transformative power of technology

The transformative power of technology in driving financial inclusion in India

In India, financial inclusion is like a powerful engine driving economic change. It’s a way of making sure everyone, especially those who’ve been left out, can participate in the economy. India’s financial institutions and fintech companies are working hard to include more people in the formal financial system. They’re using technology to make it easier for people to access banking services, and it’s working. In fact, India is being seen as a leader in the world of fintech.

According to a report called the Global Findex, a lot of people around the world (about 76 percent of adults) have bank accounts or mobile money services. But in India, an impressive 80 percent of adults have bank accounts. This shows that India is really making progress in bringing more people into the financial world.

But there are still some challenges, especially for a group of businesses called MSMEs, which stand for Micro, Small, and Medium Enterprises. These businesses are important because they make up a big part of India’s economy. However, they often struggle to get the money they need to grow. They face problems like not being able to get loans easily, complicated paperwork, and having to give something valuable as security.

This is where fintech companies come in. They’re like important friends helping these small businesses overcome these problems. They’re using technology to make it easier for MSMEs to get the money they need and be a part of the financial world.

Technology is Making a Big Difference

Technology is changing everything, and in India, it’s changing finance in a big way. In fact, India is leading the world when it comes to using technology for finance. About 87 percent of people in India use fintech, which is higher than the global average. This shows how much technology is changing the way people do banking.

People are now using digital payments, mobile banking, and other cool fintech stuff to do their money business. This makes it much cheaper and easier to handle money stuff. One big reason for this is something called the UIDAI public digital infrastructure. It’s like a big helper because it makes it easy to prove who you are online and do things like open bank accounts. This helps a lot of people who live far away from cities get into online banking and even get loans.

Also, the government has started cool programs like the Pradhan Mantri Jan Dhan Yojana and India Stack. These have been a big boost for fintech. They help new fintech companies create new tech products and build things like online infrastructure that everyone can use.

Helping Everyone, Especially Those Who Need It Most

Fintech isn’t just for rich people in big cities. It’s also helping people who don’t have much money, especially in rural areas. Thanks to mobile banking, people in the countryside can now use their phones to do banking and get loans. This has made a huge difference and is helping poor people become more financially secure. It’s also bringing the city and the countryside closer together, which is helping the economy grow and making everyone’s lives better.

MSMEs are also getting a lot of help from fintech. These small businesses often don’t have a long history of banking, which makes it hard to get loans from traditional banks. But fintech companies are using clever computer programs (things like AI and machine learning) to see if these businesses can be trusted with money. They look at all kinds of information to make sure loans are safe. This means more small businesses can get loans and help the economy.

New Ways to Get Money

Fintech isn’t just about loans and bank accounts. It’s also about new ways to buy things and pay for them. For example, there’s something called Buy Now, Pay Later (BNPL). It lets you buy stuff and then pay for it later without any extra fees. It’s like a friendly way of doing shopping.

There’s also something called Faster Rotation Credit Line (FRCL) for MSMEs. It’s like a special kind of loan where you can keep borrowing money within a certain time frame. This gives small businesses more options for getting money when they need it.

A lot of these new services use something called open banking. It’s like a special way of sharing financial information safely. This makes it easy to use different services from different companies. Traditional banks are also joining in on this, working with fintech companies to offer more services to customers. This helps everyone because it means more choices and better services.

Staying Safe and Fair

Using technology for finance is great, but it also comes with some problems. Cybersecurity threats, complex rules, worries about keeping personal information safe, and making sure people trust the system are all things we need to think about.

This is where rules and guidelines come in. We need clear rules to make sure everyone is safe and protected. New things like crypto and Distributed Ledger Technology (DLT) need rules too, so that they can be used safely. Investing in Digital Public Infrastructure (DPI) is also important. This means building a strong digital world where fintech can work well and everyone has a fair chance.

What’s Next?

Fintech is a big deal in India, and it’s not stopping. We’re seeing a lot of new rules and laws that are making fintech even better. Things like Payment Services Directive Two (PSD2) in Europe and UPI in India are helping fintech grow in the right way.

Looking ahead, there’s a big opportunity for fintech companies that help MSMEs. These small businesses are super important for the world’s jobs and economy. It’s predicted that by 2030, these kinds of fintech companies could make around $285 billion.

With more than 400 million MSMEs around the world, we can’t ignore the power of technology. India is working hard to make sure everyone, especially those who don’t have much, can use fintech to have a better life. This means more fairness and prosperity for everyone. It’s a big job, but it’s worth it because it’s helping India and the world change for the better.