Financial inclusion is only possible if banks and Fintech firms work together

Signing up for life insurance is one of a number of basic financial products many UAE residents take for granted.

But for low-income, migrant workers, an insurance product or even a bank account can be completely out of reach.

According to a new report from insurance technology start-up Democrance, low-income employees in the UAE view life insurance as a vital type of social protection, and yet the majority of them lack access to this type of coverage,

The study, Lifestyle and Attitude of Workers within the Low-Income Group in the UAE, which was funded by the United Nations, found that 43 per cent of respondents regard life insurance as vital, yet almost eight in 10 are not insured, due to the high cost of insurance as well as lack of information.

“Inclusion means making insurance affordable and accessible for those who need it most, says Michele Grosso, co-founder and chief executive at Democrance.

"Microinsurance is a vital tool to help lift entire populations out of poverty. Yet, barriers to access often seem insurmountable for low-income migrant workers, many of whom are the sole breadwinners of their households and would greatly benefit from products that can address very real existential fears.”

Mr Grosso was speaking at the Seamleass Middle East event, a payments summit held in Dubai last week, on the topic of financial inclusion. A panel of experts discussed how greater collaboration between FinTech companies and traditional banks is the best way to help the lower paid segment of the population access the financial system.

Due to a lack of suitable bank accounts, insurance policies, credit cards and loan options, approximately 80 per cent of the UAE population is outside the current financial system, according to the World Bank.

However, a number of FinTech start-ups are moving into this space to ensure the unbanked in the Emirates can access basic financial services. Now Money, a company that provides bank accounts and low-cost remittance options, via an app, for low-income employees, launched in 2015. Rise, a wealth management platform for nannies, that allows them to save, invest and borrow, went live last summer and Democrance, an insurance technology startup that aims to make insurance accessible and affordable for all, launched in 2015.

While many pundits warned that the emergence of FinTech firms would threaten traditional players such as banks and exchange houses, the opposite seems to be the case.

Katharine Budd, the co-founder of Now Money, says that collaboration between fintech and traditional banking institutions was not an option, it is a fact.

"If your start-up’s aim is to offer financial products to consumers, you will have to work with regulated institutions at some point, it's unavoidable," says Ms Budd.

Now Money, for example, has a partner bank to hold payments overnight as the company is licensed as a payment services provider rather than a traditional bank.