Month: October 2022

The acceptance and adoption of a paperless and digitized approach have led to a transformation in the banking industry. Fintech has acted as a facilitator in promoting an unconventional approach to money matters. With 6,639 Fintech in India of which, 21 of them stand tall as unicorns, India is the third-largest Fintech-related ecosystem in the world. Between 2016 to 2021, the Indian Fintech companies have been able to raise USD 16.5 billion which is approximately 60% of the capital entering India over the past 3 years. Furthermore, investors have invested approximately USD 24 billion into more than 1,000 companies functioning in the field of financial technology. Investors see the great potential Fintech holds in advancing the banking industry and digitizing the remaining aspects of banking. Fintech On The Rise in India Indian Fintech adoption rate stands at 87% as compared to 64% globally. Going by this statistic alone, India can be viewed as a potential market for investors. Furthermore, the prediction of the Fintech market to grow at approximately 20% in the coming years goes on to show the leading streak India is showcasing in the Fintech arena. India has more than 80 million internet users and various government initiatives to target the underserved population by leveraging the internet and technology give Fintech a cutting edge to showcase its capability. Digital payments have acted as a bandwagon in this transformation. India’s population and diversity allow Fintech to experiment and innovate personalized and customer-centric solutions for the targeted audience. Irrespective of whether the service is accepted by the masses or not, it allows Fintech to innovate and improvise. 3.7% of the Indian population can avail of insurance and the latest reports suggest that tech-based insurance providers are at an all-time high owing to their robust online services, especially after the pandemic. Growing computing power, internet connectivity and penetration coupled with customer awareness and demand for financial services play a significant role in boosting Fintech services in the market. The rise of Super Apps which provide a bundle of services on a single platform has augmented Fintech acceptability as Super Apps have successfully created a complete customer journey on their platform. Different branches within the Fintech ecosystem like PayTech, LendTech, RuralTech, WealthTech, InsurTech, etc., have allowed India to showcase its ability in innovative technology-driven services in comparison to other countries. India’s drive towards becoming a global leader is addressed by other countries too who look to collaborate for allied growth in this field. For instance, the UPI-PayNow linkage between India and Singapore is a milestone in the development of infrastructure for cross-border payments, financial inclusion and transparency in the overseas payment system. Conclusion Various microeconomic factors, government initiatives, supply-side factors, blockchain advances, funding, etc., have played a major role in revolutionizing and building India as the Fintech leader in the global market. As per experts, India is set to grow exponentially in the coming years with an estimated figure of USD 150 billion in valuation by 2025 spearheading the Fintech revolution in the true sense!

Fintech ushered in as an unconventional way of banking but with time and acceptance, presently it is positioned strongly in the market. As per statistics, the Indian Fintech adoption rate is at a whopping 87% against a global average of 64%. This goes on to demonstrate how Fintech and its services are not just creating a stir in the market but also generating various opportunities to broaden the financial ecosystem. The disruption is a result of an uncustomary way of lending, investing, client servicing and much more. The use of technology to improvise and optimize financial resources has evolved into a new way of banking. A report on the Future of FinTech and Banking by Accenture estimates that Global FinTech Investment will rise to USD 500 billion before the decade ends. FinTech is not only going to be an enabler but also the engine that will drive the Financial World. Apart from revolutionizing the financial space, Fintech companies are also participating in generating employment opportunities that broaden an individual’s experience slate in the long run. Fintech as a domain has evolved manifold over the years and has presented compelling job opportunities for individuals ready to go the extra mile and want to showcase a diverse career board. Here are some opportunities that will allow you to polish and grow your skills and career, respectively- Cybersecurity With innovation in services, fraudsters have simultaneously innovated their ways of fraudulent activities. Experts in this domain claim that an increase in cybercrime will result in a tripling of job opportunities in this domain in the coming years. The entirety of Fintech is based on technology and therefore, they require experts and specialists who identify and mitigate threats to innovation. Developers Developers have and will play an extremely critical role in the progress of Fintech over the years. They have developed robust programs that have eliminated the need for business intermediaries, reduced transaction costs, mitigated the need for middlemen and so on. With the participation of fresher minds in this domain along with the use of blockchain technology, AI, Machine Learning, etc., Fintech can expand tremendously in the coming years. Quantitative Analysts Also known as ‘Quants’, specialists in this area guide security firms, investment banks and hedge funds in making informed decisions about markets, pricing and financial risk; much like robo-advisors but with real-time decision-making capabilities. Fintech startups invest in machine learning, deep learning and artificial intelligence to intensify their analysis. This has allowed them to develop algorithms that have helped companies reach their financial goals. Sales Force The Sales Force is often the face of a company and the team that drives the entire financials. But, to drive effectively, it is imperative you know your product, services and market well. Individuals in sales are often the ones with the most knowledge about the domain and its offerings to efficiently build a clientele base. Having the said knowledge in the Fintech space is an add-on for future endeavors. Innovation and the zest to transform the financial ecosystem continue to expand the Fintech space and will continue to do so in the foreseeable future. Individuals eager to become a part of this growing domain are those to strive to redefine conventional methods. Check out job opportunities with a unique Fintech- Niyogin to expand your knowledge pool in the banking industry.

