FinTech's scoial disruption in India

Can FinTech be a tool to address social issues like poverty and inclusion?

A resounding YES is the answer to the growing disruption in the market. Financial services and inclusion have the potential to address major social problems and issues in many countries including India. Digital financial services can reduce the cost of receiving payments, put the power in the hands of the person (irrespective of the gender) to manage his/her finances, reduce corruption.

Look at FIndex computed by world bank.

• 69% of the adult population own an account
• usage of mobile accounts have been very widespread in the low income countries.
• Half of the 1.7 billion unbanked adults live in developing countries China, India, Bangladesh etc.
• 56% of the unbanked adults are women.

One of the NABARD surveys says the following w.r.to our rural sector

• 88.1 % of the households have a bank account.
• 33 % households have more than one savings account
• 26 % of Households have women with institutional (including Self-Help Groups) savings account
• About 26% of agricultural households and 25% of non-agricultural households reported to have been covered under one or the other type of insurance
• More than half the agricultural households in India have outstanding debts

Digital FinTech, in India, through manifestation in multiple ways, is disrupting the Indian markets, to increase financial inclusion. That alone is not enough. We need to have a proper eco-system of payments, regulations, infrastructure and consumer protection mechanisms. More important, these digital pushes should result in tailored services for the marginalized.

FinTech brings in more efficiency and enables roll out of customized products and services. It also can act as a platform for the new players and bring in more competition. The cost of remitting through mobile phone is more than 50% cheaper than conventional method. But, the challenge lies in understanding and monitoring the risk to the financial system as a result of FinTech disruption. A consistent and predictable legal and regulatory framework is the need of the hour. Many countries like Mexico, Colombia, Indonesia have passed new regulation to support the adoption of FinTech and foster innovation. Some countries like ours are going for “Sandbox” approaches to test and learn. Whatever be the case, a clear framework is required that will not only address current challenges but help bring FinTech to the doorsteps of every citizen.

India has the potential to leap frog in this space. India should take the opportunity to incentivize the players to sustain innovation and help establish interoperability with the rest of the world. Data protection, peer-to-peer lending, mobile money, access to payment infrastructures for non-banks, robo-advisory services, algorithmic/automated trading, and lending activities using artificial intelligence and machine learning offer tremendous opportunities to reducing poverty, increasing women empowerment and promoting shared prosperity with the appropriate regulatory framework in place.

These are interesting times.