Effect of Fintech Firms on Financial Inclusion – Fintech in Developing Markets

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.

Conclusion

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.

An Employee-Centric Workplace

An Employee-Centric Workplace

Employee Speaks-Satyendra

I have worked with various organizations in the past and joining Arth has by far been a great decision, that I have made workwise. 

I have observed the deep connection each and every team member shares, including senior management in Arth. 

As an early-stage startup-up, Arth is growing every single day and I am proud to be a part of this growth. When I joined in Human Resource Operations in Feb 2020, we were a team of only 30-35 members and now, we are 100+. 

Over the years, I got substantial recognition and opportunity to work in the new domain of learning and development.

Arth cares about its customers and employees and works considerably and competently to succeed. Respect, care and excellence are qualities that exude from the top and flow throughout the rest of the company.  

Arth’s value proposition is something I value myself – Empathy and Collaboration. As an experienced human resource professional I look forward to building a strong foundation and connection across verticals company wide.

Celebrating Growth at Arth

Celebrating Growth at Arth

Employee Speaks-Vidushi 

I have worked with various organizations in the past and joining Arth has by far been a great decision, that I have made workwise. 

I have observed the deep connection each and every team member shares, including senior management in Arth. 

As an early-stage startup-up, Arth is growing every single day and I am proud to be a part of this growth. When I joined in Human Resource Operations in Feb 2020, we were a team of only 30-35 members and now, we are 100+. 

Over the years, I got substantial recognition and opportunity to work in the new domain of learning and development.

Arth cares about its customers and employees and works considerably and competently to succeed. Respect, care and excellence are qualities that exude from the top and flow throughout the rest of the company.  

Arth’s value proposition is something I value myself – Empathy and Collaboration. As an experienced human resource professional I look forward to building a strong foundation and connection across verticals company wide.

The Role of Fintech in MSME Financing: Examining the rise of financial technology and its impact on providing innovative financing solutions for MSMEs

The Role of Fintech in MSME Financing

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of the Indian economy, contributing significantly to the country’s GDP, job creation, and export revenues. However, obtaining financial resources presents a considerable obstacle. Many MSMEs find it challenging to get loans from conventional banks as they lack the necessary credit histories, assets, or credit scores. Because of this, a considerable portion of the MSME Financing sector remains unbanked and unable to reach their full potential.

However, the dynamic financial technology environment in India presents a game-changing opportunity for MSME finance. Fintechs, digital banking, mobile financial services, and Non-Banking Financial Companies (NBFCs) are growing, opening up new opportunities for MSMEs to obtain much-needed finance. To further improve financial inclusion for Micro, Small, and Medium Enterprises and eventually offer loans and support, the Indian government has also created a number of schemes and credit guarantee efforts.

The Emergence of Fintech

FinTech is one of the growing ecosystems that aims to introduce revolutionary and disruptive innovation into the financial services industry through the use of cutting-edge technology that automates the process of meeting customer needs. Financial services companies may find it difficult to focus their energies on innovation projects due to reasons including regulatory restrictions and industry consolidation. Startups in the fintech industry benefit from being free of cumbersome legacy systems and procedures. As a result, FinTech firms are often able to move faster and produce solutions that directly compete with traditional methods of providing financial services.

Due to the high costs of customer acquisition and regulatory challenges, financial service businesses must decide whether to build their own internal capacity or seek FinTech partners to help drive innovation. This opportunity has provided FinTech companies with the possibility to develop new apps or products for users directly or in collaboration with major financial services institutions. Furthermore, large institutions must consider how they can act quickly to address client needs in a changing industry, whether through alliances, acquisitions, or internal initiatives. The majority of businesses employ a hybrid strategy.