The financial ecosystem has seen a tremendous extension since its formal inception in the year 1770 with the establishment of the Bank of Hindustan. Mere services grew to a full stack of financial services and with the digital revolution, services have been shifting online. Digital banking forms are rapidly increasing across the globe. Payments companies are experiencing a swell in their transaction volume. In the financial year 2022, around 71 billion digital payments were recorded across India. The evolution of financial services has also resulted in evolved financial fraud. These frauds are prevented by cybersecurity and cyber-crime teams who analyze and undertake several measures for a healthy financial ecosystem. Most financial institutions have dedicated teams of analysts who build and maintain automated systems to track transactions and red-flag potential fraudulent activities. Despite such efforts, fraudulent activities have been on an upward trend over the years. Number of bank fraud cases across India – FY 2009 to 2022 Source: Statista As per data, reported frauds in FY 21-22 amounted to Rs 60,414 crore; a decrease of 56.28% from Rs 1.38 trillion in FY 20-21. Referring to the number of frauds, the data reported 23.69% higher frauds in FY 21-22 as compared to FY 20-21. Despite a lower value, the number of fraudulent cases has been the highest in FY 2022 at 9,103. Value of bank frauds in India – FY 2018 to 2022, by category of fraud (in billion Indian rupees) Source: Statista As per the graph drawn from Statista, loan portfolios, both in terms of number and value, face the most fraud. Advances constituted 42.2% in number and a whopping 97% standing at Rs 58,328 crore in value. Cards/internet constituted 39.5% of the total frauds in number and 0.2% in value. An analysis of the root cause of fraud shows a significant time lag between the date and time of occurrence and its detection. This comes as a challenge to financial institutions that are trying to mitigate fraud from their balance sheets. Therefore, financial institutions are automating the prevention and detection process with the help of Machine Learning. The Machine Learning process to identify and thereby classify a case as fraud can be categorized into 2 major methods- Logistic regression Random Forest To measure the performance of both models, Recall is a useful metric. High-class imbalance datasets typically result in poor Recall, although accuracy may be high. Precision will also be a consideration because reduced precision implies that the financial institution that is trying to detect fraud will incur more costs in screening the transactions. In fraud detection problems, though, accurately identifying fraudulent transactions is more critical than incorrectly classifying legitimate transactions as fraudulent. Where financial institutions are investing heavily in fraud prevention, Machine Learning has allowed them to analyze and detect fraud effectively to a certain extent. However, they must ensure that the model and method they pick must give them an analysis that includes data cleaning, exploratory analysis and predictive modeling.

