Get All Access for $5/mo

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

By Sanchita Dash

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

Shutterstock.com

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.

Sanchita Dash

Entrepreneur Staff

Former Senior Correspondent, Entrepreneur India

In the business of news for 5 years now. Making my way across India thanks to my career. A media graduate from Symbiosis, Pune, I have earlier worked with Deccan Chronicle (South India's leading English daily), T-Hub (India's largest incubator) and Anthill Ventures (a speed-scaling platform). 

Stories, movies and PJs are my thing. 

If you hear 'The Office' opening score randomly, don't worry it's just my phone ringing. 

 

Leadership

The 4 Pillars of Leadership Success

Being a good leader can feel like an abstract goal, but it doesn't have to be. Here are the four pillars that I believe are the foundation of effective, successful leadership.

Business News

How to Start Your Dream Business This Weekend, According to a Tech CEO Worth $36 Million

He started his now 14-year-old company in one weekend for $60 — it made $300,000 the first year, and $3 million the second.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

How to Humanize AI Content: 3 Strategies for Authentic Engagement

Want to know why human-generated content gets 5.4 times more traffic than AI-generated material? Learn the game-changing strategies that can make your AI content feel more authentic and engaging.

Business News

JPMorgan Chase CEO Jamie Dimon Wants People to 'Stop Talking' About AI: 'It'll Help You Do Your Job Better'

Dimon said the technology is already "embedded" at the company and estimated that JPMorgan would increase its AI-related projects by 400 this year.

Business News

Microsoft AI CEO Says Almost All Content on the Internet Is Fair Game for AI Training

Microsoft's AI CEO was asked recently if AI companies have stolen the world's intellectual property.