Can FinTech Reach Rural Communities?
Can FinTech Reach Rural Communities?
FinTech is one of the most trending financial ecosystems in India. Its market size is estimated to reach $150 billion by 2025. It has given a 180-degree turn to how Indian citizens and companies view their finances. But how far does this sustainable financial ecosystem reach the rural population? India’s rural population is almost 65% of the total population. Is this financial trend that is so technologically driven ready to be delivered and taught to the diverse landscape of India? The cornerstone of FinTech is making financial transactions sustainable and easier for the consumer and the seller. But how does this take place in a society where more than 50% of the population possibly lies on the lower spectrum of the digital divide? The truth is, that true economic growth cannot happen unless one uplifts the rural citizens of the nation.
FinTech is ready more than ever to tackle the rural landscape!
Rural India has previously faced numerous financial challenges in accessing traditional banking services. The geographical challenges and the lack of banking infrastructure led to millions feeling abandoned when it came to addressing one’s financial needs. Coupled with this was a lack of awareness about insurance, credit, and savings account services. But as the FinTech community rises to make financial management easier, it hasn’t forgotten the growing rural population of India. Step by step, FinTech has started to break down the barriers to financial inclusion in rural India.
Demonetization and the COVID-19 pandemic acted as ushers for India to accept the importance of digital currency and finance. But while the urban population readily adapted to the change, rural India has a long way to go. But FinTech has already built the foundation by creating simpler and easier banking models that make customers feel secure. What helped bridge the gap was the phygital model.
Phygital is a combined word that stands for physical and digital. It is a two-in-one experience that seeks to satisfy its customers and get the best of both worlds. It is often called an omnichannel experience and is designed to improve the customer experience. It is this model that Fintech applies very well to India’s rural scenario
The biggest need that FinTech leaders felt was necessary to grow their financial ecosystem in the rural world was to gain their trust. They achieved this by teaching the local shop merchants, or nanoproneurs, about digital transactions. These merchants, who are part of the village and have gained the local’s trust, further help the locals build their financial awareness and help with digital transactions, whether it is through an app or a website. These local shops, now turned into digital smart banking points, exemplify the phygital model that bridges the gap between a rural farmer and his bank.
To further enhance financial inclusion, India launched 75 digital banking units in 2022 across different rural areas. This helped rural farmers and business owners gain financial literacy, and be aware of and use new and updated government schemes. It also allowed them to further have the privilege of securing small loans. Moreover, here are two innovations by FinTech that helped bridge the gap.
- Digital Banking: Unstructured Supplementary Service Data (USSD) and Aadhar Enabled Payment System (AEPS) enabled easier bank transactions. As rural areas usually have low internet connectivity, USSD allowed the rural locals to conduct transactions without any internet connection. AEPS further secured payments by allowing fingerprints or an Aadhar-enabled security system to help the unbanked areas have an opportunity in the digital ecosystem. According to the National Payments Corporation of India (NPCI), AEPS transactions grew by 45% in rural India.
- Financial Literary Applications: The National Bank for Agriculture and Rural Development (NABARD) has developed apps like Spice Money that increase financial literacy among rural business owners and teach them how to handle their finances better in a changing ecosystem.
3 unique startups that paved the way for FinTech in rural India:
- BharatPe is an iconic financial startup that keeps the local businessmen of towns and villages in mind. It provides services such as UPI payments and even loans to merchants and small business owners that are disbursed in 24 hours with less documentation.
- BankSathi majorly focuses on Tiers 2 & 3 of the Indian population and the remotest of locations. The company has a group of financial advisors and has partnered with numerous financial institutions, such as HDFC Bank, Axis Bank, and so on. It provides services such as bank accounts, credit cards, loans, and demat accounts.
- KhataBook is a digital ledger that assists small business owners in keeping track of their transactions. It has a simple interface in a variety of languages and is present in more than 700 locations in India. This allows small business owners to have a space in the digital economy and use technology to make their businesses more efficient.
Fintech companies have the potential to revolutionize rural communities by providing self-employment options to people residing in remote areas of India. This will positively impact a greater portion of the population that has access to digital financial services.
Redefining the banking industry in India, rural fintech is poised to elevate its offerings by bringing e-commerce and a plethora of other services, such as healthcare, to the doorsteps of numerous more communities. With rural fintech reaching all of India, it can meet all of the digital needs of rural populations. Currently, the goal of rural fintech as a whole is to further empower underbanked and unbanked individuals financially and digitally.