The year FY 2020 saw a set up of 1,22,721 new businesses which grew to 1,55,377 in FY 2021 and 1,67,076 in FY 2022 at an increased rate of 7.5%. With several new businesses participating in the growth of the economy and thereby, India, it is needless to say that these enterprises must be supported and boosted. With over 14 Lakhs registered businesses and several untracked businesses, business services take the significant space followed by manufacturing and trading. Irrespective of the type of business, what stands homogenous is the need for funds. For any business to commence, expand and thrive, capital is fundamental! Financial institutions understand this requirement for personal and economic growth and therefore, offer several types of financial services and assistance. The most common among them is Business loans specifically targeted at business needs. Capable individuals and businesses often contemplate if they require business loans to boost their business and we’ll give you all the reasons why one must opt for it. Tend to your Working Capital Need – Working capital is the prerequisite for the establishment, administration and sustenance of a business. Business Loans tend to these requirements and allow a business to function and flourish. However, business loans must be availed from financial institutions that are customer-centric in their approach. Inventory Provision – A business may require funds to meet seasonal inventory needs or continuous, in both scenarios, business loans help in providing these funds at the stated time and need. Effective Cash Management – Continuous operational activities like marketing, inventory upholding, customer acquisition and service require a continuous flow of funds that is duly inspected. Business loans enable a continuous flow of funds without having to pause or stop a business from achieving its goals. However, it is equally important to indulge in cash management to ensure funds are used efficiently. Satisfying the Surging Demand – Businesses must always keep an eye and have the intention to scale up and meet market demands efficiently. To have a full inventory and upkeep customer demands, businesses need to have a continuous fund flow and that’s where business loans come into use. With options like OD, it’s even easy to have top-ups on loans. Financial institutions like Niyogin Fintech Limited offer top-ups at lucrative rates and tenure. A Fixed Sum Investor – Suppose you go to ‘The Sharks’ and pitch your business idea for an investment of Rs 10 Lakhs. You will have to do away with a certain share of equity to avail of that amount whereas in business loans, your business remains entirely yours irrespective of the loan amount availed. Business loans are rather interested in extending financial support. Avail Tax Benefits – Apart from strong funding through business loans, it also allows you to apply for tax deductions. The interest payable on a business loan is often tax-deductible depending upon the interest limit prescribed by the government. Therefore, it is in the interest of a borrower to check the eligibility criteria before applying for a business loan. Enhanced Business Credit – Availing of business loans also means improving your business creditworthiness to apply for OD and loans in the future. However, it is important to note that to improve one’s creditworthiness, it is essential to make timely payments and repayment of the loan in its term. Now that you know the benefits of Business Loans, do you think you want to avail one to boost your business needs? Niyogin Fintech Limited offers Business Loans that offer you the financial support you need! Contact 1800-266-0266 for more information on this matter.  

Walking with a population of 136 crore Indians with contrasting needs and demands means innovation must be at its finest! To date, traditional banks have taken care of the needs but with Fintech joining hands, services that place customer centricity in the high-importance grid have grown manifolds. The financial world has crossed the road from the basics to everything digital and consumer-oriented. Long ago banks understood the need for top-up loans to cater to the unforeseen extra needs individuals get caught up in and with Fintech joining forces, the service was propelled in the market with twice the ease and speed. As a reader, if you’re wondering about the positives of a top-up loan instead of availing of a new one from a different bank, here are your reasons to consider the former- Relaxed Eligibility Criteria As the name suggests, top-up loans are applicable when an individual or a business has already availed of a loan from the same financial institute. Therefore, the formalities, procedures and eligibility criteria become less tedious and more smooth for a top-up loan as the financial institution already has the KYC. However, it is essential that you have a strong repayment history on your existing loan and you have maintained a strong credit score. Favorable Interest Rates with Low Processing Fees In most cases, the interest rate on top-up loans is almost the same as your existing loan and therefore, availing of a top-up is a wiser decision than availing of a new loan. Given that the request acceptance TAT is much lower in top-ups alongside low processing fees, favorable interest rates coupled with quick disbursals are a respite for you! Unrestricted Fund Utilization Top-up loans are more flexible in terms of their utilization and do not restrict the purpose of fund consumption. One can use the funds for business objectives or personal grounds. Flexible Repayment Option Just like your needs, your tenure can vary too in top-up loans. It is unnecessary one must match the tenure to the existing loan. If required, one can increase or decrease the tenure according to their paying capability. Additionally, loans like home loans offer tax benefits to individuals which can be used to their benefit if the tenure is extended. However, it is advisable to thoroughly go through the terms and conditions to understand one’s liberties toward tax deductions. Source of Instant Funds The trump card of top-up loans is its attribute of instant funds. One may require instant funds for professional or personal reasons and top-ups offer that relief. With quick disbursals, top-ups are increasingly getting popular in the market. Making informed decisions is wise but first being financially literate is cardinal to making any financial decision. Whether one decides to take a first-time loan or a top-up, it is important to know and acknowledge the usage, amount, repayment capability and most importantly, choose a borrower-friendly financial institute before marking oneself in the borrower group.

