Fintech disruption and the process of ‘unbundling the banks’ are the new mantras of the financial sector. That said, outside the ‘mobile payments boom’ there has been little impactful disruption for businesses across emerging markets.
With more complex and regulated financial structures, incumbent banks in the rapidly expanding markets of Latin America, Asia and Africa remain unchallenged in charging extortionate fees for forex and other services. Yet emerging market economies account for over 50% of global GDP.
Furthermore, emerging market economies have outperformed their traditional market counterparts over the last ten years and in all likelihood will continue to do so. East Africa alone is expected to see trade with China grow by 91% in the next five years. A burgeoning worldwide emerging market middle class has resulted in greater demand, but still the global playing field remains stacked against businesses operating in these regions.
At this point, you’re likely wondering why you in the UK should care about this lack of innovation in the field of emerging market trade and payments.
Well, it’s simple.
The government is pushing forward with measures to get 100,000 new businesses exporting by 2020, with the hope of adding £5.6bn to the economy. Such demand is unlikely to be met by increasingly saturated developed world markets. Rather, it can only be met by British businesses taking advantage of the opportunities available across emerging markets, where businesses and consumers are experiencing greater demand for premium goods and services from the UK.
Already there’s been movement. Trade between UK businesses and emerging market entities has grown. However, it’s also resulted in UK businesses becoming exposed to greater currency risk and volatility. In 2014 alone it was estimated that organisations in the UK lost out on up to £2.3bn on non-EU international goods payments.
In effect, the lack of disruption of the old emerging market trade and payments model has led to UK-based companies becoming less competitive on the world stage.
The solution does not lie in fixing the payments infrastructure of the UK or the ‘developed’ world, but in tackling the greater inequalities of international trade, so as to empower emerging market trade.
Currently emerging market businesses are charged upwards of 4–9% by their incumbent banks, and as a result 4–9% less stock can then be bought from a UK supplier. A reduction in payment costs would in turn eradicate the inflationary debt of bank fees, meaning that more stock can be bought for less – something that would be hugely beneficial for both emerging-market and UK businesses trading together.
It’s this very trading solution that led me to launch Kwanji and in doing so provide businesses, no matter their size or location, access to the very same tools to improve their bottom line, streamline their processes and remove administrative errors as their developed-market counterparts. In this way we are opening up markets for everyone and creating a more equitable global trading environment.
The UK may seem more than just a stone’s throw away from the distant emerging markets of Africa and Asia, but in an increasingly interconnected world we simply can’t afford to ignore international inequalities. Only through unshackling emerging markets can we facilitate a global trading boom and stop overseas businesses being grievously short-changed.