As it turns out, financial inclusion has taken on new dimensions in the year 2020. The finance industry professionals and experts in past years have considered the growing importance of financial access to millions as the key to economic growth and eventually the development of the country.

While there are a plethora of possibilities knocking on the door, several challenges remain which are required to be addressed. Somewhere, both factors intersect in 2020.

Fintech adoption rate rose to an average of 64% across the globe with India and China leading from the front. The overall transaction value in the Indian Fintech market is estimated to rise to approximately USD 137.8 billion in 2023 from USD 66.1 billion at present. In 2019, 1.3 billion people in India have unique Aadhar identity. With a robust technological ecosystem, Fintech is on an upward growth trajectory.

Changing the outlook towards Fintech, regulatory uncertainties and gender gap remain major challenges.

 

Possibilities at Present

All stakeholders which include government institutions, policymakers, banks, micro-finance institutions and other players in the finance industry are geared up to further the cause of financial inclusion in the current year.

The financial gurus believe in unison that it is in an opportune time to push various digital financial services with the mainstream finance sector as the collaboration can empower digital transactions, improve financial health and boost the economic prosperity of the country.

All over the world, especially developing countries are utilizing various innovations in financial technology to provide services to the under-served and unbanked population.

Disruptive digital technologies are playing a huge role in promoting the above-mentioned components. The modern devices and innovations are an exciting prospect to give access to the unbanked rural population of India and make it affordable for them. The Fintech comprising of high end hardware and cutting edge software services will further enhancefinancial inclusion.

A diverse range of factors can further propel financial inclusion. The important components that can be the game-changers are – Digital Financial Services and Retail agents.

Digital Financial Services contains a wide range of services which are delivered through digital channels. This includes payments, credit, savings, insurance etc. This model improves accessibility and reduces the overall service delivery cost.

Retail agents are those who play the role of converting money into digital value and digital value back into money. Depending on the regulations, they perform other functions as well such as value added services, insurance, ticketing, etc.

This allows for accommodating very small and unpredictable cash flows of the poor into the mainstream economy. It also opens the door to other financial services like interest-bearing savings, credit, insurance, and investment products.

Moreover, it helps the financial experts by providing data and insights which in turn can be used to devise a new system which can benefit the low-income segments. This can usher a new era of growth through digital financial inclusion in India. Just imagine the introduction of new participants to the financial market and the resulting boost to the economic sector.

Challenges at Present

The pursuit of financial inclusion in a country like India is a tough task. Due to its large population and varied geography, it is often not possible to reach rural areas and offer financial services. If by any means, the poor get the opportunity to avail the services, it seems un-affordable to them due to low income. Lack of trust is a big issue as well.

The gender gap is another challenge which needs to be tackled head on in the year 2020. According to the World Bank’s World Development Report on Gender, over 1 billion women in the world do not have access to financial services. Therefore, it is no surprise that millions of women in India don’t have access to a transaction account. Powerful digital technologies can bridge the gap and give women easy access to financial services and bring them into a regulated financial system. This, in turn, can unleash the growth potential and strengthen the economic health.

This is where national identification programs can give a boost to financial inclusion. The advanced technology for biometric authentication from Evolute can make it easy. The digital payment devices are by far the best Fintech innovation of our time.

Another factor is the regulation of micro-finance institutions. There is a cap on their operational expenses. This limits their ability to offer financial services to the difficult to reach population.

Brick and mortar banks are present in large numbers across India and they rely heavily on profits received via traditional way of transaction and other banking services. As a result, traditional players show a lack of interest to leverage financial technology, inhibiting the goal of financial inclusion.

It is high time banks realize that services like faster payments, improved customer engagement and better financial services can be provided through innovative Fintech technologies. Seamless integration of modern tools like POS and traditional customer service which are personalized can go a long way to push financial inclusion at the fore.

The innovations happening in digital financial technology are very promising and augurs well to achieve the goal of financial inclusion. In 2020, government and bank institutions can leverage the power of technology to further financial freedom and financial access. More modern tools must be acquired and data insights must be analyzed by all the concerned stakeholders. With further strides in digital financial inclusion, India can become an economic powerhouse.

Evolute is one of the leaders in the sphere of financial technology. It aims to revolutionise the financial industry by providing disruptive technologies for omni-channel digital payments, Biometric authentication and easy & affordable financial access. Evolute’s digital arm SpiritusPay is the first all-in-one service model services, bridging the gap between technology and digitization and helping millions to get into mainstream finance.

 

Reference:www.cgap.org/blog/what-digital-financial-inclusion-and-why-does-it-matter

http://blogs.worldbank.org/voices/digital-financial-inclusion-what-works-and-what-s-next