The provision of banking services for one and all is vital for the sustainable development of any country because inadequate access to financial services is a problem faced by a significant portion of the population across the world. Regulators and the policymakers in India are trying for a long time to achieve this financial inclusion with the goal of extending financial services to the large hitherto un-served population to unlock its growth potential. With the boom of technology, banks and Fintech startups are working side by side to achieve this inclusive growth where financial services can reach the last mile.
The Fintech industry has already revolutionized the banking
industry and is likely to grow up to 150 billion dollars within the next five
years. This industry has gone unaffected by the pandemic as it has produced 8
Unicorns since January 2020.
Banks and Fintech startups share an inseparable relationship
where Fintech companies are depended on banks for their funding and often rely
on banking, insurance, and back-office partners to deliver their core products.
On the other hand, banks acquire Fintech startups or invest in them to leverage
new technology and ways of thinking to upgrade their existing operations and
offerings.
Fintech emerged into view in September 2013, when
the Reserve Bank of India appointed the Nachiket Mor Committee that suggested a
distinguished banking structure to extend the full range of financial services
to all sections of society. To expand the span of financial inclusion, the
penetration of agent banking was based on trust development and excellent
customer relationship while involving the protection of customer data, cash
accessibility, and quality of delivery of financial services. The only
requirement was - the customers need to have registered bank accounts. With the
launch of Pradhan Mantri Jan-Dhan Yojana in 2014, the Indian government has
approved initiatives to enhance the quality of financial services digitally
through Aadhaar card biometric identification and linking the Aadhaar cards
with SIM cards and mobile phones.
With time, mobile transactions have increased
exponentially from 2014 to 2020 and India emerged as the second-largest country
on the planet for last-mile delivery of banking services. In 2019, the digital
economy in India was growing 1.5 times faster than the global average and
continuously catching up to consumer needs by providing ease of digital transactions.
The reasons behind the success of technology-enabled
last-mile delivery were:
Better internet connection
Cheaper data rates
The advanced technology of POS machines
Financial inclusion
Availability of repurposing delivery channel
The models that have driven financial inclusion through
digital or mobile banking in India were:
1. Financial service providers are in partnership
with mobile network providers to deliver mobile financial services. To expand
the project of banking the unbanked, financial service providers tie up with
mobile network providers and offer low-cost solutions for the delivery of
financial services. For example, Musoni was the very first totally cash independent
microfinance organization in which patrons could repay and receive their
finances via Safaricom’s M-PESA interface system.
2. A mutual partnership is formed between financial
service providers and payment banks to derive more access points. The AePS or Aadhaar-enabled
payment system supported by the unified payment interface (UPI) played a vital
role here. Digital payments supported by an efficient credit system accelerate
financial inclusion and help the new business models to be robust, secure, and
scalable.
Technology-enabled last-mile delivery of financial
services is more relevant in the recent pandemic scenario. While India was fighting
a battle to eradicate and curb the spread of the deadly coronavirus and was facing
quarantine and a nationwide shutdown, banking services were increasingly difficult
to access but the banks being an essential service continue to operate at
reduced strength.
Indian Post Payments Bank (IPPB) has surfaced to be a boon in these tough times. Before the COVID-19 outbreak, up until March 31st, IPPB had a record of over 6.5 lakh transactions. During the lockdown period, another 34 lakh transactions were done through Post Office Savings Bank. Banking operations were already to a minimum and the unorganized sector is getting affected. Most of the laborers don't even have bank accounts, to begin with. Since the start of the lockdown, India Post has channeled over Rs. 720 crore to over 38 lakh people. This was possible through the Aadhaar Enabled Payments System. In the course of the nationwide lockdown, Post office Saving Bank has carried out around 2.7 crore transactions which are worth more than Rs 40,000 crore. In the meantime, IPPB transactions stand at 1.3 crores including Rs 2,854 crore.
It is evident now that the increased adoption of Fintech
technologies powered by data analytics, artificial intelligence (AI), machine
learning (ML), process automation, and Blockchain has transformed the financial
world. These technical advancements empower Fintech companies to adopt and run
extensive measures of information through calculations designed to differentiate
between patterns and risk, spam information, fake practices, and suggest the right
moves.
Fintech organizations are utilizing these technological
advancements and tools to help institutions manage and control their finance,
fulfill tax compliance, pay and accept invoices, and utilize other financial
administrations according to the business requirements. They also enlighten
their customers to have a better comprehension of investment and purchasing
risk. This is the reason behind businesses and financial institutions accepting
Fintech to control and manage their financial operation while decreasing their
functional expense.