The Assets under Management (AUM) of gold loan NBFC is expected to grow at 12-14% in FY2022-23. According to an estimate, the organized gold loan is currently valued at Rs 4,149 billion and is expected to grow at a 3-year CAGR of 19.5% to reach Rs 7,557 billion by FY2024. Crisil ratings in the chart above show the growth gold loans have had over the years. To speak of potential growth in the coming years – HDFC Bank recently announced that it has added 51 Gold Loan desks to its branch network in Uttar Pradesh. With the addition of 51 new Gold Loan desks, 170 HDFC bank branches in the state will now be able to offer Gold Loan. It shows the inherent capability gold loan has in mitigating short-term capital challenges. For banks, the gold loan remains a tool to meet their Priority Sector Lending (PSL) requirements. However, with a growing presence, quicker loan processing capabilities, gold loan schemes of varied tenures, doorstep availability of gold loans, digitally-enabled solutions, etc. gold loan NBFCs have developed a strong market presence. NBFCs are targeting and specifically catering to mitigate short-term financial needs. Targeting Small and Micro enterprises that run on heavy capital requirements to fund working capital, personal requirements, supplier payments, etc., NBFCs are ensuring MSMEs are included and thrust towards growth. The pandemic has played a major role in driving acceptance amongst the audience towards the gold loan. The pre-pandemic era saw different sentiments towards gold but with a cash crunch and increasing capital requirements, businesses examined and reconsidered the use of personal assets to the advantage of their short-term business requirements. From a credit perspective, gold loans are highly secured and generate higher returns with minimal credit risk as a consequence of keeping a close check on Loan-to-Value. Therefore, NBFCs are driven toward introducing and extending a credit against gold. For NBFCs who place themselves as promoters of inclusivity, gold loans are a means of promoting financial inclusiveness within society. For borrowers who have little to no assets attached to their name, gold comes as shining armor to their rescue in times of dire short-term business needs. Niyogin Fintech Limited in collaboration with Indiagold is striving to make allowances for MSMEs who visualize growth but are decelerated due to capital requirements that arise because of no assets that could be pledged against the loan. Here’s a snapshot of Niyogin + Indiagold loan Loan Amount – Up to 75% of the market value of the gold pledged Interest Rate – 0.85% per month Processing Fees – Nil Service at doorstep Quick release guarantee Besides the fact that gold loans allow individuals and businesses to get instant funds, it also has no prepayment or late payment penalties. Its easy application process coupled with the security of the asset adds to the list of conveniences gold loans could be for society at large.

