By Yamini Agarwal

The fast pace of technology has enabled India to dream of and achieve the goal of universal financial inclusion. Fintech has been able to provide convenience, user-friendliness, speed in communication, transfer of information and moneyand has grown by simplifying the process of accessing financial services with user-friendly technology. Networks play a key role in their spread. It is important that people are brought on to the same platform for technology, data and money transfer to seek business success and induce productivity for the common man, firms, and the government.

Fintech has changed the manner in which the common man is able to transact—24X7, any amount of money, and in real-time. The JAM trinity has made the financial landscape accessible at the click of a button and in an affordable manner. The difficulties of accessing the financial landscape for borrowing, lending, seeking protection, or investing has been addressed through a large set of fintech firms that have emerged in the past five years. This has gradually enabled small businesses to integrate themselves with large aggregators to offer services on platforms like Amazon, Flipkart, and so on. It has also enabled small and medium enterprises to seek and gain new markets through the internet.

The common man can now access lending from others through crowd-funding for an ailing child, spouse or parent. A businessman can dream to get lending from peers. Earlier, the investments on bank-branches and personnel, the distance from the financial institution, need for physical submission of KYC documents, the need to maintain a minimum account balance and the cost of seeking your own money through cheque-book/ATM charges made cash an easier medium for transactions, denying the common man access to the gamut of financial services available. The government’s Saubhagya Yojana, ‘one-power-grid, one-nation’ and optic fibres to every village programmes provide access to electricity and digital infrastructure, and thus ensure that every person in rural areas has access to financial institutions, development and financial services.

This has not stopped the government from offering financial inclusion and welfare schemes like crop insurance for farmers, the Kisan Credit Card, the Atal Pension Yojana, Aayushman Bharat or even the Jan Dhan Yojana to the poor and needy. The social inclusion of the excluded groups has been possible through technological innovation in the financial sector. Momentum gains can be identified with the fast-paced reach of financial inclusion through fintech which, when added with the JAM trinity, can create manifold opportunities for development.

Initially, many countries believed that microfinance institutions could be the only means to achieve financial inclusion, but fintech has changed the entire game by including those who could save little, operate on small receipts and payments. A total initial investment for utilising fintech-governed opportunities will need to focus on digital literacy, financial literacy, electricity and mobile-phone access. Aadhaar has also given us the ability to fulfil KYC requirements, with which, slowly and gradually, everything can be mapped to an individual to unlock his betterment, from credit to spending habits. Fintech has a substantial advantage in terms of its the ability to help convert the informal economy into the formal economy, allowing people to seek benefits of public delivery systems for their livelihoods. It is a well-known fact that, for the want of documentation, greater access to funds, and sufficient background, people slip into the trap of poverty as they do not get opportunities to utilise the benefits of the formal economy. The socially-challenged groups are a common example of such exclusion. Fintech companies, with their innovations and delivery systems, make the access to the financial landscape free of discrimination as human interface that enables exclusion is limited.

This would further give rise to formal economic systems and may reduce many social evils like black money and corruption. With the fast-changing pace of financial services, people prefer to transact through fintech as it provides safety and security of transacting as well. However, regulatory endeavour is often not fast-paced enough to keep up with changes in technology, which means the potential of fintech has to be considered along with regulatory risks that may emerge later. Besides, digital frauds continue to haunt the credibility of the financial landscape. The volatility from a player becoming bankrupt can grow to becoming a systemic risk to the entire financial system.

It is important that regulations are stringent to maintain the credibility of fintech and the financial system in the eyes of the common man. Technology, which adds to speed of communication, information and transfers and convenience, needs to be well-regulated to protect the consumer from any adversity. Financial literacy levels and cyber security need to be strengthened to ensure more trust and credibility in the system. Data protection and sovereignty continue to challenge the regulation of fintech. Yet, despite the challenges, it has manifold benefits. It has made the financial system more efficient and accessible, which has empowered the common man.

The author is Director, Bharati Vidyapeeth (Deemed University) Institute of Management & Research, New Delhi