7 Important Themes Impacting the Future of the FinTech Sector

During the past ten years, the MSME FinTech industry has experienced tremendous growth. FinTech has grown to be a crucial component of the financial industry as a result of the rising use of technology and the popularity of digital payments. Yet the market is continuously changing, and fresh trends appear daily. We’ll talk about seven major factors that are influencing the direction of the fintech sector in this blog.

Applied Machine Learning and Artificial Intelligence

The way financial services are provided is changing as a result of artificial intelligence (AI) and machine learning (ML). Process automation, enhanced customer experience, and cost reduction are all possible with AI and ML. For example, ML algorithms may be used to evaluate financial data and offer insights, while AI-powered chatbots can help clients with their inquiries.

Moreover, fraud detection and prevention can benefit from the use of AI and ML. Artificial intelligence-powered systems are able to detect fraudulent transactions and take preventive action by evaluating massive volumes of data in real-time.

Public Banking

Third-party financial service providers can access bank data through open APIs according to the idea of “open banking” (Application Programming Interfaces). Customers may obtain better financial services and products by securely sharing their financial data with third-party suppliers. Due to the ease with which clients may switch between different financial service providers, open banking also increases market competition.

Digital Currency and Blockchain

Because of its safe and transparent transaction recording capabilities, blockchain technology has the potential to transform the financial industry. Blockchain is a decentralized ledger that records transactions in a way that is tamper-proof and hence perfect for safe and open financial transactions. Blockchain technology also underpins cryptocurrencies, which are digital assets intended to serve as a medium of trade. Financial institutions across the board are starting to accept cryptocurrencies as a means of payment as they grow in popularity. Cryptocurrencies are still quite erratic, though, and are a dangerous investment because they are not yet universally acknowledged.

Electronic Payments

Cashless purchases are becoming more and more common as digital payments gain popularity. Customers can now make purchases with only a few clicks on their smartphone thanks to the growth of mobile payments and digital wallets. In comparison to conventional payment methods, digital payments are not only more convenient, but also more secure.

Additionally, financial inclusion is being fueled by digital payments. Customers in remote locations may now access financial services that were previously inaccessible to them because of the growth of mobile banking.

Regtech

Regtech, or regulatory technology, describes how financial organizations might employ technology to comply with regulatory standards. Financial organizations may automate compliance procedures, lower compliance expenses, and increase compliance accuracy with the use of regtech solutions. Regtech products also aid in the detection and avoidance of fraud.

Insurtech

By utilizing technology to enhance customer experience, lower costs, and boost efficiency, insurtech (Insurance Technology) is revolutionizing the insurance sector. Insurance firms may streamline the processing of claims, enhance underwriting, and offer tailored policies with the use of insurtech solutions.

Moreover, big data and analytics can aid in the discovery and avoidance of fraud. Financial organizations can spot possible fraud and take preventive measures by examining trends in financial data.

Wrap Up

In conclusion, the fintech sector is always changing, therefore it’s important to stay on top of the most recent developments influencing it. The contribution of Arth is especially important since it offers MSMEs individualized financial advice, mobile payments, digital currencies, and tailored insurance solutions. By following these trends, Arth is advancing the MSME FinTech sector and facilitating easy and affordable access to financial services for MSMEs.

April 14, 2023April 14, 2023

Loan Protection Insurance: Needs and Necessities

Anyone can have financial needs at some time, and if they are unprepared or underfunded, they may end up taking out a loan. Loans have traditionally assisted individuals in solving their financial difficulties and demands, whether it was a quick cash constraint brought on by an emergency or unforeseen expenditure or a vehicle or home purchase or a loan for business.

Secured loans, however, need security or a guarantee, where the lender is permitted to seize possession of the item in the event of non-payment. Unsecured loans on the other hand, are provided easily and without the need for any collateral.

But what if something unfortunate happens, making it impossible for you to repay the loan? What happens to the cash you borrowed? Who will be in charge of making the repayments and how will you go about doing so?

The unpredictable nature of life may cause anybody to default on a debt in the case of certain occurrences including fatal accidents, physical disabilities, life-threatening illnesses, and unemployment. In this scenario, the close family members take on the weight of the debt, which turns them into unwelcome financial obligations.

An answer to these issues is loan protection insurance, which protects your loan in the event of non-repayment or late payments. Let’s simplify it:

What is Loan Protection Insurance?

A loan insurance plan covers the debt you borrowed, much like a life insurance plan covers your life. Loan coverage protects your monthly loan payments in the event of the principal borrower’s death, temporary or permanent incapacity, or loss of employment.