India owns 12 Public Sector Banks (PSBs), 21 Private Banks (PBs) and 43 Regional Rural Banks (RRBs) as of January 2022. Amongst these, only a handful was constituted in recent years while the majority are age-old banks with legacy data, frameworks and policies with long-in-the-tooth customers. These banks have managed to remain cemented in the market with their traditional ways of working owing to customer trust, confidence and assuredness due to their brick-and-mortar model and strong frameworks. Nonetheless, with dynamic and instinctive surroundings coupled with economic and societal transitions, customer sentiments, needs and preferences, India is beginning to experience a shift in the banking, payments and investment system among several other transitions in financial services. These developments can be attributed to Fintech which has disrupted the financial ecosystem at large. India is amongst the fastest growing Fintech markets in the world and there are 6,636 Fintech startups in India. The Indian Fintech industry’s market size was $31 Bn in 2021 and is estimated at a whopping $150 Bn by 2025. Fintech exhibits a promising future and traditional banks possess a solid foundation. In such a scenario, an arrangement that offers equal opportunities to both parties rather than rivalry is recommended for the benefit of customers and the financial world. Here are a few examples of traditional banks that have collaborated with a Fintech to leverage the digital tag and the growth opportunities a Fintech brings- Bank Partnered with Service Opportunity in Discussion ICICI Bank Niyogin DEMAT Account Through the partnership, Niyogin offers the bank an opportunity to target a specific audience while undertaking digital marketing activities too. By leveraging the bank’s database, Niyogin generates insights like customer preference, behavior, need, etc., allowing the bank to customize its offerings. HDFC Bank Niyogin Secured Loan Fintech is known for its capability to generate comprehensive, specific and automated customer reports that allow banks to securely cater to their target audience. Niyogin, through its algorithms, offers insights that allow the bank to lend to legitimate customers. IDFC Bank Niyogin Secured & Unsecured Loan Niyogin allows banks to leverage both databases of customers trying to avail of secured and unsecured loans. It offers them insights and risk-assessed leads thereby limiting the risk banks face. The objective is to stroll beyond basic lending/investment options and offer customers a wide range of financial services. To achieve this stance, an ecosystem that is customer centric must be the principal rule. Traditional banks are certitude amongst customers while Fintech owns the reputation of innovation- in such a scenario where the opponents possess different virtues, a collaborative approach will lead to sustained growth rather than a fight to be the lord of the ring!

Micro, small and medium enterprises are playing a vital role in the growth of the Indian economy. They contribute to roughly 30% of India’s GDP while employing a whopping 11.10 crore Indians in various sectors of functionality. Given the fact that the majority, i.e., 65% of the Indian population is below the age of 35, job generation is a very significant part of overall economic growth. Amidst this, the question arises, how are MSMEs treated in India and what is their growth prospect? With the launch and shift towards technology-driven services, MSMEs are regarded as the new worthwhile and remunerative sector by several tech-driven companies. They are not just targeting MSMEs at a broader level but launching customized services targeted specifically at the 63 million MSMEs. These services not only give tech-driven companies a larger audience to serve but also ensure MSMEs expand and contribute toward sustainable growth. Growth chart of Indian MSMEs Source: https://www.livemint.com/opinion/online-views/india-needs-an-ecosystem-that-s-conducive-to-msme-expansion-11629736194548.html As per reports and shown in the chart, the percentage of registered MSMEs across sizes grew by 18.5% YoY. Furthermore, the number of registered MSMEs increased from 2.1 million to 2.5 million between 2018-2020. Micro, small and medium-sized enterprises have all shown positive growth during the mentioned span. Source: RBI Report As per the chart, the percentage share of Urban and Rural MSMEs is almost at par with 49% and 51% respectively. While Urban MSMEs have higher access to financial services, rural MSMEs are more in need of assistance in every aspect of growth. The idea is to nurture and grow the opportunities we present to these and new MSMEs irrespective of their geographical location or the product they sell. This will allow us to launch and handhold initiatives that will ensure these MSMEs are more exposed to opportunities and financial services. A major known stake is owned by trading followed by manufacturing at 230.35 lakh and 196.5 lakh respectively. Keeping this in mind, efforts must be made to focus on aided trading and quality manufacturing to benefit the end users as well. Leveraging automation to enhance operations, use of technology for data analytics, venturing into new markets through e-commerce, providing them subsidies, equipping them with education and so on, MSMEs can be given the assistance they have missed for so long. The regulators can further chalk out formal plans and frameworks to standardize the functions of MSMEs thereby instilling a sense of inclusiveness in MSMEs to strive harder at what they are already doing; building the nation. While building the said framework, regulators can ensure that these policies are inclined towards boosting small production units, compliance is easy on MSMEs and their growth plan is well defined to enable MSMEs to introduce themselves to global markets thereby ensuring financial inclusion for themselves.

