Financial Inclusion Through Fintech: Bridging the gap in India

India stands on the cusp of a financial revolution, propelled by the convergence of technology, policy reforms, and shifting consumer behaviors. Fintech has become a ray of hope, providing new and creative ways to close the gap and promote financial inclusion like never before. By using digital platforms, mobile phones, and data analysis, fintech companies are making financial services accessible to a wide range of people, including those living in underserved regions with personalized and customised offerings.

Undoubtedly, initiatives led by the RBI and the government like the Jan-Dhan Yojana, Stand-up India Scheme, Financial Inclusion Plan, and many others have played a crucial role in advancing financial inclusion in its current state. The biggest example is the UPI, which stands as the foremost catalyst in advancing financial inclusion in India, owing to the remarkable surge in Internet banking adoption over the past five years. According to the data by the NPCI, UPI transactions worth 18.41 trillion were processed in January 2024. Moreover, the platform is remarkably expanding its footprints in other countries.

However, there is a significant contribution of fintechs in shaping this narrative of growth. Firstly, with the advent of seamless Aadhar-mobile number linking, fintechs have revolutionized user onboarding by requiring minimal documentation. This innovation has greatly streamlined the KYC process, facilitating enhanced access to financial services. Whether it’s obtaining loans, securing insurance, or utilizing e-wallets and payment applications for everyday transactions, individuals now experience unprecedented ease in navigating the financial landscape. Fintech platforms also make it easier for small enterprises and individuals to obtain microloans. Today financial service providers host an assortment of instant loan applications in the market that provide short-term loans to borrowers with quick disbursals.

Secondly, through the gaining popularity of embedded finance, financial service providers can now visit clients where they are. This means that users across the country can access digital services like payments, pay later services, and more on online platforms that they already access. Prominent examples of this are Flipkart and Amazon that allow users to make purchases using various digital payment methods.

Additionally, digital lenders have embraced the use of alternative data to evaluate borrowers’ creditworthiness. This comprehensive approach to underwriting has expanded access to credit for individuals and small businesses with limited or no formal credit history, thereby enhancing loan accessibility. Also, lenders are now more willing to extend credit to borrowers with less effort and greater scalability through the use of alternative data. Now, borrowers can simply access low-cost financial services with the least amount of paperwork. Products such as equated daily payments (EDIs) are therefore becoming more popular.

It is known that insurance is a critical component of financial inclusion as it provides a safety net against unforeseen financial shocks. Insurtech startups use technology to produce low-cost insurance products. Microinsurance products, for example, are becoming increasingly popular in Africa and Asia. In India, term microinsurance and health microinsurance are the two most widely embraced types of microinsurance providing affordable and tailored solutions to underserved populations.

Besides this, blockchain technology offers a decentralized and transparent financial transaction platform, which contributes to the promotion of financial inclusion. Peer-to-peer transactions can now be done securely and effectively, negating the need for intermediaries like traditional banks. Furthermore, blockchain’s immutable ledger ensures transparency and reduces the risk of fraud, thereby building trust among users. Hence, blockchain technology contributes to advancing financial inclusion in India by delivering accessible, secure, and efficient financial services to previously underserved communities.

As the fintech industry progresses in India, we can anticipate further innovations that empower individuals and communities to reach their financial objectives. Collaboratively, we can construct a world that fosters financial inclusion for everyone.

The author is CEO and MD, Niyogin Fintech Limited