The borrower is shielded from loan default by the loan protection plan. As in these instances, the insurance provider firm is obligated to pay the whole balance of the loan. However, the insurance policy you select will determine the coverage amount and the circumstances covered. You may get loan insurance on a number of loans, including micro business loans, house loans, business loans, student loans, and even personal loans.

How Does Loan Insurance Operate?

For a set period of time, often between 12 and 24 months, loan protection insurance aids the borrower in repaying the monthly loan installments. The loan amount and the kind of insurance the borrower chooses are taken into account while finalizing the details. These plans are available to employed policyholders between the ages of 18 and 65. The person must work a minimum number of hours a week in a job or for a certain amount of time as a self-employed person to be eligible.

There are two primary categories of insurance policies: regular plans and age-related policies. A specified premium payment must be made for each policy for the policyholder to be eligible to receive benefits during periods of unemployment or disability. Death benefits are also a service offered to clients by some insurance firms.

How are Loan Insurance Premiums Chosen?

Similar to other types of insurance, the policyholder must pay a premium before registering for a loan protection insurance coverage. The cost of the premium varies across banks and financial services companies in India. It relies on a few elements, including:

Loan Amount: The amount owed and premium have a direct correlation. A big loan amount entails a hefty premium that must be paid.
Repayment Period/Duration: If the loan’s tenure is lengthy, a significant premium must be paid.
Age: Older people pay a greater premium than younger people since it is believed that younger people tend to file fewer claims because they are more likely to be working and in good health.
Health: People in poor health must pay a higher premium since they are more likely to file claims at that time.

What kinds of insurance are there for loans?

Typically, loan protection insurance products fall into one of two categories. They are listed below.

Standard Policy

The age, gender, and employment of the policyholder are not considered in the typical loan protection insurance policy. The maximum coverage length is 24 months, and the policyholder can choose the level of coverage they need. Most loan providers provide this kind of loan insurance generally. Additionally, the loan insurance doesn’t start paying until after the first 60 days of exclusion.

Age-related Policy

The maximum coverage term under the age-related loan protection insurance policy is 12 months, with consideration given to the policyholder’s age and the level of coverage they choose. Because they are more likely to file fewer claims, younger people are often charged lower rates. Due to declining health and unemployment, older people are more prone to file claims.

With this understanding of the many loan insurance kinds and how they differ, it is crucial to select the policy that best suits your needs and to carefully review all the terms, restrictions, and exclusions before deciding.

What Justifies Choosing Loan Insurance?

Many loan insurance policies offer a life insurance policy to all borrowers, which secures the debt.
When a loan is not repaid, loan insurance covers your family members for a variety of loans, including those for housing, cars, personal loans, education, businesses, loans against property, and merchandise loans.
Both the principal borrower and a secondary borrower, or co-borrower in the event of a combined loan, may purchase a loan insurance plan.
According to current tax legislation, the policyholder receives tax benefits under the loan insurance plan.

Purchasing a Loan Protection Plan? Here are Some Crucial Considerations.

Loan insurance is not mandatory to be purchased. Despite the fact that the lender could urge that you purchase a loan protection plan.
You have full authority to make decisions. As having coverage is preferable for financial security, the plan, nevertheless, keeps you worry-free for the duration of your loan’s tenure.
You must conduct thorough study according to your needs because the terms of the coverage and the quantity vary from provider to provider and on plans as well.
The majority of loan protection plans only provide coverage for resulting physical disability and accidental deaths. Natural disasters and unemployment are seldom mentioned. So, while purchasing a loan protection plan, you must do your research.
Comparing the coverage and costs of various loan protection policies is crucial.
When purchasing an insurance, always make sure the premiums are reasonable because they may initially affect your EMIs.

Wrap Up

You may protect yourself from unforeseeable events that are out of your control by purchasing loan protection insurance. You may rest easy knowing that in the case of something bad happening, your family will be protected by the insurance.

Connect with ARTH for any and all your loan protection insurance needs, and we will be pleased to provide you with the appropriate solutions and guidance. Loan protection insurance enables you to prevent your family from having to bear needless costs. When the occasion calls for it, take out the loan, but also make sure you have insurance. It is better to be safe than sorry, as the proverb says.

April 3, 2023April 7, 2023

Effect of Fintech Firms on Financial Inclusion

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.

March 29, 2023April 7, 2023

How Financial Services are Helping Women Entrepreneurs

Over the past several years, India has seen a favorable cultural change. Statistics show that the number of female entrepreneurs in the nation is significantly rising, with women owning about 10% of all Indian start-up unicorns.

