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Fin-Acce (Acceleration in Financial Inclusion)
Fin-Acce (Acceleration in Financial Inclusion)

February 23, 2022

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Knowing the FinTech and Financial Inclusion:

FinTech is a term that combines the words "financial" and "technology." It can be broadly characterised as technology-enabled financial innovation that leads to new business models, applications, processes, or products, all of which have a meaningful impact on financial markets, institutions, and financial service delivery. As a result, FinTech has the ability to fundamentally alter India's financial services and financial inclusion environment. FinTech firms can help increase competition and accelerate Financial Inclusion in India by lowering costs and improving access to financial services for the underserved, low-income groups, rural, and other underserved sectors of the Indian economy through their innovations, new business models, and applications. According to one estimate, about 90% of India's tiny businesses are still operating without access to formal finance. This category, along with small businesses, can greatly benefit from a partnership between banks and FinTech companies, in which their other payment histories can be used to determine their credit worthiness. It's worth noting that a lot of FinTech businesses have seen significant growth in recent years, and from being essentially unknown at the start of this decade, there are now 1218 entities functioning in India.

 

"It takes more than financial literacy to truly help people work toward a stronger financial situation. Attention must also focus on their behaviours, self-efficacy and helping them develop systems to truly make a positive impact."

-Vince Shorb

National Financial Educators Council CEO

What World Bank says:

According to the World Bank, there are almost 1.7 Billion people in the world who are unbanked as they don’t have access to the banking facilities. Most of these people are from developing nations. Although, the user penetration for mobile phones is quite high in these regions which makes it the perfect destination for FinTech apps and branchless banking. And this exactly, what’s happening, FinTech solutions like Agency Banking and Mobile Money are playing a crucial role in improving financial inclusion in these regions. In the year 2022, this trend is set to rise as innovative technology of FinTech apps will offer banking facilities to the unbanked, weak, and illiterate section of the society. This trend will improve financial inclusion by making access to financial services easy, fast, and convenient for the unbanked.

Our days revolve around a critical question as World Bank personnel working on financial inclusion: what are the most promising approaches to promote access to and use of appropriate financial products for the underserved? A large part of our job entails keeping track of a wide range of global experiences and learnings and incorporating them into our work advising policymakers and regulators. We thought it would be helpful to share our current thinking, which has been condensed into a top-eight list of ways to increase financial inclusion. This list is compiled from the standpoint of policymakers, and it recognises that policymakers have a multifaceted role in financial inclusion, balancing promotion, protection, and stability.

First, a couple of cautions. This is a personal list based on our own experiences. We expect rational individuals to disagree with some of our decisions, which is fine - debate is encouraged. Second, the environment of a country is crucial in determining effective measures to financial inclusion. This list is intended to serve as a basic guide to what has the greatest impact in the majority of countries.

Fintech: A Catalyst for Financial Inclusion | M2P Fintech

Examples of Prominent Players:

Private enterprises have also started programmes to help the country achieve financial inclusion. These private companies devised and implemented schemes to encourage low-income people to participate in development projects. DCM's Haryali Kisan Bazaar, ITC's E-Choupal or E- Sagar, Hindustan Unilever's Project Shakti, and others are among these programmes.

In order to build the economy in a sustainable manner, financial inclusion has become a very major public policy issue in recent years. It is crucial in maintaining the stability and soundness of financial institutions. When financial inclusion is achieved, banks can enjoy good stability.

They can also use electronic payment wallet systems to make payments for goods and services in their own neighbourhoods. The Indian government has launched a number of electronic wallet systems via smartphone apps, including Bharat Interface for Money (BHIM), Aadhaar Pay, and many others.

Electronic wallets, often known as e-wallets, are wallets that can be used with electronic devices such as mobile phones. These wallets are meant to take the role of physical wallets. A consumer can utilise both online and offline methods to conduct cashless payments. He or she will need to install an e-wallet app on their phone and use it to conduct transactions. Mobile recharges, utility bill payments, grocery stores, and e-commerce platforms may all be done with these e-wallets.

Paytm strives to make digital payments simple and quick for its users. Adding your bank account information and linking it to your Paytm profile is a step forward in this process. If you link your bank account to Paytm, you can use UPI to conduct a variety of transactions (Unified Portal Interface). You won't have to enter your bank information every time. You can link multiple bank accounts to your Paytm account. Ensure that your bank account and Paytm account both have the same phone number. It will generate a UPI ID as soon as you finish. Paytm, on the other hand, chooses one of the several bank accounts you enter as your default bank account. However, you can change it as and when as required.

Future Ahead:

This blog, therefore, examines the technological revolution that is reshaping India's financial future, as well as the critical role FinTech can play in advancing Financial Inclusion. It also examines the regulatory actions taken to promote the FinTech movement in India, as well as the framework for India's Regulatory Sandbox and the steps required to help realise the sector's potential for growth and inclusiveness. The blog is based on valuable advices from industry experts and policymakers who are driving the FinTech agenda in our nation, as well as the work of top FinTech firms focusing on promoting financial inclusion in our country. It advocates that financial inclusion be accelerated through innovation, and it offers suggestions for how FinTech may help. The article also emphasises the need of fostering a collaborative ecosystem and the need for banks and FinTech firms to collaborate for mutual gain. It explores how to take use of FinTech's advantages while also addressing concerns about data security and customer safety. The importance of Reg-Tech and Sup-Tech, i.e. technologies that help improve efficiency through the use of automation, bringing new capabilities, and streamlining workflows, is also examined in terms of potential hazards and their mitigation. The key to FinTech success is to maximise the benefits while minimising the dangers. As a result, this blog believes that a suitable legislative and supervisory framework is required to allow the expansion of this industry and guarantee that FinTech continues to help India achieve greater financial inclusion.

“Financial Inclusion helps people lift out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contribution to society.”

-Sri Mulyani Indrawati


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