“The benefits of financial inclusion and inclusive growth are clearly established. Access to financial services opens doors for families, allowing them to smooth out consumption and invest in their futures through education and health. Access to credit enables businesses to expand, creating jobs and reducing inequality. Financial inclusion is the bridge between economic opportunity and outcome.”
– Mitsuhiro Furusawa, Deputy Managing Director, International Monetary Fund
Traditionally a cash-driven economy, India has the world’s second-largest share of the unbanked population. And hence, its financial inclusion journey is riddled with challenges. Fortunately, the scenario is changing quickly with fintech companies taking over the mantle. Despite being a nascent market, India boasts of the world’s third-largest fintech ecosystem. It has a fintech adoption rate of 87%, which is significantly higher than the global average of 64%.
The smartphone revolution fuels India’s spectacular response to the fintech opportunity. The country has a base of a billion mobile connections – half of which belong to rural areas and 325 million broadband connections. Fintech companies are leveraging these metrics to achieve universal financial inclusion in the country. In the process, they are rapidly changing how we access and consume financial services.
Shifting paradigms of one of the world’s oldest industries
The progression has led to the dawn of true customer-centricity and service innovation in the domain. The foremost example that comes to mind is that of India’s largest private sector bank, HDFC Bank. The Bank turned 3,00,000 village-level entrepreneurs (VLEs) of government-run common service centres (CSCs) into banking correspondents. The initiative made banking services more accessible in rural areas. The VLEs also function as Business Facilitator (BF) which will enable merchants, youth, entrepreneurs, farmers and women to avail loan facility from the Bank.
We can also take the examples of Mexico’s Banamex Bank and Brazil’s Bradesco Bank. Both these banks are among the largest and oldest financial services brands in their countries. In recent years, both the organisations have adopted unprecedented measures to reach out to these ‘unbankable’ audiences. Bradesco Bank’s floating branch along the Amazon enables thousands of Brazilians to access its services as its wades along the world’s longest river. Banamex has partnered with Oxxo, Mexico’s largest chain of convenience stores, to percolate its services to the base of the pyramid. Today, Oxxo is the country’s numero uno bank account supplier.
Bridging the financial services gap in underserved communities
Despite the efforts of traditional banking institutions, there are barriers to bank account ownership among marginalised populations. These range from lack of trust to unavailability of documentation and high service charges. The lack of bank accounts limits their access to other financial services such as formal credit and insurance. In spite of having technology that could make financial services available at their fingertips, most low-income people in rural areas do not use digital financial services. Consequently, their needs for financial services remain unaddressed.
Here is where independent fintech companies step in. A large number of successful fintech companies are innovated by non-bankers to ease the problems faced by the common man. As transformational agents, they are erasing the traditionally-defined boundaries between feasible and unfeasible customer segments. For instance, they provide users with the flexibility to access financial services without holding a bank account or even using their mobile phone. Instead, they appoint agents who conduct financial transactions on behalf of the consumers. The consumers, in turn, pay them in cash in addition to a service charge. This way, they absorb the low-literate, a digital transactions weary populace within the periphery of financial inclusion.
Our investee financial transactions platform, RapiPay, is built on a similar approach. Rapipay is a prepaid payment instrument platform approved by the Reserve Bank of India. The platform facilitates convenient and secure financial transactions through a franchised retail network of ‘RapiPay Saathis’. By training local merchants such as kirana storeowners and panwallas to be a part of this network, we are extending our services to the hitherto inaccessible parts of the country.
Conclusion
Technology has the power to reinvent financial services delivery to suit the needs of an expanded and new audience base. The significance of such services in strengthening India’s economic prosperity and social progression cannot be overstated. By delivering services to customer’s doorsteps and fingertips, financial technologies have spurred a socio-economic revolution in the country.
And so, service providers – both traditional and modern – will need to innovate methods to infuse tech-efficiencies in their offerings continually.
