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Has Indian Fintech Startups Contributed to Financial Inclusion in India? From cashless economy to the use of mobile banking it was all new for India but Fintech revolution has changed it all

By Manish Khera

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Financial inclusion, a term used by the former RBI Governor Y. Venugopal Reddy in the Annual Policy Committee for 2005-2006 only to be popularly used in India and abroad, is the process of providing access to financial services to the financially marginalized section of the society. As easy it might sound, financial inclusion is one of the most challenging processes that has thrown down the gauntlet for RBI since more than a decade. But, as evidence has been the recent advent of the Fintech sector in India, can it also become a game-changer in helping India overcome this teething trouble?

As a matter of fact, it already has and is continuing to do so. Let's have a look at how the Fintech sector is making a difference for financial inclusion in India.

How did the Financial Technology sector turn into a silver bullet for financial inclusion?

In the words of Ramkumar V. (Financial Inclusion & Financial Literacy: SBI Initiatives, CAB CALLING, July-2007), financial inclusion is not a onetime process. It is something that requires concentrated efforts from all stakeholders including government, financial institutions, regulators, private entities, and the community at large.

Lately, the Indian Government and regulators have taken a series of steps to increase the reach of banking penetration and bring people under the ambit of mainstream economics. For instance, the Pradhan Mantri Jan Dhan Yojna opened 1.8 crore bank accounts during its inauguration week, also receiving the Guinness Book of World Record for "most bank accounts opened in one week as part of financial inclusion campaign'. It has till date opened more than 32 crore bank accounts in India. The number of adults with a bank account has simultaneously increased to 80% according to the recent World Bank report. This has created the perfect ecosystem for Fintech to operate with their digital, technology-based model.

Mobile wallets from 2017 onwards, which had till then largely been limited to the urban geographies, started witnessing adoption throughout India and helped the nation sustain economic flow in cash shortage. These financial instruments were also adopted by people who didn't have a bank account till then and introduced them with the merits of cashless transactions and digital payments.

This development, at the same time, decreased people's apprehension of "the internet' vis-à-vis financial services. The growth in cashless transactions also amplified the remittance data as well as the digital footprint of the individuals. It enabled other Fintech platforms to address the financial needs of people across the socio-economic spectrum.

For instance, credit, and especially readily available credit, used to be a prime challenge for the people and businesses alike as it was entangled in a labyrinthine task of credit approval. A loan would ideally take anywhere from weeks to months to be approved and disbursed, and that too, without any assurance of receiving credit. Things were destined to change with Fintech players stepping into the picture, reducing this time to just a few days. This increased flexibility boosted people's proclivity towards the digital services and helped in enhancing financial inclusion. Multiple payments bank is driven by financial technology also started emerging within the scenario, further acting as a catalyst in formalizing the economy and extending the reach of the banking system.

The Road Ahead: Taking the battle of financial inclusion off to another level

Since financial inclusion is not a onetime process, the Fintech sector isn't ready to stop before it achieves the overarching objective. Today, the Fintech sector is not only including an average customer as part of its financial inclusion plan, but it is also channelizing seamless financial services to microenterprises, which have to bear the brunt due to unavailable working capital. The forward-looking players are doing so by leveraging state-of-the-art technologies such as Artificial Intelligence and Big Data in conjunction with remittance data that they source from PoS vendors and mobile wallet players, thereby ensuring that the Indian financial system is inclusive, effective and, above all, future-ready!

Manish Khera

Founder & CEO, Happy

A powerhouse of microfinance and micropayments knowledge, Manish Khera is the CEO and Founder of Happy, one of India’s most innovative loan facilitators. He spearheads operations at the organization and devises the overall strategy, ideates new products and offerings and leads the fund raising initiatives. With over 25 years of experience in the banking and financial sector, he has been an investor and advisor to several banking, technology and impact related ventures.
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