Financial Inclusion: The Fintech Buzzword of 2025
Financial inclusion has been a buzzword in the fintech industry for years, yet as we approach 2025, the question remains: are we truly making progress? Governments, banks, and fintech companies are experimenting with various strategies to bridge financial gaps, but the effectiveness of these efforts is still under scrutiny.
In the UK, policymakers have made strides to enhance accessibility within financial systems, particularly for small and medium-sized enterprises (SMEs). This initiative has the potential to democratize lending for businesses that have historically been excluded from traditional financing. However, a glaring disparity persists: women-led fintech businesses continue to receive a disproportionately small share of venture capital, with female-owned firms attracting only 2% of total investment in financial services, according to Deloitte (2024). Despite advancements in AI-driven risk analysis and the rise of embedded finance, many entrepreneurs remain locked out of the financial system.
The Usability and Trust Factor
Access to finance transcends mere availability; it also encompasses usability and trust. As highlighted in "Banking the World: Empirical Foundations of Financial Inclusion," simply making credit more accessible does not guarantee financial inclusion. Financial products must be designed with the actual needs of users in mind, seamlessly integrated into their financial lives, and developed with accessibility as a core principle. For fintech to genuinely address financial gaps, it must prioritize not just access to funding, but also its relevance and equitable distribution.
Having worked in both banking and fintech, I have witnessed firsthand how access to finance—or the lack thereof—can dictate the fate of a business. At Juice, I see digital-first SMEs struggling to secure funding, not due to a lack of potential, but because traditional credit systems were never designed with them in mind. Fintech has the power to change this narrative, but only if it is genuinely committed to inclusion rather than mere innovation.
Three Critical Areas for Fintech to Focus On
To level the playing field, fintech must prioritize three critical areas:
- Leveraging Alternative Data for Credit Assessment
- Expanding Embedded Finance
- Closing Gender and Diversity Gaps in Funding
1. Leveraging Alternative Data for Financial Inclusion
Traditional credit assessment frameworks have long disenfranchised companies and entrepreneurs lacking assets, long credit histories, or conventional financial statements. As a result, SMEs, gig workers, and underbanked communities often find themselves without access to financing, even when their financial health is robust.
Fintech is revolutionizing this landscape by employing alternative data to assess creditworthiness. Lenders are moving away from relying solely on credit scores and balance sheets. Instead, they are utilizing AI to analyze real-time payment behavior, cash flow trends, and alternative sources of data, such as rental payments and e-commerce sales performance.
How Traditional Credit Frameworks Shortchange Underserved Borrowers
For years, the determination of creditworthiness has hinged on extensive historical data and traditional financial metrics, which often exclude innovative businesses. Key failures of this approach include:
- Trapped in Traditional Scoring: High-potential companies often fall below the scoring thresholds set by traditional models.
- Collateral Lending: Many SMEs and digital businesses lack tangible assets, which disqualifies them from collateral-based lending.
- Absence of Traditional Banking Records: Gig workers and entrepreneurs using alternative payment networks are often invisible to conventional lenders.
According to Deloitte (2024), financial institutions are increasingly recognizing the value of alternative data in gauging creditworthiness, thereby opening doors for previously underserved groups.
How Fintechs Expand Access with Alternative Data
By leveraging AI and real-time financial information, fintech lenders can make informed judgments about creditworthiness that reflect a company’s actual financial performance. Key advancements include:
- AI-Powered Cash Flow Analysis: Lenders evaluate real-time earnings trends rather than relying on static credit scores.
- Payment Behavior Tracking: Monitoring rental, utility, and vendor payments provides a more accurate picture of financial responsibility.
- E-commerce and Transactional Data: Online sellers can validate their financial stability through sales data.
The transition is underway, with reports from BCG (2024) indicating that alternative data is unlocking millions in funding for SMEs, particularly in emerging economies where traditional credit structures have historically excluded entire industries.
The Road Ahead: Setting Alternative Data as an Industry Benchmark
While fintechs are leading the charge in utilizing alternative data, traditional financial institutions and regulators are lagging behind. To truly level the playing field, fintechs must:
- Standardize alternative data models for easier integration into financial assessments.
- Ensure ethical AI use to eliminate bias in automated decision-making.
- Collaborate with regulators to incorporate alternative data into compliance frameworks.
Alternative credit assessment is not merely about innovation; it is about ensuring fair access to finance. By dismantling traditional barriers, fintech can bridge the funding divide and create real opportunities for disadvantaged businesses.
2. Embedded Finance as a Tool for Inclusion
Many individuals and businesses still lack access to traditional banking services, complicating their ability to obtain credit, process payments, or manage finances effectively. Embedded finance addresses this challenge by integrating financial products directly into the platforms people already use, thereby reducing barriers to entry and expanding access to essential financial tools.
