Steps Businesses Should Take To Accelerate Financial Inclusion in India
Last year has seen teething troubles for many businesses across the globe. In India, the low earning and underbanked population faced huge challenges to survive the catastrophic COVID-19 pandemic. Amidst such times, when creating a financially inclusive system looked no less than an impossible task, the COVID-19 pandemic resulted as a game-changer for digital financial services. Households with low income and small firms have gained massive advantages from mobile money and online banking, which in turn helped lift the country’s economic growth. Besides, the Indian government has also actively begun extending financial services to the indigent population as it steers towards more sustained and balanced economic growth. Financial inclusion can considerably reduce inequality and poverty; therefore, it shall continue to be a policy priority for the government to bring a more equitable and feasible post-pandemic recovery.
Financial Inclusion In India
Making their presence felt with their A-game and beating the brunt of COVID-19, India’s FinTech industry has recently become one of the fastest-growing digital markets globally. With over 2,100 FinTechs operating today, more than half of them have been set up in the last five years, making India a global FinTech Superpower. Nevertheless, the country continues to have several hurdles in achieving financial inclusion as 24% of India’s population are still struggling with being financially literate, making approximately half of the bank accounts inactive. Nevertheless, it is high time for the nation to develop financial inclusion to extend monetary assistance to the underbanked population and create a robust platform for the FinTech corporations to work.
Are We Doing Enough?
A better platform for the growing number of Indian FinTech companies is nothing but a positive sign. But is it enough to bring in financial inclusion?
To scale up financial inclusion, the country needs to bring a collective effort of FinTechs, banks, and regulatory authorities into power. Secondly, having flexible regulation and better awareness in place for FinTech players to function can significantly improve financial inclusion in India. Reports say financial inclusion is the key to strengthening the country’s economic position and eventually achieving Sustainable Development Goals (SDGs). The major policies planned for 2019-2024 focus on expanding and sustaining financial inclusion with the help of an extensive convergence of businesses taken up by the stakeholders belonging to the financial sector. The strategy is expected to provide easier access to financial services affordably. Lastly, to turn the post-pandemic struggle into a driving factor of financial inclusion, more businesses need to partner with Corporate Social Responsibility (CSR) firms.
Can FinTechs Bring A Change?
We have often seen people struggling to trust FinTechs regarding multiple issues such as security, unavailability of physical offices, lack of awareness etc. Nonetheless, in the present time, with more robust regulations to support NBFCs and FinTech market players, much funding, and technological innovations, FinTechs have a multiplier effect in the expansion of financial inclusion.
There are a few contemporary models of financial services, which can effectively help develop financial inclusion:
- e-KYC for faster processing without much time to spare
- Instant money transfer from digital mediums for users
- Quick onboarding and handy credit repayment history
- Smart banking initiatives and awareness in remote areas
- No-frills accounts for those having low-income backgrounds
Are Startups Our Game-Changers?
This year, the potential game-changers we can look up to are the emerging Direct-2-Consumer (D2C), Software-as-a-Service (SaaS), and EdTech businesses in India. These fast-growing markets are founded by Gen Z entrepreneurs, who have clear fundamentals but lack funding. This is where startups can turn to Revenue Based Financing (RBF) that will enable them to raise funds by pledging a portion of their future revenue. Since RBF allows businesses to easily raise funds without diluting any equity, along with gaining data points such as GST, unlike other traditional methods, it is in the interest of every entrepreneur. Hence, it will be the right time to execute the RBF model in the country to rebuild financial inclusion through startups. Subsequently, new-age financing strategies and instruments can bring out the true potential of RBF and help new businesses bloom.
Innovations and policies made in India centre on bridging barriers to access existing financial methods and bringing people closer geographically via banking services. How much of it has seen the light of success? FinTechs now are not burdened by any traditional process, and hence, have better reach out to the vast market potential than before. With innovation, FinTechs currently offer a diverse range of products and their alternatives as well for the customer to choose. Furthermore, we now witness an established framework that brings more awareness about financial products, increases financial literacy, and yields higher revenue.