Digital Transformation of the Financial Infrastructure: Treading Towards Financial Inclusion in India

If FinTech companies continue making focused efforts towards building new solutions and broadening the horizon of use to a diverse segment, a complete financial inclusion is not a far dream to wake up to
Digital Transformation of the Financial Infrastructure: Treading Towards Financial Inclusion in India
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Founder & CEO PayNearby
5 min read
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In this rapidly transitioning era, FinTech is one of the enablers to help evolve financial services across the globe. The convergence of technologies and financial services has been touted as “the key” to complete the vision of financial inclusion. While traditional banking and financial institutions continue catering to a wide distribution network across the country, the dynamics are changing rapidly. As the applications of FinTech evolve with innovative use cases, its rapid pace is helping shift the paradigm across all industries since the payment is the core to speed up commerce/eCommerce. You will agree that the FoodTech has a fintech in it and AgriTechor HealthTech becomes better with FinTech enablement. It is estimated that within the next four years, nearly 60per cent of India’s GDP would be an outcome of digital transformation trends. Armed with emerging technologies and new capabilities, FinTech is actively complementing the traditional infrastructure to make financial services more native, personalized, and empowering.

Regulatory and policy changes are also working towards the betterment of ecosystem and transition will be an outcome of quick enablement and controls. If FinTech companies continue making focused efforts towards building new solutions and broadening the horizon of use to a diverse segment, a complete financial inclusion is not a far dream to wake up to.

The Current Financial Landscape

India is undergoing a FinTech revolution at this very moment. The country has an unparalleled underlying financial infrastructure core, unlocking in numerous possibilities for FinTech to innovate, thrive, and sustain. The payment space currently stands as one of the leading use cases of FinTech, but, lending, investment and insurance are the next big daddies of tomorrow. Digitization of payment services has been a boon for businesses as well as individuals, with transactions being instantaneous and more secure. With a robust rise in the ownership of mobile phones and the advent of cheap data, people have become confident in making mobile-based digital payments. With the integration of unique identity like Aadhaar with the digital infrastructure, this has also led to increased financial access to the common man, who would not have used digital in this life. Of course, the already digital savvy users are finding the depth in the discounts/cashback available with UPI-enabled offerings. 

The capabilities are not just limited to the dimension of payment and transactional services. Today, FinTech in India has evolved much beyond accepting payments and being merely transactional to now transforming age-old businesses like restaurant and deliveries from grocery stores – Pay on Delivery (digitally). Simplicity being the common value proposition, FinTech has something to offer to varying segments of the population. For instance, the SME and MSME segments in India are deploying digital lending platforms to seek loans, the millennial workforce is using EMI and buy-now-pay-later options for e-commerce, salaried employees and students are availing instant loans through P2P platforms. Even in the highly underserved segments like kiranas and local retail stores, the digital financial space has emerged as an active facilitator of their empowerment through partnership arrangements. The companies in this segment are actively utilizing payment services such as Aadhaar Pay, UPI, Bharat QR, Mobile POS and Card, not Present payment options. 

While FinTech is seen as an enabler of financial inclusion, the skewed adoption poses a challenge. Moreover, the dynamics of FinTech keep evolving due to contextual relevant controls from regulations. As we speak, there is seriousness on the GDPR implementation and data localisation. In parallel, regulators like RBI SEBI and IRDA are progressively working to facilitate innovation through Regulatory Sandbox program. DPIIT (erstwhile DIPP) has done fabulous empowerment of the Startup ecosystem and it continues to evolve. By adapting to different changes in the regulatory environment, leveraging the present infrastructure, and bringing out new and innovative offerings accordingly, FinTech has the potential to chart the direction for a scalable and sustainable “complete” financial inclusion of India.

The Road Ahead

The Indian FinTech ecosystem is at a nascent stage and the potential ahead is humongous. A huge percentage of the population remains untapped and unserved to this day, thereby presenting several key opportunities for FinTech players to tap into. Every Indian is unbanked after 2 pm because Banks are closed and every Indian in underbanked before 2 pm because there is a lot of crowd at the Bank branches. Financial sector reforms have been progressing over many years and with evolving dynamics, a fantastic work has been implemented by National Payments Council of India under the direct supervision and guidance of Reserve Bank of India. India is rapidly climbing to the potential of financial technologies. Mobile network operators have served as a force multiplier in substantially increasing internet access at the last mile. Faster than we will think, India will surprise the globe with digital services access in Tier-III, Tier-IV towns and beyond, as the role of UI/UX emerges stronger to ensure easy onboarding and use by the tech oblivious users. 

In such a progressive scenario, the definition of FinTech continues broadening with innovative and all-encompassing solutions coming to the fore next to every day. As India presents a stellar example of continuous digital growth, FinTech companies in the country like PayNearby are not only addressing the financial needs but also empowering the unbanked and underserved sections of the population, which is a large and difficult sector to cater too. While overcoming barriers to inclusion through active digitization and bringing out products that serve both urban and rural segments, the segment of financial services is actively and significantly contributing to the economic growth of the nation.

Banks and FinTech players are the twin pillars for the outreach of inclusion and these, together with active government support, are harnessing the potential to address all the challenges in the current landscape. Through an increased penetration of financial and digital services in the remotest locations, a strengthened regulatory framework, the assisted financial services sector continues to enjoy the growth trajectory. 

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