Challenges Fintech Companies Face While Expanding to Rural India

Even today, the effect of digitization is more seen in urban India. However, the true essence of change from technology comes when it makes a difference even in the remote parts of the country
Challenges Fintech Companies Face While Expanding to Rural India
Image credit:
Entrepreneur Staff
Former Senior Correspondent, Entrepreneur India
4 min read

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The boom in the Indian fintech space is one that can’t be avoided. Every other day, a new payments platform makes it easier for us to carry out transactions. This growth in fintech has been padded up with the Indian government’s demonetization plan and push for digitization. When demonetization happened in November 2016, the various fintech platforms came to the rescue of the country enabling transactions even when cash was out of the picture.

However, the knowledge of these digital payments platforms was restricted to the bigger cities of India while rural India struggled to make its way through cash problems. Even today, the effect of digitization is more seen in urban India. However, the true essence of change from technology comes when it makes a difference even in the remote parts of the country.

So, what really are the challenges that restrict the growth of a fintech company into the deepest corners of India? We spoke to fintech experts to find out.

The Importance of Digitization in Rural India

There are no doubts about the growing need of digitization across the country. Vivek Tiwari, Managing Director and CEO, Satya MicroCapital Limited points out that rural India is home to millions of small-scale businesses which, cumulatively, are amongst the top contributors to the country’s GDP. He added that there are around 63.4 million MSME units spread across India at present, providing employment to nearly 120 million individuals and contributing approximately 45% to the overall exports. “Despite this, Indian MSMEs have been underserved for several years by traditional BFSI players. This credit demand-supply gap has severely restricted the sector’s growth,” said Tiwari.

The requirement of financial services like credit, insurance, mutual Funds investment is needed by Rural India as the present system reaches to urban/semi-urban population only, the use of fintech to provide financial services to rural masses is need of the hour believes Praveen Dhabhai, COO, Payworld. “Most of them are uneducated and are unaware of the existence of digital facilities which can bring ease to their lives. To overcome that we also began training target consumers and the retailer on using the services and tried to bring about a behaviour change among consumers in the rural segment,” he said.

The fintech players in the country have understood the need to turn to smaller players in the Indian economy. Tiwari said that with this alarming need-gap within the market, fintech players have been playing a major role in making Indian MSMEs a part of the mainstream economy through innovative financial services and products. “They are reaching out to MSMEs across geographies and are helping the sector realise its true potential by facilitating seamless access to credit. Fintech companies will, therefore, be critical to rural India’s resurgence as an economic powerhouse,” he said.

What Are the Challenges

There are multiple challenges that stand in the way of fintech players from expanding into rural India. The Indian government has been pushing for digitization across all sectors. However, the hike in growth has been seen mainly in the millennials of India. Millennials, who form a significant share of the country’s overall consumer base, are quite well-informed and digitally-savvy. Even older audiences have shown significant maturity with regards to operating digital devices. “However, when it comes to fintech products and services, there is a gap regarding people’s current ability, desire, and need. This holds particularly true for rural areas, where digital adoption is still quite low,” said Tiwari.

Meanwhile, Dhabhai believes that that the challenges are infrastructure and awareness, which can easily be addressed by creating “ phygital – Physical + Digital ” channel. Payworld is working towards achieving this goal by providing training and awareness through more than 100,000 retail points across rural India.

While, reaching out to rural India opens up an enormous market for the FinTech companies and furthers their agenda of aiding inclusion, availability of data for assessment often becomes an impediment especially for business loans due to the higher cash economy in rural areas, believes Rohit Lohia- CDO- Tech and Operations, CoinTribe. “Solving this problem will need a substantial change in approach and we will see FinTech companies looking towards rural soon. CoinTribe already caters to a large number of businesses in small towns through its dealer financing program,” he said.

More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Are you paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.

Latest on Entrepreneur

Entrepreneur Media, Inc. values your privacy. In order to understand how people use our site generally, and to create more valuable experiences for you, we may collect data about your use of this site (both directly and through our partners). By continuing to use this site, you are agreeing to the use of that data. For more information on our data policies, please visit our Privacy Policy.