Financial Inclusion in British Columbia: Evaluating the Role of Fintech

Abstract

Financial technology (fintech) can help to mitigate the problem of financial exclusion in British Columbia. Individuals who participate in the traditional banking and financial system experience a variety of social and economic benefits. Yet several factors like personal hardship, financial illiteracy, high product costs, perceived eligibility, informational gaps, a lack of credit history and legal documents, bank resistance, and customer feelings of distrust and disrespect contribute to the exclusion of many from traditional financial products and services. People who are “unbanked” and “underbanked” often turn to high-cost (even predatory) substitutes like payday lenders, rent-to-own firms, cheque-cashing services, and pawn shops. This paper illustrates how some fintech innovations—highlighting numerous companies operating in British Columbia, Canada, and internationally—can benefit people who are unbanked and underbanked as an alternative to “fringe” banking. Fintech is not, however, a panacea for those excluded, marginalized, or underserved by traditional financial firms, and there are several implementation barriers and integration risks in this market development. This paper provides seven key policy recommendations to help maximize the inclusionary benefits of fintech in British Columbia while mitigating its potential risks.

Keywords: Fintech, Financial Inclusion, Unbanked, Underbanked, Financial Exclusion, Challenger Banking, Cryptocurrency, Cryptoassets, Open Banking, Mobile Banking, Neo Banking, Fringe Finance, Predatory Lending, Payday Lending

JEL Classification: G21, G28, I31, I32, O16, O38, O51, Z13, Z18