Wealth Management has been an invariable part of society. From saving money in piggy banks to saving it in bank accounts, society has always had the ‘Save The Money’ ideology. With evolution, the brick-and-mortar model of savings converted into tech-driven options that we know today as WealthTech where individuals can save and invest through a paperless and digitized process. Since its inception, Wealth Tech has experienced steady adoption and growth. But with the pandemic, the bet on Wealth Tech grew immensely. The diagram shows the immense potential Wealth Tech holds. As per the diagram, by FY25, Wealth Tech is estimated to grow 3 times its current value reaching a whopping USD 63 billion! Changes in investor demographics, a new generation of clients who demand customer experience, convenience and functionality have created a whole new area for investment activities. Decades of traditional working have been disrupted by a paperless and digitization approach. Moreover, this has also ensured financial inclusion by bringing the ‘underinvestors’ into the ‘investor club’. Wealth Tech has propelled a change in the market which ensued as a result of creating a digital ecosystem. Furthermore, by adjoining robust cybersecurity and keeping pace with market threats, Wealth Tech is steadily commenting on its hold in the market. Starting with personal investments, Wealth Tech is leveling up by targeting institutional clients as well. If they achieve a breakthrough, Wealth Tech can experience winning opportunities in the market. Wealth Tech providers understand the changing era and the demand for DIY investment options. Therefore, by allowing the market to have exactly what they demand, Wealth Techies are offering self-serve solutions and enabling the investors to grow their investments, take risks and avail profits at their own decisions and pace. Continued enhancement to meet customer preferences and needs has also acted as a winning point for Wealth Tech. End-to-end process optimization, richer experience, relevance, state of art offerings, etc., has propelled Wealth Tech’s penetration and adoption into the market. Furthermore, by investing in an agile and lightweight architecture, several Wealth Tech companies are investing in an architecture that can be accessed through APIs or microservices. This allows them to update, change specific functionality or deploy new services into the market as and when required. Its minimal yet skilled human intervention at locations ensures a data-driven approach yet a personalized effect. Robo-services help in advising, reporting and wealth planning while human intervention helps in customer acquisition, customer support, client retention, etc. Although Wealth Tech has witnessed steady growth overall, the growth has been well-planned and strong. By creating a digital ecosystem, Wealth Tech companies are leaving very little space for non-fulfillment and collapse.

Ancient civilizations paid in beads or coins that eventually changed to gold or silver coins and today, we have adapted to paper money as a form of payment. This goes on to show that ‘Payment’ has been an integral part of our society since the beginning of time irrespective of the type we considered currency. With the invention of technology affixed with payments, we are switching from a long-followed method; payment in physical form to technology-based payment methods – PayTech. Individuals indulge in digital payments and to a large extent, Gen Z prefers digital payment over physical payment, especially after the onset of the pandemic. Pay Tech has now become the norm with its high adoption rate and as per experts, India is a great market for Pay Tech. Big players like PayTM, BHIM, Google Pay, Apple Pay, etc., are investing heavily to penetrate the Indian market owing to the potential it holds. Contactless cards, mobile wallets, QR payments, the BNPL model, neo-banking, open banking, etc have gained great traction in India. Positive government policies and regulations have added to the widespread reach and adoption of PayTech even in rural India. Interestingly, other countries are also looking up to India and are shaking hands for a successful collaboration. For instance, India and Singapore are set to link UPI and PayNow this year to benefit the population who indulge in international transactions. Blockchain technology and cryptocurrencies have also gained immense popularity due to technology-based payment options. Card networks, acquiring banks, electronic money institutions, issuing banks, payment gateways and payment service providers have all come under one roof to offer an end product to the customers. The government of India is leveraging this interest, adoption and usage to cater to the underserved market, i.e., the rural population. 800 million individuals fall under the category of ‘underserved’ who can be tapped and given financial services through the promotion of PayTech. However, to penetrate the said rural market, the government must adopt alternatives other than the traditional brick-and-mortar model. Financial inclusion comes when every individual is financially abled and empowered; hence, the government needs to leverage technology to achieve the said stance. By ensuring internet connection in rural areas, the government can reach out to the people with a robust and secured digital pathway. Other challenges like awareness, education, human intervention, trust, etc also play a vital role in delaying the penetration plan. However, Fintech is slowly and steadily reaching out to people and enlightening them on basic financial terms. Today, Fintech like iServeU is successfully functioning in rural areas, promoting PayTech through its secured and robust business model where they leverage the existence of Kirana stores to enable people to make digital payments. PayTech has opened big avenues for service providers as well as users. It has enabled service providers to aim, serve and expand to larger populations while offering them ease, convenience, security and experience for users.

