The rapid growth of fintech players has accelerated the growth of financial inclusions. New technologies such as AI and ML will adopt the consumers in coming years as per the experts. In the World Bank Group (WBG), financial inclusion is considered regarding the "Access, Usage, and Quality" of financial services.
Fintech can bring down prices while boosting accessibility and speed, enabling more specialized financial services that can expand. 1.2 billion adults have had access to financial services in the past ten years. This indicates that the unbanked population was reduced by 35%.
However, 1.7 billion individuals still lack access to financial services, but fintech is making it simpler and easier to opt for technical financial services.
What is Fintech?
Fintech is a financial technology connected with the term for technology such as augmenting, streamlining, digitizing and disrupting traditional financial services. Fintech is about algorithms, software and applications for both desktop and mobile.
However, it includes hardware such as internet-connected piggy banks in certain cases. Fintech platforms enable routine chores like check deposits, money transfers between accounts, bill payments, and financial aid applications.
Governments have used digital delivery methods to quickly and securely send cash transfers and emergency liquidity to vulnerable consumers and enable the transmission of funds with little direct physical interaction. In addition, the usage of technology may completely revolutionize international remittances.
So, fintech trends are used by businesses to process payments, conduct e-commerce, handle accounting, and, more recently, assist with government aid programs like the Payroll Protection Program (PPP).
After the pandemic, more and more businesses are turning to fintech to accept contactless payments and other technical advancements.
Role of Fintech in Financial Inclusions
Fintech is making it easy for many people to use financial tools. Apart from mobile money, Fintech has paved the way in sectors like cross-border transfers and payments from the government to individuals. Following is a description of the role of fintech in financial inclusions:
Improved Credit Access
Fintech businesses, in contrast to traditional banks, need little documentation for lending money. This makes borrowing simple and faster. Fintech companies utilize AI to analyze clients' risk with little to no credit history by using factors like income and spending patterns.
This makes microfinance services available to small-ticket borrowers and neighbourhood businesses for significant purchases and capital investments.
Innovation with Speed and Compliance
For the most part, fintech companies have fewer compliance requirements and commitments than their traditional counterparts, such as capitalization, identification verification, and consumer complaint redressal.
For instance, to encourage digitization and cut down on client acquisition costs, the Reserve Bank of India (RBI) permitted fintech companies to use e-Aadhaar verification and video-know-your-customer (KYC).
Fintech companies may quickly roll out new features and products by evaluating new innovations in safe sandboxes while ensuring compliance with laws and data protection. This makes it possible for Fintech businesses to offer cutting-edge goods and services quickly and safely.
Promotes Cashless Economy
Fintech advancements allow for quick and secure electronic payment methods. With this, Fintech companies can immediately authenticate and transfer digital payments, all due to AI's usage.
Online payment methods offer more flexibility, convenience, and ease, enhancing everyone's access to basic goods and services. Such as Customers can order LPG cylinders online and pay their utility bills at home. Besides this, the fintech and corporate world play a vital role in digitalization across the globe.
Extending Financial Services to the Most Remote Areas of the Nation
Fintech companies can reach out to remote locations where physical bank branches cannot be established because of increasing internet usage and advancements in online banking.
Fintech companies enable people in rural places or low-income, unbanked persons to save and develop their money. This also helps take advantage of government programmes and assistance by giving access to simple products or services, including financing or savings instruments.
Disruptive Potential in the Traditional Finance and Banking Sector
Fintech companies are pioneering new territory in the formal finance sector through the creative and inventive use of technology in the loan process. Fintech businesses boost efficiency and expand loan availability using machine learning algorithms and other data sources like social media footprints, call logs, purchase history, and utility service provider payments.
Additionally, Fintech companies' approval and disbursement of loans happen considerably more quickly.
Future Fintech Prospects for Financial Inclusion
It is impossible to exaggerate the significance of MSMEs as an important economic force and a key provider of jobs. Moreover, Fintech can reach out to a big market of underserved populations.
Innovation for the mass market is urgently required to overcome issues like restricted regulatory policy and lack of financial and digital literacy. Additionally, maintaining relationships with SME clients notwithstanding defaults is a responsibility that falls solely on a Fintech company. The issue of payment delays in financing, particularly in the MSME sector, is comparable to an occupational hazard that cannot be eliminated.
However, maintaining resiliency, keeping an eye in the broader picture, and ensuring that collaborations continue are the prime elements of the process.
Thus the term "fintech" is new and has grown in acceptance since 2015. A common misconception about this term is that it only refers to technology and tech-savvy people. In reality, this phrase refers to the blending of financial services offered by diverse clients with technological breakthroughs.
In this case, the combination of technology with financial services implies that a number of platforms and applications are being created to make it simple for you to use financial services. For instance, you are applying for online personal loans or business loans and much more. With this you should also know about fintech startups as a future service for banks because it is a boon for web banking.
Usually, customers are less inclined to accept new technology since they have confidence and trust in the existing banking system.
Customers' satisfaction with privacy and security issues is a prerequisite for adopting new technology. Although it is simpler and less expensive than using traditional methods but still takes some time to gain the trust of the clients in pursuing Fintech technologies.
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