March 28, 2024

Bridging the Wealth Gap: WealthTech for Underserved Markets

The FinTech landscape is constantly evolving, and WealthTech is emerging as a game-changer and not just for the privileged few. WealthTech companies are leveraging technology to make investing more accessible, affordable, and user-friendly for everyone, including those in underserved markets. Despite the overall positive World Bank’s Global Findex Database showing that the number of adults with a bank account at a financial institution or through a mobile money provider grew from 51% to 76% in 2021 the overarching challenge we are facing is to integrate the 1.4 billion unbanked adults worldwide into the financial system if we want to see a significant impact in bridging the wealth gap.

Understanding the Wealth Gap

The wealth gap refers to the difference in the overall value of assets that different groups of people hold. It is typically measured by net worth, which is the total value of assets minus liabilities (debts) a person holds. The 2023 update of the World Inequality Database reported that the top 10% of the population now own nearly ¾ of the world’s wealth, while half the world’s population is almost entirely deprived of wealth (2%). The gap between the top 0,01% and the bottom 50% has kept going up and is now about 50% higher than what it was in 2008.

As the data shows, the wealth gap is a pervasive challenge that disproportionately affects certain segments of the population, including low-income households, unbanked individuals, and those living in remote or underserved areas. Traditional financial services often fall short of addressing the unique needs of these demographics, leaving them without access to essential financial tools and opportunities

Often overlooked by traditional financial institutions, this segment remains underserved because it is seen as less profitable or higher risk. However, there is a growing recognition of the potential for serving these markets bringing to light the transformative potential of WealthTech in bridging the wealth gap by reaching historically underserved or unbanked populations and paving the way for a more inclusive financial future.

WealthTech as a Catalyst for Change

WealthTech is stepping up to address the wealth gap by leveraging technology to create inclusive solutions. These platforms recognise that financial inclusion is not just about providing services to the wealthy but ensuring that everyone, regardless of their financial status, has access to tools that can help them build wealth and achieve financial health. 

As technology continues to evolve, the vision of a financially empowered global population becomes increasingly achievable. But let’s explore the strategies used.

Micro-Investing

Micro-investing has emerged as a powerful strategy within WealthTech to make investing accessible to a broader audience. Rather than requiring significant upfront capital, micro-investing allows users to invest small amounts of money, breaking down traditional barriers to entry. A perfect example of it are the Automated micro-investing apps. They use algorithms to invest spare change or small amounts automatically. These apps round up everyday purchases and invest the difference, helping people to grow wealth gradually without a significant financial burden. This approach is particularly beneficial for individuals with limited financial resources, enabling them to participate in the wealth-building process incrementally.

Fractional Investing

WealthTech platforms are introducing fractional investing. It enables individuals to own a part of otherwise too high-value assets without having to cover the full cost, making investing more inclusive than ever. Advancements in technology are now paving the way for fractionalisation of bonds as well, facilitating the seamless division of bonds into fractions, and enabling investors to own a portion of a bond rather than the entire security. This democratises access to a diverse range of investments, including stocks, real estate, and other assets that were once out of reach for many.

Empowering Through Financial Education

Financial education is a cornerstone of bridging the wealth gap. WealthTech incorporates educational components to empower users with the knowledge and skills necessary for sound financial decision-making. From basic financial literacy to advanced investment strategies, these platforms aim to level the playing field by providing the tools needed to make informed choices.

Simplifying the User Experience

Intuitive Interfaces: WealthTech platforms prioritise user-friendly designs with clear visuals, simple navigation, and easy-to-understand explanations.

Multilingual Support: WealthTech solutions can cater to diverse populations by offering support in multiple languages, eliminating language barriers for non-native speakers.

Culturally Relevant Investment Options: Some WealthTech companies are developing investment options that align with specific cultural values or religious beliefs (such as Shariah-compliant investing), making investing more inclusive for underserved communities.

WealthTech’s potential to bridge the wealth gap is not just theoretical; it’s a tangible force for change. By embracing strategies such as micro-investing and prioritising financial education, WealthTech platforms are reshaping the financial landscape, making it more inclusive and accessible. As technology continues to advance, the vision of a financially empowered global population becomes increasingly achievable. WealthTech is not just a tool for accumulating wealth; if used correctly it’s a catalyst for positive social and economic transformation.