As women-driven startups continue to grow, they are also laying the foundation for next generations of would-be female entrepreneurs. Financial institutions like ARTH are assisting women in achieving their business objectives by offering them multiple financial solutions including small business loans and insurance.

An increasing number of non-banking financial institutions (NBFCs) like ARTH now offer business loans without collateral, with low interest rates and flexible repayment plans.

Need for Women-Owned Small Business Financing

More women will be able to establish their own enterprises if they are assisted with customized loans for female entrepreneurs. It also aids in financial market diversification. The lack of funding that once prevented many women from achieving their dreams of starting their own businesses is no longer an issue.

Giving women access to small-business loans helps them realize their goals and motivates others to follow in their footsteps. By preserving the health and activity of financial institutions, it also benefits the economy.

In general, no one should give up on the idea of starting their own business due to a lack of resources. And that’s exactly the objective that these small-business loans for women seek to achieve. Many financial services for women’s microbusinesses provide a variety of these programmes, ensuring that the businesswomen have a large pool to choose from and obtain the best rates possible.

Specifications of Small Business Loans for Women

These loans’ main selling point is that they are only available to female entrepreneurs who are aiming to launch new businesses or grow current ones. These loans are made available to them at fair and alluring interest rates, with a quicker rate of acceptance, and are hassle-free. The target group also benefits from the small loans’ exclusivity as they are spared from having to contend with other business owners seeking larger loans.

The features of entrepreneurship in a business setting predominately made up of males are changing as more and more women attain economic independence and economic empowerment. Pro-women laws and a social paradigm shift are also boosting women’s businesses in India.

While obtaining a loan through a bank or an MSME fintech company like ARTH is a wise choice, many female business owners still rely on shady sources of funding. This is changing slowly and gradually, as more lenders now provide easier, speedier lending options without a collateral, when certain banks’ tight borrowing criteria may be deterrents, especially for first-time business owners with poor credit records. Here are several ways in which a business loan could help female business owners.

Economic Independence

Unlike equity investors, banks and non-bank lenders don’t care how a business owner runs her company. For women, this is the key advantage of a business loan.

Women can handle their enterprises independently of their friends’ and families’ help by securing an unsecured business loan. Also, they are saved from the hassle of providing a mortgage on their gold jewellery or other asset in order to get credit from local moneylenders.

Individualized Tenure

The vast majority of small micro finance companies provide specialized term business loans with amounts ranging from a few thousand rupees to many crores. Businesswomen can choose from a number of flexible repayment alternatives, allowing them to make EMI payments when it suits them and their company’s cash flow.

Internet Resources

A sizeable share of the Indian financial industry is under the hands of traditional lenders. But the loan application processing time with these lenders is lengthier. They also have stringent requirements for document processing and tight borrowing rules.

New age small finance companies offer digital finance fully accessible through internet, which is a quick and safe way to finance a business, especially for first-time female company owners with a pressing need for capital but no credit history or assets to use as security.

Develop a Credit Record

If female company owners just need a little amount of funding, taking out a business loan is a great way to improve their credit ratings. The profile of the business and its credit rating are both enhanced by higher commercial credibility through a loan and its repayment on time. In the future, this may make it easier for the female entrepreneur to borrow money for bigger sums and at lower interest rates.

Tax Advantages

There are also certain tax advantages associated with business borrowing. Tax deductions are available for the interest that borrowers pay on the principal sum. The reason for this is that since the money is utilized for business purposes, the interest that is paid to the lender each month as part of the payment is viewed as a cost. The principal that is returned, though, cannot be accounted for as a cost.

Conclusion

Due to encouragement from the government and regulatory bodies, some of the best small business lenders now provide financing to women business owners with specialized repayment terms and lower interest rates.

Obtaining financial independence is another benefit of a business loan for women, in addition to enabling them run a business that they are passionate about.

Women don’t have to give up their valuable gold jewellery if they need to offset any business shortfalls by taking out an unsecured loan.

Thus, it is for a large number of reasons that financial services companies in India like ARTH are becoming increasingly popular by providing business loans to micro, small, and medium-sized firms.

Women entrepreneurs who need loans to expand their businesses can apply for collateral-free loans at ARTH, even if they have no property or assets. A business loan from the firm, one of India’s top NBFCs, may be approved with a minimum amount of paperwork. Many MSMEs choose ARTH because of its rapid application procedures and affordable interest rates.

March 24, 2023April 7, 2023

Fintech’s Effect on Indian MSMEs

Manufacturing companies, particularly Micro, Small & Medium Businesses or micro MSME fintech companies, will lead the effort for India to achieve true self-sufficiency and make “Atmanirbhar Bharat” a reality. But first, we need to smooth out the wrinkles and clear the bottlenecks off their route.

