Financial inclusion is one of the cornerstones of a developing nation. The higher it is, the more developed a nation is considered to be. While on the contrary, low levels of financial inclusion indicates economic slump and slow development.
In India, technology has brought about significant improvement in the accessibility and affordability of various financial services which were erstwhile inaccessible to the unbanked or severely under banked masses. In addition, the affordability of digital services and wide-reaching usage of smartphones has further paved the way for the country’s socio-economic development.
Financial Inclusion in India – Current Scenario
In recent times, the biggest boost to the efforts of financial inclusion has come primarily from ‘Digital India’. Multiple initiatives like easy banking facilities for everyone, simplifying procedures related to financial instruments such as Permanent Account Number (PAN), simplifying tax procedures through GST, and unique identification process of Aadhaar have further catalysed the process of financial inclusion in the country.
However, a major challenge that remains despite the headway made is formal use of these financial products and services by those belonging to the lowest strata of the population in the country in terms of their per capita income – women, rural areas, and MSMEs. As per the findings of the India FinTech Report 2019, only 18% of MSMEs are effectively financed by the formal sector with the MSME financing gap currently standing at $240 billion and consumer lending gap being nearly $300 billion. And FinTechs can play a role here in solving this glaring issue.
FinTech start-ups are fast emerging as the face of financial inclusion possibilities globally, especially in a developing nation like India that is economically quite diverse. These start-ups form an enormous market opportunity for India in the financial services segment, an opportunity that remains untapped. With a rising number of FinTech start-ups, favourable government policies, and a maturing ecosystem, it goes without saying that FinTech will stay and grow further.
How FinTech is Enabling Financial Inclusion
For the most part, India’s cash-based economy has quickly and remarkably digitized over the past few years. Even the rate of opening of bank accounts has been considered phenomenal by many. Yet, nearly 80% of the rural population still is deprived of digital payments. This is where new-age technologies are making a difference. The swift rise of fintech players has accelerated financial inclusion and advanced technologies like AI and ML are further expected to quicken the pace of digital adoption in the country, benefitting both the industry and the consumers in the coming times. Reports show that India witnessed 3,435 crore digital payments in 2019-20.
FinTech start-ups are using blockchain technology to create a transactional framework which will cover the entire spectrum of bill payment services that includes mobile app, web, touch screen kiosks, PoS device and a mobile ATP Van. The blockchain-based framework effectively brings together government projects, payments and cash disbursements under one roof, so that each transaction is recorded and verified accordingly for the government schemes to be more fruitful and effective.
This innovation has been conceptualized as a mobile van-based bill payment service which is meant to simplify payment of utility bills for those residing in the remotest rural areas where collection already poses a massive challenge. There is a touch screen kiosk present inside the van which will visit the different areas for payment collection. At the kiosk, consumers can pay various utility bills, such as electricity, water, gas, mobile, landline, broadband, and DTH either by cash or other digital payment channels. The kiosk also contains a cash acceptor, that accepts and validates cash, mitigating the chances of fake currency being exchanged. A Point of Sale (PoS) device has also been put in place which aceepts payments via debit and credit cards.
This way the mobile van facilitates the transactions and end-to-end customer journey with ‘one-click’ processing for transactions carried out in digital channels. It’s a highly secure payment system following the AMBIC model (Artificial Intelligence, mobility, blockchain, IoT, and cloud-based solutions) in the form of Platform-as-a-service (PaaS), Software-as-a-Service (SaaS), and Infrastructure-as-a-Service (IaaS).
Over the years, RBI too has been working hard tomake technology an integral part of the development of the Indian banking sector. There has been constant digital development in the banking sector, by improving customer services, bookkeeping, and management information systems (MIS) to widen the reach and enhance productivity. RBI has played a vital role in achieving banking milestones and in implementing measures for electronic payment, such as Electronic funds transfer (NEFT) and Real-time Gross settlement (RTGS), including Mobile banking services.
Today, a larger part of the population is going digital with various internet services. The rise of new-age FinTech start-ups and the advancements in technology are majorly driving the financial inclusion of the country. As technology continues revolutionizing the banking sector, it is just a matter of time until India achieves complete financial inclusion.
BY: Rohit Kumar, Founder and CEO , XPAY Life