How can you improve your financial situation?
We all know that life without money won’t be good. That’s why we’re continuously trying to enhance our financial situation.When we consider the impact of every financial decision and activities on our financial health now and in the future, finding the right answer to the question of how to improve our financial status is not as easy as we think. Given the complexity of these processes, nobody is the only person who cannot make healthy decisions on his/her own financial future.
In a nutshell, the term personal finance can be described as a whole of the ways we manage our money and plan for our future. Mostly, our financial decisions are shaped by the comments of the experts, our relatives and acquaintances, who give us advice on monetary issues to help improve our financial situation. Their first advice, which would have only a few steps, is that we should start by accepting our financial problems, stop blaming our past decisions and focus on the future to fight against our tedious debts.
Another common advice is that we should be aware of our current financial situation. By making detailed calculations of our income stream and expenditures, we can easily determine our monthly spending plan. If our income is saliently lower than our expenses, there is a need to take immediate actions to increase our earnings or reduce our spending. Either way, it is assumed that we can have a clear sense of where we stand financially, and cut off any unnecessary expenditure.
“If you can’t pay, don’t get the credit card!”
I’m sure, all of us have heard or will hear this advice at least once in our lives. The rationale behind this remark is as follows; for the foreseeable future, people should pay their debts with the cash that they earn and save. Naturally, it would prevent people from accumulating more debt in the process. In short, ‘If you don’t have enough cash to pay for something, you’ll just have to be without it!’
Lastly, we should check our credit reports frequently from each credit bureau to make sure there aren’t any mistakes related to our expenses. At this point, it should be acknowledged that many of these advises were put to a test in time and proved to be successful in helping our everyday lives to a certain extent. However, we have to say that these advises are makeshifts. The main point here is to consider what we should be doing to find the ways we can improve our personal finance in a more permanent way since the problem is much more related to the structure of traditional finance sector rather than the fizzle of people’s personal expenditure plans. Therefore, we need to offer something different from ‘austerity policy’ unlike what most government policies do all around the world. So, today, we will discuss the new ways of being improving ourselves financially through the opportunities provided by our ‘innovative’ age.
New Way to Improve Financially: Fintech
When we look at the remarks mentioned above, it’s undeniable that these advises can only serve some people who have already been taking place in the current financial ecosystem to a certain extent. For example, can we say that these words apply to people who have never taken a loan from a bank in their entire life? Or, what advice do we have for people who can’t get to banking services to help improve their financial situation?
Today, approximately 38% of the world population has no formal bank accounts, and another 40% is undeserved by traditional banks. Due to high compliance and infrastructure costs, mainstream financial institutions such as banks and fund managers that are constrained by domestic and international regulations are unable or unwilling to serve the vast section of disadvantaged and low-income groups of the society.
However, providing sturdy financial services to the unbanked at affordable costs is a pillar of economic growth and development all around the world. The availability of banking facilities and strong bank branch network for everyone increase equality among the nations and lead to financial inclusion and integration.
Today, many sustainable and profitable enterprises harness various technologies to ensure that financial services should be accessible to larger masses. For example, the companies using mobile technologies can contribute to the aim of financial inclusion by offering an alternative to debit and credit cards for providing direct payments from customers’ mobile accounts.
So, what is the concept that we refer to as financial inclusion?
According to the World Bank report, the term financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs delivered in a responsible and sustainable way. These products and services can include transactions, payments, savings, credits, and insurances.
At this point, some opportunities provided by the financial technologies (Fintech) such as mobile payment system using digital KYC process, crowdfunding, alternative credit scoring, and lastly Blockhain infrastructures e.g., may provide a sustainable business model by serving ‘the entire pyramid’ including the undeserved people and communities.
For example, the companies using mobile payment systems such as Alibaba, Tencent e.g., can complement the traditional banking and financial services with banks with no physical branches such as WeBank, and micro-financial services such as ANT Financial. While these companies continue improving the current financial sector landscape, they enable previously unbanked people to make their transactions at lower costs.
More importantly, new credit scoring models using advanced machine learning techniques and alternative data science tech without ignoring the ethical and privacy regulations, enabling large parts of the population to reach microlending opportunities in today’s world. Through numerous sources of data such as financial transactions, social media, public records, internet e.g, the creditworthiness of people based on their credit scores can now be assessed more reliably and fairly, which in turn can contribute to reduce poverty, boost prosperity, and thus increase the financial well-being of people all around the world.