The Indian regulators are cognizant of the significance of financial inclusion to achieve economic growth and the fact that to achieve the said objective, equitable growth opportunity through inclusive financial services is primary. India being a diverse country with a noticeable disparity in income and education across levels acts as an opportunity and challenge both, for financial institutions. Where institutions have the liberty to innovate, customize and offer customer-centric solutions, they also face the challenge of reaching the interiors of India. Hence, exposure to financial services has also been uneven in various parts of India where financial exclusion is due to income disparity, financial illiteracy, high transaction cost, infrastructure cost, lack of documents, remoteness, etc. Financial inclusion implies that all adult members of society are given basic personalized financial services that begin with bank accounts, deposits, transactions, etc. For instance, accounts opened through Jan Dhan Yojana for farmers have increased the circulation of money in the market owing to an increase in savings accounts, larger agricultural output due to subsidies and therefore, household expenditure. It is important to note that financial stability plays a major role in attaining financial inclusion, efficiency and sustainability. Despite this fact, it is often neglected in financial development comparisons; partly due to the lack of data required for the analysis. While moderate synergy between inclusion, efficiency and sustainability is expected to give positive output, growing financial inclusion negatively adversely affects financial efficiency while showcasing a favorable influence on financial sustainability. Therefore, through the process, considerable attention must be paid to financial efficiency. At the G20 Summit held in Seoul, South Korea in 2010, financial inclusion was recognized as one of the 9th key pillars of global development and this comes through financial development; an inextricable part of the growth process. Financial inclusion enables improvement in quantity, quality and efficiency of financial intermediary services which can be attained through lower banking costs, greater proximity to financial intermediaries, better institutions for stronger legal rights and politically stable environments. Apart from the stated challenges, a few fundamental challenges are as follows- Lack of skill to use digital technology and services. Implementation without an actual success rate – For instance, Jan Dhan Yojana managed to open a considerable number of accounts that never witnessed any transactions. This proves to be a cost rather than a success story. Being a cash-dominated economy, bringing a paradigm shift to digital adoption may face unusual challenges. Moreover, over 80% of the Indian population work in the informal sector which is heavily cash oriented and therefore, bringing them to digital adoption may take longer than anticipated. Financial efficiency and sustainability is a sequel of financial inclusion which is considered a success when micro-inclusion shows a positive trend in analysis and this trend can be achieved by targeting the bottom of the pyramid which will also help in achieving financial stability in the long run.

