How Fintech is Transforming The Financial Landscape in Somalia?

FinTech

FinTech is a combination of “financial technology”. Financial technology is the new way to use and get financial services. It’s a way to improve the process as FinTech is a new technology that will help people get better loans. FinTech is a way to help companies, business owners, and people better manage their money. FinTech is used on computers, but sometimes on smartphones too.

FinTech is a new type of company that does things to help people with their money. FinTech helps people by making sure they have good credit and get money from other companies. Since then, they have made more services for people, which means they now have a new definition. As of now, it includes different sectors such as education, retail banking, and investment management, etc.

 The development and use of cryptocurrencies are also included in FinTech, such as bitcoin. This part of FinTech might get a lot of attention, but big money still lies in traditional banking.

Actual Meaning Of FinTech

Financial technology or “FinTech” is the name for new ways to do business. For example, it can be digital money or accounting methods. Since the internet changed things and everyone has a phone, there are many different ways to finance. FinTech is when you use your phone to do things like pay bills. A lot of people use it now. One-third of them use at least two different services, and they are also more aware of the FinTech they have in their lives.

When it first started, FinTech was just about computers in banks. Now it is all about new technology for personal and business finance. FinTech is a word for many things. For example, it might mean you use your phone to send money to someone else. Or, it does also mean that when you apply for credit, you don’t even need a person. FinTech also means that people can raise money for their business using the internet and people’s money. FinTech has changed the perspective of how asset management companies work. Now, with robots’ help, they can provide you with portfolio management services. 

New Tech And FinTech:

New technologies will take the guesswork out of what you should do with your money. They will learn about your habits and do it for you. This is a good thing because people often make mistakes when thinking about their money, but these apps can help them. FinTech is also a quick adaptor of new technology for customer service. For example, chatbots can answer customer questions, and AI interfaces can help them with basic tasks. By looking at people’s payment history to see if they are spending money that is not normal, FinTech is also being used to fight fraud.

FinTech Example

FinTech is a company that offers financial services using technology. There are many types, so here are some examples which are discussed in detail below:

Blockchain And Cryptocurrency

One of the most controversial applications of finance is blockchain and cryptocurrencies. These are included in some of the first technologies that showed us how new advancements could change an industry. Different types of companies are now looking into cryptocurrencies. Facebook has created Libra, which is digital money. Some banks and tech companies are also starting to use crypto. For fraud prevention in blockchain, fintech has back behind it.

Budgeting Applications

Some apps let you maintain your budget called budgeting apps. Some of the most popular are Personal Capita, 

Mint, and Good Budget. These all are also known as part of the FinTech sector. This app helps users keep track of what they earn and what they spend. These apps will help you track how much money you have and what you have spent.

Online And Mobile Payment System:

FinTech is a way to pay. You can use your computer or phone. It’s different from paying with cash or debit card. It is good for people who have these things because they can buy things online. In 2019, 950 million people used mobile payments. This number is expected to continue increasing by 2023. This growth is fueled by people who are not using banks in certain countries in Asia, Latin America, and Africa.

Crowdfunding Platforms

Before crowdfunding platforms, startups had to talk to banks for loans. Now you can get money from just one platform, and you don’t have to ask for money from different investors one by one. Crowdfunding platforms like Kaal Somalia (Kaal.so) created significant  opportunities for startup founders to raised funds in Somalia. This could serve as an emerging viable option for funding. Everyone can use the same platforms to help them gather some money. Like,  they can use their platform to pay for hospital bills, travel, etc.

Investment and Trading Platforms

Due to technology, the stock market investors now do not need to go to a stock exchange directly. It is now easier for them to buy and sell stocks. FinTech apps let them trade stocks even on their phones. Some apps are cheaper and for people with less money.

 How Does FinTech Work:

FinTech companies make it easier for people to use financial services, which can be hard to find. These services include things like saving and investing money. You can also borrow money. But it also includes new financial technologies like blockchain and cryptocurrency. For FinTech companies, there is still a long way to go because one-third of adults don’t even use any financial institution or bank for some reason. 

FinTech And Banking Sector

Some financial institutions like banks invest in other things, like new technologies. This is called “FinTech.” It’s changing the way consumers manage their money. We can say that FinTech companies compete with banks. In some ways, this is true, but now in FinTech companies, banks are also investing. In 2017, US banks invested over US$3.6 billion in 56 FinTech startups. 

JPMorgan Chase spends $11 billion on its internal technology researchers and developers each year. They also partnered with FinTech startups worth $600 million.

