Achi news desk-
By using digital platforms, mobile phones and data analytics, fintech companies make financial services accessible to a wide range of people
India is on the cusp of a financial revolution, driven by the convergence of technology, policy reforms and changing consumer behaviours. Fintech has become a fund of hope, providing new and creative ways to close the gap and promote financial inclusion like never before. By using digital platforms, mobile phones and data analytics, fintech companies make financial services accessible to a wide range of people, including those living in underserved areas with customized and personalized offers.
Undoubtedly, initiatives led by the RBI and the government like Jan-Dhan Yojana, Stand-up India Scheme, Financial Inclusion Plan and many others have played a crucial role in promoting financial inclusion in its current state. The biggest example is UPI, which stands as the chief catalyst in advancing financial inclusion in India, due to the incredible surge in internet banking adoption over the past five years. According to the NPCI data, 18.41 trillion worth of UPI transactions were processed in January 2024. Moreover, the platform is tremendously expanding its footprints in other countries.
However, fintech has a significant contribution to make in shaping this narrative of growth. First, with the advent of seamless linking of Aadhar numbers to mobile numbers, fintech has revolutionized user onboarding by requiring minimal documentation. This innovation greatly streamlined the KYC process, facilitating improved access to financial services. Whether it’s getting loans, securing insurance or using e-wallets and payment apps for everyday transactions, people now experience unprecedented ease in navigating the financial landscape. Fintech platforms also make it easier for small organizations and individuals to get microloans. Today, financial service providers host in the market a variety of requests for instant loans that provide short-term loans to borrowers with quick repayment.
Second, through the growing popularity of embedded financing, financial service providers can now visit customers where they are. This means that users across the country can access digital services such as payments, pay later services and more on online platforms they already access. Prominent examples of this are Flipkart and Amazon which allow users to make purchases using various digital payment methods.
In addition, digital lenders have embraced the use of alternative data to assess borrowers’ creditworthiness. This comprehensive approach to underwriting has expanded access to credit for individuals and small businesses with limited or no formal credit history, thereby improving access to loans. Also, lenders are now more willing to grant credit to borrowers with less effort and greater scalability through the use of alternative data. Now, borrowers can simply access low-cost financial services with the minimum of paperwork. Products such as day-to-day payments (EDIs) are becoming more popular.
Insurance is known to be a critical component of financial inclusion as it provides a safety net against unexpected financial shocks. Insurtech startups use technology to produce low-cost insurance products. Microinsurance products, for example, are becoming increasingly popular in Africa and Asia. In India, long-term microinsurance and health microinsurance are the two most common types of microinsurance that provide affordable and tailored solutions to disadvantaged populations.
Apart from this, the blockchain technology offers a decentralized and transparent financial transaction platform, which contributes to the promotion of financial inclusion. Peer-to-peer transactions can now be made securely and efficiently, negating the need for intermediaries such as traditional banks. Furthermore, blockchain’s immutable ledger ensures transparency and reduces the risk of fraud, thereby building trust between users. Thus, blockchain technology contributes to the advancement of financial inclusion in India by providing accessible, secure and efficient financial services to previously underserved communities.
As the fintech industry progresses in India, we can expect more innovations that empower people and communities to reach their financial goals. Working together, we can build a world that fosters financial inclusion for all.
The writer is CEO and MD, Niyogin Fintech Limited
Published: May 4, 2024, 4:30 PM IST
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