Financial inclusion is a key determinant for the development of an economy. However, increasing financial services penetration by setting up Tier II & III cities branches leads to high customer acquisition costs for banks and NBFCs. Additionally, the high cost of delivery, small transaction sizes, lack of credit history, and documentation among rural individuals & MSMEs lead to financial institutions favoring crème customers. This leaves a large untapped opportunity for Fintechs that operate on asset-light tech-centric models to solve the problems faced by traditional banks and make it easier for them to serve lower-income groups. The MSME Landscape At the heart of India’s dynamic business landscape, ~63 million MSMEs contribute 27% to GDP, generating one-fifth of India’s employment. The Indian economy continues to modernize at a healthy clip, thus pushing the formalization of businesses. Events such as the introduction of GST in India have further accelerated this process. Thus far, MSMEs have been operating in an informal setup; however, there is a multi-decadal trend where these MSMEs need to formalize and digitize to remain relevant and continue to grow. The introduction of GST has seen rapid growth in the number of GST taxpayers from 5.7 million in 2018 to 7.0 million in 2020. Further, India’s 70 million retailers want to increase their product offerings and augment their income on the rural front. These numbers are expected to increase manifold in the forthcoming years as they come into the financial inclusion fold. The formalization of this customer group creates multiple opportunities across various technology SaaS products, income augmentation products, and financial services. One of the challenges for traditional delivery models has been how to reach these MSMEs across India given geographical dispersion, slow technology adoption, and low ticket/ transaction size. This will be solved through the technology-led ecosystem and efficient distribution. This is creating an attractive product market gap for Fintechs and is a structural opportunity. How is Fintech helping MSMEs? Fintech, in its endeavor to provide hassle-free financial services, is working towards becoming a one-stop solution for small enterprises to meet their financial needs. The need for businesses to formalize is creating multiple product opportunities. The product stack of Fintech is more wide-ranging than traditional banks. The fintech product stack could be dispersed and range from procurement, SaaS-ERP systems, commerce and payments, income augmentation, wealth, and lending. This allows Fintech to drive greater business visibility, exercise better control, and generate transaction data. We have seen the single-product (lending only) and multi-product Fintech models beginning to scale in India. Our view is that a multi-product allows firms to generate transaction data to solve the lending in a rather difficult segment. The payments have been at the forefront of adoption as B2C-centric MSMEs digitized their customer-facing payment systems. The adoption of UPI is a prime example of the payment revolution in India. In the UPI ecosystem, the growing disintermediation of payments has created intense competition for banks. While the bank retains control of the payment source and destination (along with any related costs), Fintechs (with a 98 percent value market share in UPI payments) dominates client and merchant acquisition and the user experience. On the B2B side, the payment systems adoption rates have significantly increased, driven by internet adoption and the need to move businesses online. Fintech again continues to dominate this segment with payment gateways and aggregator platforms. Fintechs powered with alternative credit evaluation models and transaction data can offer low-cost loans with a technology-enabled asset-light model on the lending side. Rural India landscape India is home to over 1.3 billion people, out of which 900 million reside in rural areas. A major chunk of this population is underserved in terms of basic banking services. Therefore, to promote financial inclusion, the Government introduced various initiatives, most important among them was developing a digital pipeline that involved linking Jan Dhan accounts (currently standing at ~420 million) with Aadhaar cards and mobile numbers (i.e., the JAM trinity). This digital infrastructure acted as an essential backbone for facilitating DBT (Direct Benefit Transfer) flows, adopting social security schemes, and promoting a cashless society by enabling digital payments through RuPay cards. Thus, accelerating the pace of developing an insured, digitalized, secured, and financially empowered society. The current average balance in these accounts stood at around D 3,000/- as of March 2021. However, for the rural population to shift from cash to digital modes of transaction, the need for robust interoperable cash in cash out (CICO) network emerged. Hence, in conjunction with the Government, the RBI launched the banking correspondent (BC) model and set up new brick-and-mortar branches and ATMs in every location to increase penetration in Rural India and expand the banking network. But, given India’s vast geographical base and large population, it becomes excessively difficult for FIs to reach out to every individual. Setting up branches to increase touchpoints involves huge infrastructure costs. On the other hand, the BC model attracted various regulatory requirements like settling withdrawals and completing accounting with bank branches within 24 hours of completing the transaction, which is difficult due to the distance, lack of human resources, and technology. Therefore, access to banking services among the rural population is a problem that persists. Financial Institutions like iServeU specifically target these challenges and the audience associated with them. Their objective is to promote financial inclusion by catering to the said underserved audience. Fintechs leveraging on the BC model Fintechs today, with their innovative business models, provide last-mile links to banks to connect the rural population to modern technology and offer services through local retail stores. They empower BCs through their technology-enabled platforms and are riding on the various initiatives taken by the Government over the past decade like JAM trinity, RuPay cards, and the continuously advancing digital infrastructure – the IndiaStack. On the other hand, banks benefit through this model as the entire setup cost is taken care of by Fintech. Since Fintechs operate on a fully digital asset-light model, it becomes easier for them to serve lower-income groups in deeply… Continue reading The MSME and Rural India Landscape