Role of Fintechs in MSMEs

The entire value chain of financial services has changed as a result of the latest technological advancements. Additionally, a number of non-banking financial corporations (NBFCs) have the necessary tools to bridge the funding gap for the nation’s Micro, Small and Medium Enterprises thanks  to the utilization of behavioural and psychometric data as well as social media records. By focusing on niches in the SME lending business, fintech has created an easy road to flexible and tailored credit packages. Speaking of the current situation, micro enterprises still exhibit a natural resistance to formal financial institutions (banks and Internet lending platforms). Complacency and a lack of digital literacy are two of the main causes of this.

Arth Impact: Revolutionizing MSME Financing!

The growth and development of India’s economy depend heavily on MSMEs. However, the industry faces a number of challenges that limit its growth potential. This is where digital platforms play a significant role in resolving these problems and providing MSMEs with access to funding, technology, and markets. These platforms continue to play a pivotal role in transforming India’s MSME Fintech industry and contributing towards a more equitable and sustainable economic system. With the right support and enabling environment, MSMEs, supported by digital platforms like Arth, can significantly contribute to both India’s economic growth and employment generation.

Women’s Entrepreneurship in India: Capitalizing on the Gender Dividend

In India, women’s entrepreneurship is on the increase, with more and more women striking out on their own and launching their own firms. Despite the rising number of women entrepreneurs, major restrictions remain that prohibit women from completely realizing their potential and contributing to the country’s economic success. This blog will look at the present condition of women’s entrepreneurship in India and how we can use the gender dividend to create more gender equality and economic development.

Indian Women’s Entrepreneurship: Present Situation

India boasts a sizable population of educated and competent women. Nonetheless, the nation has poor gender equality, with major impediments to economic, medical, and educational possibilities for women. India placed 140th out of 156 nations in the World Economic Forum’s 2021 Global Gender Gap Report for gender equality.

Women are starting more businesses in India despite these obstacles. According to research , there will be 38 million women-owned enterprises in India by 2025, growing at a 10% compound annual growth rate. In comparison to the existing estimate of 13.5 million women-owned firms, this represents a huge growth.

The number of female entrepreneurs is rising, but their enterprises are often smaller and less successful than those run by males. In India, women-owned firms are typically concentrated in low-growth industries, according to research by the International Finance Corporation. They also face a number of difficulties, such as restricted access to money, markets, and technology.

India’s Barriers to Women Entrepreneurs

Women face a number of obstacles that keep them from achieving their full potential and making an economic contribution to the nation. Among the main obstacles are:

Cultural and social norms: Women in India experience cultural and social norms that prevent them from starting their own enterprises and participating in the official labour force. Traditional gender roles, the expectation of marriage and motherhood, and a lack of mobility and resources are a few examples of these norms.

Restricted Access to Capital: It is extremely difficult for women business owners in India to obtain msme financing, especially from official sources like banks and financial organizations. This is caused by a number of things, such as a lack of collateral, poor financial literacy, and prejudice on the part of lenders.

Restricted Market Access: Women entrepreneurs in India also have difficulties in gaining entry to markets, particularly in sectors where males predominate. This is caused by a number of things, such as constrained networks, a lack of market knowledge, and prejudice.

Restricted Access to Technology: Women company owners in India also struggle to get access to technology, which might restrict their capacity for innovation and business expansion. This is brought about by a number of issues, such as low levels of digital literacy, a lack of accessible technology, and inadequate infrastructure.

Taking Advantage of the Gender Dividend

We must remove these obstacles and advance more gender equality if we are to fully realize the potential of women entrepreneurs in India. This entails fostering an atmosphere that encourages female entrepreneurs and offers them the tools they need to be successful. The following are some crucial tactics for utilizing the gender dividend:

Enhancing Access to Capital: We must provide women entrepreneurs additional opportunity to obtain financing in order to solve the issue of limited access to capital. As part of this, specific loan products for women are developed, financial literacy classes are offered, and women-led investment funds are encouraged to emerge.

