability and sustainability of many zero-fee digital banking models remain to be fully proven at scale. Furthermore, the source material does not detail the specific regulatory hurdles these startups face in different jurisdictions, nor does it address potential issues related to data privacy and the use of alternative data for credit scoring. The specific strategies required to reach the final 1.4 billion unbanked, who are often in regions with political instability or limited connectivity, are not fully detailed.

The industry’s focus is shifting from basic access to a fuller suite of financial services, including savings, credit, and insurance products offered through mobile platforms. The primary challenge remains reaching the last billion unbanked individuals, who are concentrated in the most remote and economically challenging environments. Future progress will likely depend on continued innovation in low-cost service delivery and deeper partnerships between fintech companies, governments, and telecommunication providers to overcome infrastructural barriers.

Individuals can take several steps to navigate the evolving financial landscape:

• Familiarize yourself with the digital financial services and mobile money platforms available in your region.
• Understand the terms, conditions, and fee structures of digital wallets and banks, even if they advertise “zero-fee” accounts.
• Prioritize digital financial literacy to protect against scams and manage finances effectively in an online environment.
• For those in developing markets, explore government-backed financial inclusion initiatives that may offer subsidized or simplified account opening processes.