Lack of easy access to finance and liquidity is a startling constraint that messes up the supply chain. Prior to production, MSMEs spend in labour and raw materials, and as a result, they must provide their customers 30 to 60 days of credit. If consumers don’t make their payments on time, this might delay the execution of future orders.

A study claims that “MSMEs in India constitute for 99 percent of all firms, encompassing 63 million MSMEs across sectors and geographic regions.” The article went on to say that a survey by Ernst & Young of 1000 MSME entrepreneurs revealed that “70% of them were negatively affected during Covid-19 because of decreased orders, loss in business, raw material availability and liquidity issues,” essentially explaining why it is even more important for this sector to have accessible and reliable sources of credit and financing.

Consequently, the most urgent task is democratizing trade receivable reduction in the Indian B2B ecosystem and producing sustainable liquidity and value throughout the supply chain.

The Present Need

The main issue is how to develop new financial products for MSMEs and other participants in the production/supply chain based on various data points and how to broaden the range of financial products available to them. The majority of financing by banks and NBFCs is predicated on collateral, and it is here where MSMEs struggle and fall behind. How can we continue to innovate and promote MSMEs’ access to credit? Is it possible to grant loans to MSMEs based on indicators like current assets?

In the recent years, platforms for the Trade Receivables Discounting System (TReDS) have expanded dramatically. Their expansion and influence, however, have been constrained by a number of problems that they deal with. In the recent years, platforms for the Trade Receivables Discounting System (TReDS) have expanded dramatically. Their expansion and influence, however, have been constrained by a number of problems that they deal with. Issues involve not being a vendor-first platform, limitations on the kinds of anchors that may be onboarded, a lack of substantial incentives for anchors to utilize the platform, and a restriction on the types of financing options to banks alone.

The development of successful transaction finance solutions for their habitats by several new-age enterprises working with new-age lenders and financial services companies in India like ARTH has also gained traction, ensuring cash availability for respective stakeholders.

There is a need for a new financial platform to democratize transaction-based finance for all parties involved.

Model Being Suggested

In that vein, the new platform must function on a few key focuses: prioritizing MSMEs, expanding anchor coverage, obtaining funding from institutions and individuals, utilizing embedded finance using transactional data and recourse from anchors, and exploiting transaction data using GST e-invoicing.

Unlike the majority of the present platforms, the new platform should first feature transactions started by suppliers and largely driven to meet their financial needs. Apart from huge firms, it is crucial to make sure that additional sectors of the economy and different business sizes are included by the programme. The democratization of this product and, consequently, the total value chain will be impacted if the eligibility requirements for corporates are loosened to accommodate mid-sized corporates and rapid growth start-ups that may be losing money but have solid balance sheets.

The platform also has to accept funding from all lending institutions (banks and NBFCs), other investment firms (mutual funds, insurance companies, pension funds, small micro finance companies etc.), corporate bonds, including those issued by the anchor corporation itself, and retail investors. Lowering the hurdle for corporations and increasing liquidity by bringing on more financiers will provide suppliers access to greater money.

Moreover, anchors have the option to opt in and offer specific transaction-based information about their suppliers, their own financial information, and a strong remedy for making payments on time. Access to transaction data practically in real time may also be made possible via connections with the government’s e-invoicing portal.

To provide a seamless onboarding process for vendors, the platform should make use of the Account Aggregator architecture.

The Fine Print

The anchor will have first dibs on utilizing their corporate treasury to finance the deal under the proposed plan. This is done in an effort to entice the anchor to take part in the transaction. We think a big part of the reason for other platforms’ modest growth has been the anchor corporate’s lack of incentive. Nevertheless, this scenario is constrained by the cash provided by the anchor/treasury buyer’s team and can include a significant amount of lending partners.

When the anchor/buyer is unable to take part, the participating lenders can fund the invoices by placing a bid on it, allowing the vendor to pick the best offer and be paid for the transaction in full transparency. With the new platform’s features, the supply chain will see exponential value creation since suppliers and buyers will start using it more frequently.

Final Words

Using technology to enhance the provision of financial services via micro enterprise financing was once fintech’s main goal. MSME Fintechs are now beginning to alter how individuals and companies interact with money, though. What fintech first provided and what it’s set to deliver in the following 10 years will drastically differ from one another. The latent potential of MSMEs is being recognised by the fintech sector, and it is looking into new possibilities to create solutions that might transform India’s small business sector.