Access to Markets: We must provide women entrepreneurs additional opportunities to network with customers and suppliers in order to overcome the issue of limited market access. This involves giving marketing and sales training, fostering networking, and assisting in the growth of online markets.

Arth’s Support for Women’s Empowerment

Organizations like Arth are assisting in using the gender dividend and releasing the full potential of India’s female workforce by boosting women’s entrepreneurship. Women entrepreneurs in India are eradicating hurdles for future generations of women and questioning traditional gender norms in addition to providing jobs and economic prosperity.

To guarantee that Indian women entrepreneurs get the assistance they need to flourish, there is still considerable work to be done. This involves broadening financial access, enhancing networking and training opportunities, and combating gender-based discrimination at work.

Final Words

In conclusion, women’s entrepreneurship in India is a significant driver of both social and economic advancement. Women entrepreneurs have access to the tools and assistance they need via organizations like Arth, which also helps to create a more prosperous and inclusive society.

The Role of Technology in Advancing Financial Inclusion

The Role of Technology in Advancing Financial Inclusion Image

Small businesses are critical pillars of developing economies like India. However, for a number of reasons, a considerable fraction of them are far from leveraging their use of financial solutions . Gradually, the country is taking the required steps to increase financial inclusion, giving long-term unbanked and underbanked small businesses in rural areas access to a wide range of financial products & solutions.

While there have been significant strides towards bridging the financial inclusion gap, technology  plays a crucial role in advancing it in the country. Financial institutions, and fintech companies in particular, are driving financial services to a consistent and greater level of accessibility and democratisation for these small businesses. Ultimately, it is enabling them to access more financial products and solutions that were inaccessible before.

Payments made easy

India has been at the forefront of the transformation of the global digital payment landscape. The last five years have seen a significant shift. UPI payments have reached new highs, enabling merchants to accept digital B2B payments as well as credit in a seamless manner. In addition, increased smartphone penetration, increased internet access, the introduction of feature phone-based payments, and other improvements are generating a synergistic value proposition to secure the inclusion of the greater population in the digital revolution. Simultaneously, fintech firms are developing novel ways to disrupt the market.

Increased accessibility to credit

Due to high information costs, promoting credit services to nano and small business owners has been a recurrent concern for policymakers worldwide. Recent advances in fintech may be able to alleviate financial inclusion. Financial institutions are able to provide short-term loans to millions of small businesses by leveraging big data or digital footprints on existing platforms. Moreover, artificial intelligence (AI) is leveraged for alternative credit scoring that uses non-traditional data to assess credit risk. This has enabled businesses with limited or no credit history to easily access credit, thereby expanding financial inclusion.

Enhanced financial literacy

Financial literacy has frequently been cited as a barrier to reaching full financial freedom. Fintech firms have identified this concern and are taking proactive measures to address it. They provide customers with the knowledge and resources they need to make informed financial decisions through educational apps, online tutorials, and interactive platforms. These organizations provide tailored financial management services, assisting nano and small enterprises in setting budgets, maintaining credit scores, and effectively achieving growth. Fintech companies not only improve individuals’ economic well-being but also build a culture of financial responsibility by providing them with financial literacy and management skills.

Arth: Democratising finance with technology

Arth is a digital platform that  provides micro, small, and medium-sized businesses (MSMEs) with easy credit, other financial solutions as well as access to welfare & livelihood enhancing solutions It also offers MSMEs consulting services and training programmes to help them improve their skills and capacities. Arth has emerged as a powerful growth partner for many small enterprises, particularly those managed by women, by identifying and supporting their financial needs.

Arth’s product technology, process integration, and credit engine were all created with innovation in mind. To analyze creditworthiness, the company collects data on potential consumers across social, economic, health, and business criteria. Furthermore, it generates and digitally offers the most flexible line of credit to its consumers using its own credit engine and digital lending platform. By addressing issues such as market access, technology, and funding, Arth has the potential to close the financial inclusion gap in India by a large extent.