The Uprise Of FinTech In Somalia

Somalia is becoming a cashless society by using new ways of paying for things. In this kind of society, people pay with their phones instead of cash. They also use them to buy groceries and pay bills, and they sometimes get money from relatives who live far away. This happened because there were no banks. And people don’t trust the Somali shilling. According to the head of the IMF, there’s about 98% counterfeit money, Samba Thiam. According to Somalia’s High-Frequency Survey conducted by the World Bank in 2017, 70% of Somali households own a cell phone, and 63% have access to a mobile money account.

There is no regulation of financial technology in Somalia. This causes them to create new things to do with their money. The Somali government stopped working in 1991 due to war. It was only in 2009 that the Somali Central Bank was established again. Somalis have historically used the Hawala system for money transfers, especially international and domestic remittances. 

Hawala is a way to send money internationally and domestically. You don’t need to have a bank account on your end. First, Dahabshiil was a company that helped people send money from other countries to Somalia. A person would hand over cash to an agent and then get a text message on their phone. After proving their identity, they could show the text message and then take the money out of the agent’s office. 

Every transaction is recorded, and the identities of senders and recipients are recorded using biometric information. Somalis do not have many IDs but instead use their clan networks to identify themselves. They then record that information for future reference. This system became the most reliable way to transfer money into Somalia. Humanitarian groups such as Oxfam, Care International, and World Vision have used this technique to transfer money. But now, they can do it directly by transferring the money to the bank or mobile money accounts.

In Somalia, World Remit is another way to send money. You do not have to go into the bank to send money. You need an account. It is digital, and you can get it on your phone for free! These mobile transfer operators have linked their payment platforms with mobile money accounts. It is easier to pay for things at home now.

Some FinTech Application:

WAAFI 

WAAFI is an app. It has many things in it. It is for money, talking to people, and being productive. With WAAFI, you can send and receive money. Ride-hailing and paying for a ride is easy too. WAAFI is a new lifestyle. You can do things like send and receive money from people instantly and securely, chat with people, all on one app. You can pay your bills and do many other things with WAAFI. Search for videos, call friends and family at a low cost, book travel arrangements, and shop online. With WAAFI, you can make instant payments to different companies through the platform.

Mobile money

Mobile money is a banking system that lets you store and use your money using your phone. More than 270 services of mobile money are available throughout the world. It can be used to make payments electronically with different cell phones. Using the mobile money app ensures that your money is in safe hands, and you don’t have to worry about it even though you can go shopping, pay bills, and submit to school just with a single click. 

E-Wallet

E-Wallet is a way to store your credit card and bank account information in one place. You can then pay faster because you won’t need to type in the account number. Once you have created an E-Wallet, you can use it for payments.

FinTech Is The Future Of Finance.

FinTech, a technology in financial services, will be the future of finance. And vice versa. Technology has become mainstream because of its effect, effectiveness, and popularity. Financial institutions in any part of the world have shown that they can grow to fit changing technology. This helps them keep up with the demands of the market. Even people have been doing well in the banking industry. People have been able to do good things for themselves and their country. They have shown that other countries can do well too.

Impact Of FinTech In Africa

There are lots of African startups that raise money. They get $330 million in the first 6 months of this year. That is more than double the 2020 figure. Investors are also looking for bargains in Africa’s startups because there is not much money there.  African consumers need a lot of things. One thing they need is access to vital financial services. And that is why it’s essential to improve the penetration of telecommunications infrastructure in Africa, which will continue to enable equitable access to finance for all Africans.

Faq:

Role of FinTech in banking?

A company that provides technology regarding finance is called FinTech. It is an emerging service for the 21st century. Banks should quickly adopt this change and use good strategies to be better.

Does FinTech refer to internet banking?

FinTech is a lot of different things. It can be technology, digital products, or even business models for delivering banking services and products. All of these are happening through web-based interfaces or mobile applications.

Drawbacks of FinTech?

FinTech (a type of technology) is making changes in the world. But there are some problems and challenges it will have to deal with. One of the bigger problems is low trust. It can be hard to believe people and companies on the internet, especially when they say that their website has no security breaches.

Conclusion:

We’ve covered all the ways that FinTech can benefit your business and what you need to consider before getting started. We know how important it is for businesses of any size to make sure they are staying ahead of the curve with their marketing strategy. FinTech is beneficial for everyone as it has got something for all of us, so always try to benefit from this amazing opportunity.

Dr. Ali Yasin Sheikh Ali, Senior Researcher, SIMAD University