Recent macroeconomic trends underscore the importance of accessible financial services. With UK inflation rising to 3.0% in January 2025, driven by increased transport and food costs (Reuters, 2025), businesses and consumers require seamless access to credit and financial management tools—exactly what embedded finance offers.
How Embedded Finance Lowers Barriers to Financial Services
Historically, financial services have been disconnected from the daily operations of businesses and consumers. SMEs often face the cumbersome task of applying separately for loans, integrating third-party payment processors, and manually tracking expenses. Embedded finance simplifies these processes by integrating financial tools into existing digital ecosystems, such as:
- E-commerce Platforms: Offering instant financing at checkout for businesses purchasing inventory.
- Payroll Systems: Providing employees with early wage access, eliminating the need for payday loans.
- Freelance Platforms: Embedding lending options tailored to gig workers with unpredictable income.
By embedding financial services into existing workflows, businesses and individuals can access credit and payments precisely when they need them, rather than navigating a complex, fragmented process.
The Role of Fintechs in Expanding Embedded Finance
Fintechs are at the forefront of expanding embedded finance by partnering with non-financial companies to deliver seamless, contextual financial services. Notable developments include:
- Revenue-Based Lending: Integrated within accounting software, allowing businesses to access funding based on real-time cash flow data.
- Supply Chain Financing: Available within B2B marketplaces, enabling businesses to delay payments while maintaining supplier relationships.
- Integrated Insurance Products: Offered within gig economy platforms, ensuring workers have financial protection without needing separate policies.
Financial institutions are beginning to recognize this shift. For instance, HSBC is intensifying its investment in wealth management and transaction banking—areas closely tied to embedded finance—as part of its strategy to expand financial services beyond traditional banking (Financial Times, 2025). This indicates a growing alignment between fintech-driven embedded finance and traditional banking institutions, paving the way for more inclusive financial services.
Making Embedded Finance a Standard for Inclusion
While embedded finance is rapidly evolving, many financial institutions and regulators are still catching up. To maximize its impact on financial inclusion, fintechs and policymakers must:
- Ensure regulatory compliance so that embedded financial products meet the same standards as traditional services.
- Expand partnerships between fintechs and non-financial companies to integrate financial tools across various industries.
- Educate businesses and consumers on how embedded finance can enhance access to credit and payments.
By embedding financial tools directly into digital platforms, embedded finance is dismantling long-standing barriers to financial inclusion. With banks like HSBC reallocating resources toward AI and embedded services, and fintechs continuing to innovate, the gap between traditional and alternative financial services is narrowing. As adoption increases, embedded finance has the potential to reshape how businesses and individuals access and manage money, making financial services more inclusive and accessible for all.
3. Closing Gender and Diversity Gaps in Fintech Funding
Despite ongoing discussions about gender equality in finance, gender bias in funding remains a significant obstacle for women-led fintech startups. The numbers reveal a stark reality: systemic barriers continue to block access for diverse founders, limiting the potential of innovative businesses that struggle to secure investment.
Breaking through this "triple glass ceiling" is not merely about diversity metrics; it is about ensuring that fintech innovations are not built on the same systemic inequalities that have plagued traditional finance.
How Fintech Can Bridge the Gap
To address these disparities, fintech companies can implement targeted strategies to create a more inclusive industry:
- Bias-Free Recruitment: AI-driven tools can anonymize applications and standardize evaluations to mitigate unconscious bias in hiring and funding decisions.
- Inclusive Leadership Development: Fintechs can actively support women and underrepresented founders by increasing funding access and visibility.
- Targeted Mentorship & Networks: Programs focused on supporting female and minority entrepreneurs can dismantle systemic barriers by providing access to capital and advisory support.
The "triple glass ceiling" presents a formidable challenge, but fintech has the opportunity to reshape financial inclusion from the ground up—ensuring that access to funding is based on potential rather than outdated biases.
The Future of Inclusive Fintech
Fintech possesses the tools, technology, and momentum necessary to create a more inclusive financial system, but it must act with intention to dismantle entrenched barriers. AI-driven credit models, embedded finance, and women-inclusive funding strategies can close financial gaps, but only if fintechs prioritize inclusion over convenience.
Regulators are demanding greater transparency in lending practices, yet fintech startups and challenger banks are leading the charge to challenge credit availability. However, the "triple glass ceiling" for fintech investment remains a significant threat. If the industry neglects to focus on diverse founders, it risks perpetuating the same systemic biases that have hindered traditional finance.
The potential for the future is clear: develop fintech products that cater to more than just the financially affluent. Companies that embed inclusion into their products, talent acquisition strategies, and investment approaches will not only foster better financial outcomes for underserved communities but also tap into vast, untapped markets.
What challenges do you think fintechs face in making financial services more inclusive? Join the conversation.