Effect of Fintech Firms on Financial Inclusion - Fintech in Developing Markets
Financial inclusion has expanded more quickly due to the booming fintech industry. According to experts, customers are fast adopting new technologies like AI and ML leading to accelerated growth in this space. Financial inclusion is taken into account by the World Bank Group (WBG) in terms of “Access, Use, and Quality” of financial services.
Fintech may lower costs while increasing accessibility and speed, allowing for the expansion of more specialised financial services. In the last 10 years, financial services have been made available to 1.2 billion people. This suggests a 35% decrease in the population of unbanked people. MSME Fintech is making the choice of technological financial services simpler and easier.
Fintech: What is it?
Fintech is a phrase for financial technology that refers to technological advancements that supplement, streamline, digitise, and disrupt traditional financial services. Algorithms, software, and mobile and desktop apps are all part of fintech.
But, in some circumstances, it also incorporates hardware, such as internet-connected piggy banks. Paying bills, transferring money between accounts, depositing checks, and applying for financial aid are all made possible by fintech platforms. Governments have employed digital delivery technologies to facilitate the speedy and safe provision of cash transfers and emergency liquidity to needy customers while minimising direct physical contact. The use of technology may also radically transform international remittances.
As a result, businesses employ fintech trends to process payments, carry out e-commerce, handle bookkeeping, and, more recently, help with government aid programmes like the Payroll Protection Program (PPP). More and more companies are utilising fintech as a result of the epidemic to accept cashless transactions and other digital payment services.
Fintech’s Role in Financial Inclusion and Emerging Market
Many consumers are finding it simple to utilise financial instruments thanks to fintech. In addition to mobile money, Fintech has opened the way in areas like cross-border transfers and payments from the government to people. The following describes the function of fintech in financial inclusions and emerging markets:
Better Credit Access
Top fintech companies in India require less paperwork to borrow money than traditional banks do. This makes borrowing easy and quick. By leveraging variables like spending and income habits, fintech businesses use AI to estimate the risk of consumers with little or no credit history. This renders microfinance services accessible to neighbourhood businesses and small-ticket borrowers for big-ticket expenditures and capital projects.
Innovation with Efficiency and Conformity
When compared to their conventional competitors, fintech businesses typically have less compliance obligations and regulations, such as capitalization, identity verification, and consumer complaint redressal.
For instance, the Reserve Bank of India (RBI) allowed MSME fintech companies in India to employ video-know-your-customer and e-Aadhaar verification in order to promote digitalization and reduce client acquisition expenses (KYC). By testing new ideas in secure sandboxes while maintaining legal compliance and data security, fintech businesses can swiftly introduce fresh features and products. Fintech companies may now swiftly and safely offer cutting-edge products and services.
Favours a Cashless Economy
Fast and safe electronic payment options are now possible thanks to advances in fintech. This allows Fintech businesses to instantly validate and send digital payments thanks to the application of AI.
All people now have easier, more flexible, and more convenient access to fundamental products and services thanks to online payment options. Consumers may, for instance, acquire LPG cylinders online and pay their utility bills from home. The corporate sector and fintech also contribute significantly to global digitization.
Providing Financial Services in the Nation’s Remotest Regions
Due to rising internet use and improvements in online banking, a micro msme fintech company may reach out to rural areas where traditional bank branches cannot be constructed. Fintech businesses make it possible for unbanked, low-income, or rural residents to save and grow their money. By providing access to basic goods or services, such as financing or savings instruments, this also aids in utilising government assistance and programmes.
Possibility for Disruption in the Conventional Banking and Financial Sector
With the innovative and creative use of technology throughout the loan procedure, fintech businesses are establishing new ground in the formal financial sector. Using machine learning algorithms and additional data sources including social media footprints, phone logs, purchase histories, and utility service provider payments, fintech organisations increase efficiency and broaden the loan availability. Also, loans are approved and disbursed by Fintech businesses much more swiftly.
Upcoming Fintech Possibilities for Financial Inclusion
It is hard to overstate the relevance of MSMEs as a significant economic force and a crucial employer. Moreover, a sizable market of underprivileged people may be reached through fintech.
To solve problems like constrained regulatory policy and a lack of financial and digital literacy, innovation for the mass market is sorely needed. Also, a Fintech business is the only one with the obligation of sustaining ties with SME clients despite defaults. The problem of payment delays in funding, specifically in the MSME sector, is analogous to an occupational danger that cannot be removed. Yet, sustaining resilience, keeping an eye on the big picture, and making sure that collaborations persist are the key components of the process.
Hence, the word “fintech” is new and has gained popularity since 2015. This phrase is sometimes misunderstood to mean solely technology and tech-savvy individuals. This word actually describes the mixing of financial services provided by various clients with technology advancements.
Technology and financial services are being combined in this situation, which suggests that various platforms and apps are being developed to make it easier for you to utilise financial services. You may, for instance, apply online for personal loans, business loans, or other types of loans. Due to the benefits of digital banking, you should also be aware of the top fintech companies in India as a potential substitute for banks in the future.
Due to their faith and confidence in the current banking & financial system, clients are often sceptical to adopt new technologies.
Prior to using new technology, customers must be satisfied with privacy and security concerns. Gaining the clients’ trust in adopting Fintech technology takes time, despite the fact that it is easier and inexpensive than using conventional techniques. However, the adoption of fintech has reached a high coverage of 87% in India. This is greater than the global adoption rate, which is 64% on average. Therefore, it cannot be denied that fintech has been able to provide future-proof financial solutions acceptable to the masses. This in turn, will undoubtedly aid in financial inclusion as well.
With the unique solutions that Arth is already offering and aiming to offer further, the prospects for financial inclusion in the nation are bright.