Role of Fintech in Driving Financial Inclusion

Although 1.7 billion individuals still lack access to financial services, Fintech is making it simpler and easier to choose technical financial services.

Financial inclusion has expanded more quickly due to the booming fintech industry. Customers will adopt new technologies like AI and ML in the future years. Financial inclusion is taken into account by the World Bank Group (WBG) in terms of the "Access, Usage, and Quality" of financial services. Fintech can lower costs while increasing accessibility and speed, allowing for the expansion of more specialised financial services. In the last ten years, financial services have been available to 1.2 billion adults. 

This suggests a 35 per cent decrease in the population of unbanked people.  Fintech is making choosing technological financial services simpler and easier, yet 1.7 billion people still do not have access to financial services.

Many consumers now find it simple to use financial instruments because of fintech. Fintech has paved the way in areas like cross-border transfers and payments from the government to individuals in addition to mobile money. The following describes the part that fintech plays in financial inclusions:

Promotes Cashless Economy

Electronic payment methods are now swift and secure due to fintech innovations. Due to the use of AI in this, Fintech companies can instantly authenticate and transfer digital payments.

Everyone's access to essential goods and services is improved by the flexibility, convenience, and ease of online payment methods. Customers can order LPG cylinders online and pay their utility bills from the comfort of their homes, for example. In addition, the corporate sector and fintech industries are crucial to global digitisation.

Innovative with Speed and Compliance

When compared to their traditional competitors, fintech businesses typically have fewer compliance obligations and regulations, such as capitalisation, identity verification, and consumer complaint redressal.

For instance, the Reserve Bank of India (RBI) allowed fintech companies to utilise video-know-your-customer (KYC) and e-Aadhaar verification to promote digitisation and lower client acquisition expenses. By testing new ideas in secure sandboxes while maintaining legal compliance and data protection, fintech companies can quickly roll out new features and products. Fintech companies may now swiftly and safely offer cutting-edge products and services.

Improved Credit Access

In contrast to traditional banks, fintech startups require less paperwork before providing money. This facilitates quick and easy borrowing. Fintech companies use artificial intelligence (AI) to assess the risk of customers with little to no credit history using variables like income and spending habits.  Small-ticket borrowers and local enterprises can now use microfinance services for large purchases and capital projects.

Providing Financial Services in the Nation's Remotest Regions

Due to rising internet use and improvements in online banking, fintech companies can reach out to rural areas where physical bank branches cannot be constructed. Fintech businesses make it possible for unbanked, low-income, or rural residents to save and grow their money. Providing access to basic goods or services, such as financing or savings instruments, also helps in utilising government support and programs.

Potential for Disruption in the Traditional Banking and Finance Sector

Through the innovative and creative use of technology during the loan procedure, fintech companies are establishing new ground in the formal financial sector. Using machine learning algorithms and additional data sources, including social media footprints, call logs, purchase histories, and utility service provider payments, fintechorganisations increase efficiency and broaden loan availability. Additionally, loans are approved and disbursed by Fintech companies much more swiftly.

Fintech Prospects for Financial Inclusion in the Future

It is impossible to overestimate the importance of MSMEs as vital economic drivers and job creators. Furthermore, Fintech has the potential to reach a large market of underprivileged populations.

To address difficulties such as limited regulatory policy and a lack of financial and digital literacy, mass market innovation is urgently needed. Moreover, sustaining relationships with SME clients notwithstanding defaults is primarily the obligation of a Fintech company. The issue of funding payment delays, particularly in the MSME sector, is analogous to an occupational hazard that cannot be eradicated. The key aspects of the process, though, are retaining resiliency, keeping an eye on the big picture, and ensuring that collaborations continue.

One prevalent misperception about this term is that it solely pertains to technology and those who are technologically savvy. In actuality, this phrase refers to the combination of financial services provided by many clients with technological advances.

In this scenario, the integration of technology with financial services entails the development of several platforms and applications to make it easier for you to use financial services. For example, individuals may be applying for online personal loans or business loans, among other things. They should also be aware of fintech companies as a potential service for banks because they are beneficial to web banking.

Customers typically have a lower propensity to accept new technology since they are comfortable and confident with the current banking system. Before new technology can be adopted, customers' satisfaction with privacy and security concerns must be ensured. Although adopting Fintech technologies is easier and less expensive than using conventional ways, it still takes some time to win the clients' trust.