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Fintech Potential In Rural India Fintech has fast emerged as the solution to the challenges in front of achieving financial inclusiveness in the country

By Rohit Gajbhiye

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India's fintech sector has seen phenomenal growth in the past several years. The penetration of Internet and the smartphones has aided the growth of the fintech sector in India. With more than 6,000 fintech startups, the sector in India was valued at around $50 billion in 2021 and is expected to grow at a CAGR of 31 per cent between 2021 and 2025. At this growth rate, it is expected to be valued at close to $150 billion by the year 2025. The fintech adoption rate in India (87 per cent) is well above the global average (65 per cent). Looking at the above data, the picture looks very rosy; however, as we dive deeper, we realize that there is a lot of underserved population in the country, especially in the rural areas.

As of now, India's fintech industry is largely concentrated in urban areas. However, more than 65 per cent of India's population lives in rural areas. Only around 28 per cent of the rural population has an Internet-enabled smartphone. The financial literacy in these areas is also extremely low. While these factors pose a serious challenge to the growth of fintech in these areas, the aforementioned numbers also represent huge untapped opportunities.

Digital banking

A large section of the Indian population has been left unserved by traditional banking. Lack of infrastructure, lengthy and complicated banking processes, and lack of financial literacy have been some of the reasons for this. Digital banking can solve this issue as it only requires a smartphone and Internet connection to the operation. Digital banking with innovations such as video KYC and paperless processes makes banking hassle free. Most fintech companies also promote digital literacy among their customers.

Digital lending

Digital lending is yet another area with huge potential for fintech companies. Those underserved by conventional banking resort to microfinance for their financing needs. However, in many cases, even microfinance companies find it difficult to provide loans to these customers due to the lack of credit history as it is difficult to determine their credit worthiness. Fintech implies digital technologies like AI and ML to help determine the credit worthiness of such individuals. Digital lending provides a huge scope of growth for the fintech companies in rural India.

Digital insurance

COVID-19 once again highlighted the uncertainty of life. In bigger cities, a majority of people have some form of life or health insurance. However, in rural areas, only 8-10 per cent of people have life insurance. The health insurance coverage in these areas is around 20 per cent. The pandemic underlined the need for life and health insurance. Property insurance in rural areas is almost negligible. The huge untapped market for insurance in rural areas offers an ocean of opportunities for fintech companies operating in the insure-tech space. Technology-led accessible models and innovative products can help insurance reach every Indian.

Innovative products

The fintech industry is coming up with various new products and offerings that were previously unheard of. Buy Now Pay Later (BNPL), digital credit cards, digital share broking, digital asset management, etc have the potential to take the rural India market by storm.

The government of India is aiming for financial inclusiveness in the country. In a country as diverse as India, it is practically impossible for traditional banking to reach out to all citizens. Fintech has fast emerged as the solution to the challenges in front of achieving financial inclusiveness in the country. Data democratization is already taking place in the country. The increasing penetration of the internet is providing momentum to fintech in rural areas. The change is already visible in form of a large number of people using UPI to make and receive payments. The fintech industry is poised to create a win-win situation for itself and rural India.

Rohit Gajbhiye

Chief Executive Officer, Financepeer

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