Financial inclusion means facilitating access to financial products and services to the entire population irrespective of economic and geographic conditions. Accessibility has been an issue in the formal financial system since its inception. However, recent advancements in technology have allowed fintech companies to positively impact the financial service through inclusion.
While 20% of the Indian population is still unbanked, fintech companies are working hard to bank the unbanked and increase the financial inclusion possibilities. By leveraging the existing ecosystem with emerging technologies, fintech makes banking accessible, simple and cost-effective.
The RBI has been of the view that fintech can potentially transform the financial landscape by providing consumers with a variety of financial services at competitive prices. It also opens up upskilling channels for financial institutions as well. Within the Indian financial system, there are large banks, mid-sized banks that include niche banks, small finance banks, regional rural banks and co-operative banks. Fintech and digital players are now the fourth arms of the system and the NPCI has helped provide them with innovative solutions such as Unified Payment Interface (UPI), Application Programming Interfaces (APIs) and Aadhaar-based payments.
Here’s how fintech can lead the way for financial inclusion:
- Innovation and use of technology: Fintech companies innovate to enable secure digital payments. With AI, they have been successful in creating instant digital payments that allow transfers, verification, cashless buying and selling, and more. They are all about convenience and flexibility. They are also easy to use. From booking LPG cylinders online to paying utility bills has all become clicks.
- Easy access to credit: Traditional banks typically require a lot of paperwork. Fintech companies, on the other hand, require minimal paperwork. They also use AI for risk assessment on indicators such as income and spending patterns. This is greatly useful for local businesses for micro-financing services and capital investment. Fintech companies also use various tools to educate their audiences. Financial literacy is the way to go forward. Awareness about qualifying for loans and fulfilling credit requirements helps users as well as fintech.
- Innovation and compliance: Compliances such as identity verification are fewer for fintech companies. Moreover, the RBI has allowed eAadhaar verification and video KYC to promote digitisation and reduce customer acquisition costs. All this works in favour of fintech companies and they can innovate and roll out new features and products faster; while also adhering to government regulations.
- Reaching far and wide: Internet usage has drastically increased in the country. In areas where physical banks cannot be set up, fintech companies have a massive advantage. They can provide access to basic products and services and help unbanked users save and grow their money. Fintech companies can help uneducated and semi-educated users with easy onboarding. They can also provide customer-friendly services with the integration of AI and ML with Big data.
- Trustworthiness: Most people are skeptical of online payments due to a lack of trust. Biometric technology plays a major role here. It makes banking faster, more reliable and more efficient. It can ensure the highest level of authenticity and prevents data from getting compromised.
India has an 87% fintech adoption rate. This is higher than the world’s average adoption rate of 64%. There is no denying that fintech is working towards next-generation financial solutions. They will also without a doubt contribute to financial inclusion.
Thanks to fintech companies’ innovative solutions, the future of financial inclusion in the country look promising.