Fintech-NBFC links can boost inclusion

By Rajiv Sabharwal

Financial inclusion is undoubtedly one of the most critical drivers of economic progress and is essential for our country to develop into a booming economy. The government is creating a robust ecosystem to meet the needs of the underserved. Key initiatives such as Jan Dhan Yojana, Pradhan Mantri Mudra Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana and Atal Pension Yojana enabled the masses to have bank accounts, obtain insurance protection, pensions and loans. In addition, the simplification of PAN acquisition procedures, unique identification (Aadhaar), simple tax procedures through GST as well as Digital India have contributed significantly to the country’s financial inclusion goal. Financial institutions, including NBFCs, are also advancing the mission by addressing some of the key challenges related to financial services for underbanked and underserved populations.

Technology has allowed NBFCs to reinvent their business model. The NBFC sector has been at the forefront of digitization and widespread adoption of technology in the financial services industry. NBFCs large and small have digitized their processes, business functions, lending cycle and built dynamic underwriting models. NBFCs are agile and deliver with speed and efficiency by leveraging digital tools and platforms. This, in turn, has enabled NBFCs to expand their reach and offer their services to the unbanked population using tools like eKYC, e-signature, Aadhaar-based verification. Additionally, Chatbots and Voicebots in regional languages, RPA, cloud computing, AI, and ML help businesses build a deeper connection with customers and speed up processes that can improve the overall customer journey. NBFCs are also taking advantage of India’s growing smartphone and internet penetration by offering mobile financial service platforms in vernacular languages. These vernacular platforms have safe delivery systems designed to serve underserved segments in different regions.

The population of India is large and diverse. keeping the product design simple and tailoring it to the complex needs of a low-income individual or family promotes financial inclusion. For example, by creating simple and user-friendly mobile applications, NBFCs enable rural people to obtain loans in minutes and without hassle. In addition, products focused on micro-savings help people to invest so that they have liquidity and financial security. Over the years, NBFCs have invested in local distribution networks and products to make financing easily accessible to the most remote places in the country.

The rapid use of all forms of technology helps NBFCs create financial education programs. While technology is crucial for accelerating financial inclusion in India, transparency is important for building trust. Teams that work hard to create financial awareness initiatives, engage with individuals, and earn their trust are responsible for the last-mile connection that makes financial solutions viable. These teams have insight into the challenges people face and the opportunities that can be created. Information and data analysis tools are then applied to create specialized products to ensure the development of the region. In addition, education and the right of access to financial solutions allow the vulnerable fringe to move away from the pitfalls of unscrupulous debt. Financial awareness programs are designed to meet different needs, from helping merchants and manufacturers understand the importance of a credit score or how a retirement plan works. These training sessions are delivered through online platforms or in in-person class formats. A rapprochement with local authorities reinforces their effectiveness.

Currently, there are nearly 10,000 NBFCs spread across the country, with almost 25% of banking sector assets. However, financial inclusion must be a collaborative effort and therefore NBFCs are partnering with emerging fintech companies to create additional efficiencies and create smarter products and services. Collaboration with fintechs will help NBFCs deepen their market penetration and increase their bottom line. This can be seen with the growing interest of players in both segments to offer quick and inexpensive financing solutions. In addition, collaborative efforts are made to support upskilling and retraining programs. The Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) program partners with technology companies to achieve inclusive education, create job opportunities and help bridge the digital divide.

Fintechs are also helping NBFCs connect with loan seekers from diverse backgrounds through operational automation and fraud detection tools. A big beneficiary are MSMEs. MSMEs are the growth accelerators of our economy, instrumental in job creation, and are also well connected to the rural economy as more than half of MSMEs operate in rural India. The collaboration between NBFCs and fintechs has enabled the growth of the MSME lending space by making credit affordable. Digital financial inclusion will continue to evolve in India and we will contribute to the country’s growth journey. An innovative technology-driven financial ecosystem will drive inclusive growth, reduce income inequality, and enable people to be economically capable and strong.

The author is Managing Director and CEO, Tata Capital Limited

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