By Nishant Jain
Over the past few years, Fintech has become an integral part of the financial ecosystem in such a way that we can’t imagine payments and financial transactions without the new-age fintech products. With the onset of Digital India, followed by demonetization, and then the black swan event of the pandemic, there has been a transformational shift in the way India pays.
Today, when you step out in the retail markets, customers paying via smartphones is a common sight. The story was a lot different a few years back but the advances in digital finance have ensured that one can make payments at a retail outlet, accept payments, and transfer funds to anyone across the country, in less than 30 seconds, with just a few screen taps. While the initial years had witnessed slow adoption, the last 3-4 years have seen an unprecedented rise in the adoption of digital payments, with UPI becoming the preferred payment medium for millions, across locations and age groups.
The numbers say it all. As per the Economic Survey 2023, Unified Payments Interface (UPI) witnessed mass adoption and accounted for 52 per cent of the total 8,840 crore financial digital transactions in FY22. The survey said that UPI accounted for 17 per cent of 3,100 crore of digital transactions in FY19, which had increased to more than 27 per cent of 4,600 crore digital transactions in FY22. Additionally, India’s adoption rate of fintech stands at 87%, while the global average is 64%. Infact, UPI transactions were at a record high in May 2023- clocking Rs. 14.3 trillion in value and 9.41 billion in volume.
Though initially, it might have been just another ‘good to have’ option, digital payments have emerged as a preferred option for many- due to increased trust and convenience. Also, numerous fintech products emerged as a game changer for the underserved and unbanked, as many startups focused on building products to address the credit gap faced across businesses and individuals.
The role of India Stack
The digital infrastructure has played a vital role in enabling financial inclusion across the country. The India Stack has been instrumental in widening the reach of financial services, across the length and breadth of the country. A digital ID card has lowered the cost of confirming people’s identities. The JAM trinity has enabled millions to be a part of the formal economy. Also, open APIs have fueled innovation and enhanced the growth of new-age companies. Additionally, tokenization and 2-step verification have gone a long way in building trust. The India Stack has played a vital role in enhancing the adoption of digital payments across the country.
The expansion of digital payments, facilitated by the stack, is an important enabler for businesses across the smaller towns as well as rural India. It has not only brought businesses in the fold of formal economy, but also enabled better access to credit.
The need for Financial Inclusion
It is important to understand that without financial inclusion, an economy will be essentially underutilizing the opportunity that it actually has. The wisdom is in realizing that a truly prosperous economy is not in gatekeeping financial access, but in empowering as many as possible.
As India works towards promoting greater financial inclusion among unbanked sections, building products that leverage the power of technology and digital, fostering an enabling environment for fintech companies, as well as having a collaborative partnership with the traditional banks and financial institutions, can play a vital role in realizing this objective much faster.
Fintech companies leverage new-age technology to build products that can help the small/ emerging enterprises to grow faster. While digital payments is a proven success story, fintechs are also working closely to enable credit access to unbanked and underserved businesses as well as consumers. Fintechs have redefined the lending process and leveraged technology to offer a more digital experience, unlike the traditional process that required loads of paperwork and multiple visits to the banks. Since they don’t face the roadblock of having a physical infrastructure and have a digital offering, they are able to reach out to those who need credit, irrespective of their location.
Over the last few years, numerable startups have rolled out modern, easy, and innovative products to support a growing economy, while simultaneously enabling people with basic financial literacy to make money, save and invest. People who believed that they would not have access to credit, except the one from friends, family or money sharks, have now been able to realize their dreams- be it a tea vendor opening his own dream tea shop, or a generational tailor extending his business to be a showroom! Each of these success stories adds to the wider picture of a thriving economy.
Access for All!
Finance has always had an air of aspirational otherness and unreachability, especially when it came to the section of society who had no access due to location or were limited by the spew of complicated documentation. It has always been a gated community, but fintechs have brought about a change with their digital-first offerings, highly personalized intuitive services, and innovative underwriting techniques.
Fintech has managed to do good work around bridging the gap between the classes and empowering the willing to make big power moves. With easy lending, increased flexibility, simple documentation, and the introduction of digital payments, more and more SMEs and entrepreneurs are breaking the barrier and growing their businesses. Financing budding potentials, empowering the unbanked and making financial education accessible and easy are showing results already. However, it’s less about the results, and more about granting access to anyone who needs it, and for once, the exclusivity of financial access has paled and financial inclusion is here to stay. With time, more progressive leaps, and increased economic maturity, fintech seems to be heading in a direction of promised growth and economic empowerment.
(The author is Nishant Jain, Chief Business Officer, BharatPe, and the views expressed in this article are his own)
