This article was translated from its original version in spanish, and it was written in the context of our virtual event "Financial Inclusion Cycle for SMEs 2023".

The advance of technology has significantly influenced and transformed the business models of many industries. The financial sector has been no exception, and the innovations that now exist in this field have radically changed the way people and companies manage their money.

Typical operations such as payment for products and services, collections, credit applications, insurance and other services have changed to become more agile, inclusive and decentralized. In this article we tell you about digital financial services and their relationship with the financial inclusion of SMEs.

The term "fintech" refers to a sector made up of companies that use technology to improve or automate financial services and processes. The word comes from the combination of two words: finance and technology.

From digital wallets, to insurance companies, to investment applications, payments, and digital banking, financial technology has become a high-growth industry, in which the Latin American and Caribbean region is actively participating with 2,482 companies, representing 22.6% of the total number of firms in this sector worldwide. Types of financial innovations or fintech verticals Financial technology companies operate to serve a variety of markets and needs. The types of financial innovations or "fintech verticals" most relevant to SMEs can be quickly grouped into:

• Payments Fintech: platforms that facilitate digital payments in local and foreign currency, across multiple media (debit, credit, cash) and between different companies. These platforms facilitate the digitalization of businesses, are key allies of companies that sell through e-commerce, facilitate payroll payments of global teams, facilitate payments in different currencies for foreign trade operations and allow physical stores to offer different payment methods for their customers, such as QR codes.
• Financing Fintech (Credit, Factoring and Confirming): These platforms facilitate the acquisition of capital through credit and sale of accounts receivable. They provide services to companies that allow them to manage their liquidity, reduce their risks, benefit from discounts for prompt payment to suppliers, among others.
• Fintech for Financial and Accounting Management: These are digital platforms designed to automate and digitize the financial and accounting management of companies. They facilitate electronic invoicing and the generation of financial statements, essential for the administration of companies.
• Fintech for Collective Investment or Crowdfunding: platforms where entrepreneurs and businessmen can obtain financing for their projects and companies and in turn, invest in the projects of others to generate profitability.
• Digital Banking: These are platforms that offer digital services supported or interconnected with traditional banks, however, unlike traditional banks, the value proposition of digital banks lies in adjusting their products to meet the demand for financial services in specific market niches. Thus, digital banks are fintech, but not all fintechs are digital banks.

Other fintech verticals are those dedicated to personal finance, stock market and cryptocurrency investments, Insurtech or insurance fintech.

Financial inclusion consists of the level of access and use that individuals and companies have to formal, safe, accessible and sustainable financial services. In addition, the concept of financial inclusion includes the level of satisfaction and well-being that individuals and businesses obtain when using the services. Some concepts related to financial inclusion are access, usage, wellbeing

• Access refers to the degree to which new or underserved consumers can obtain appropriate financial products and services at an affordable price.
• Usage refers to the frequency with which people make use of the services.
• Quality relates to the degree to which people are satisfied with the services provided and the extent to which they truly address their needs and challenges.
• Financial wellbeing refers to the adequate management and level of financial education of the users of financial services, making them a support and an impulse for their operations.

Although in Latin America and the Caribbean close to 90% of formalized SMEs have at least one financial product, access to and use of financial services by microenterprises and non-formalized SMEs still has great opportunities for improvement. Financial inclusion is one of the most important global challenges, prioritized among the United Nations Sustainable Development Goal 8, since the growth, sophistication and export capacity of companies depends to a large extent on their access to financing and related financial services that support their expansion.

Today we held the first session of our Cycle of Financial Inclusion for SMEs, where we were joined by executives from the Fintech Associations of some of the countries in our region. To watch the recording (in Spanish) of this event click here.