Topics In Demand
Notification
New

No notification found.

Driving Financial Inclusion through FinTech in India
Driving Financial Inclusion through FinTech in India

February 26, 2024

143

1

Financial inclusion refers to the availability, accessibility, and affordability of financial products and services to all sections of society: individuals, communities, and businesses, particularly to underprivileged segments who have been excluded from the formal financial system. The government of India has brought in multiple schemes to enhance financial inclusiveness in India, viz., PM Jan Dhan Yojana, Atal Pension Yojana, PM Mudra Yojana, PM Suraksha Yojana, etc. These programs have worked quite well, as evident by the three-fold increase in PMJDY accounts from 14.72 crore in 2015 to 50.06 crore in 2023.

The financial sector of India is presently undergoing a significant transformation with the expansion of financial technology (FinTech). FinTech refers to the usage of advanced technology to improve financial inclusivity by empowering individuals’ access to financial products and services. Widespread internet connectivity, increasing use of smartphones, and government schemes have worked in favor of FinTech startups. These FinTech companies are continuously striving to make the process of offering financial services to clients as simple as possible, at minimal costs. Therefore, decreasing customers’s expenses, promoting savings, or allocating the saved amount to other purposes. 

One of the most innovative solutions in the financial system is in the digital payments space. In this system, a user can make cashless payments through e-wallet apps on their smartphones. The customers also enjoy cashback, coupons, and other referral bonuses, thus further incentivizing people to go cashless. It is seamless and instant. According to NPCI, UPI crossed 10 billion transactions in August 2023 for the first time, signifying the fast adoption of digital payments among its people.

In rural India too, FinTech companies have enabled these people to open bank accounts or avail loan facilities via quick banking procedures and lesser fees and charges. Some banks have introduced mobile banking vans and trucks into remote areas where transportation and communication still remain a luxury so that people in such regions can access financial services.

 

                                                                        Source: RBI

AI and ML are playing a pivotal role in identifying the underserved parts of society and creating a personalized financial product or service. Let’s take a look at a few cases where AI and ML are being deployed to boost financial inclusion:

  • Credit Assessment: AI-based credit scoring algorithms analyze mobile usage patterns, payment of utility bills, etc. This way, those who were earlier ineligible to get loans could now be included. Thanks to AI!
  • Digital banking and chatbots: digital platforms for 24*7 banking (fund transfers, bill payments), answering queries. In India, approx. 80% of banks have already adopted AI chatbots in the banking sector to converse with humans. (Annual report by RBI 2022-2023)
  • Personalized financial advisory: understanding income and savings patterns, investment preferences, degree of risk aversion, etc. to provide a tailored solution for financial planning. (E.g., mint, goodbudget, wealthfront)
  • Regulatory compliance: natural language processing (NLP), optical character recognition (OCR), to automate the KYC process, reduce paperwork, and ensure smooth on-boarding of customers. Therefore, enhancing the scalability of financial services.
  • Banking the rural segment: The rural population is more conservative in adopting financial services compared to the urban population. With more than 65% of the population dwelling in rural regions, their participation in the financial system becomes essential. AI-based predictive analytics is playing a crucial role in helping banks understand the financial needs of rural people and accordingly provide them with products and services.

The objective behind financial inclusion is to promote a habit of saving among people, especially the poor, who lack proper facilities to save their hard-earned money. Money in the bank also tends to decrease corruption and improve the accessibility of economic resources, thus contributing to the growth of the nation.

However, there are some challenges in the FinTech sector, such as cybersecurity and data privacy, financial illiteracy, that demand solutions. Undoubtedly, FinTech is transforming India’s financial environment, encouraging financial inclusivity and economic expansion. To fully realize its potential with the safety of the people at its core, the government and key market players must collaborate as the industry evolves.


That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.


© Copyright nasscom. All Rights Reserved.