Rural consumption: how fintech ‘bagging’ can bring financial services to the bottom of the rural stratum

Financial products intended for last mile access must be small and short-lived, aimed at meeting the specific needs of the population.

Mahatma Gandhi’s concept of Gramodaya, Antodaya and Sarvodaya captures the true essence of all economic progress and development. These terms can be roughly translated as the rise of rural India, the last mile and the rise of all. Today, this is especially true than ever because for India to shine brightly, rural India must move forward. It is becoming increasingly clear that “inclusive growth” is essential to facilitate our country’s journey towards economic progress. India, home to one of the most fragmented banking systems, has deployed new age financial startups to expand its reach, pushing the financial inclusion agenda in the process. However, in a largely geo-distributed population like ours, financial inclusion has been a huge challenge due to factors such as: socio-economic influences, inhibition of technology adoption, distribution costs and exploitation and lack of inclusive growth, among others.

Most of India’s population lives in villages, it is imperative that a strong network is in place – both digital and supported – to enable beneficiaries to benefit from it. People living in rural areas have a particular need for financial services for a range of products – such as easy access to savings, credit, education, working capital for entrepreneurship and for social reasons. protection like health insurance. Several constraints such as the high cost of financial infrastructure in these areas, lack of financial literacy and high transaction costs also discourage people from depositing savings, thus depriving households of the opportunity to build up assets. financial. The key is to allow banks to be independent of their location, ensuring that no matter where people are, they have access to financial facilities.

Fintechs are driving the inclusion wagon with their technological solutions. They are quickly becoming the face of opportunities for financial inclusion, especially in an economically diverse and developing country like ours. The growth story of the fintech industry in India – due to its capabilities and agility – points to a huge financial services market opportunity that has not been exploited. Technological innovations aimed at breaking down the barriers of the urban-rural divide have the potential to bring more shy people into the realm of financial inclusion. With a growing number of startups, a mature ecosystem and a favorable government position, it goes without saying that fintech is here to stay and grow further. The idea is to push the fintech industry down a path where it should make a difference – beyond an easily accessible market for tech-savvy urban customers.

The barrier of accessibility in underserved areas is largely addressed by branchless banking – through correspondent business (PO), point-of-sale terminals and mobile banking. Their use has only intensified since the pandemic – with more and more people adopting channels like the Aadhaar Activated Payment System (AePS) or micro ATMs to withdraw cash and access DBT funds ( direct profit transfer) in the peak months of foreclosure when movement was severely restricted.

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To generate appeal within the rural stratum, governments and providers must closely monitor adoption patterns and understand the needs of clients to bring them into the realm of financial inclusion. One of the main obstacles to their access to formal banking channels is their irregular income flow which prevents them from obtaining bank loans, saving for interest and even purchasing insurance policies, which usually involve high premiums. Bagging services is one way to get to the bottom of the pyramid – tailoring financial offerings to be affordable to meet future goals. This will allow communities outside the financial fold to save, borrow and invest safely. This will spare them for future contingencies and unscrupulous lending channels, which often push them further into the debt trap.

Financial products intended for last mile access should be small and short-lived, aimed at meeting the specific needs of the population. Bagging isn’t a new concept – it has already transformed the consumer goods industry (think shampoo bags) – helping services move from luxury to affordability. Through these “micro” sizes, a systemic change can be made in their mindset when it comes to insurance, investing and even lending. With the help of APIs and plug-and-play platforms, they can serve a huge segment of the population with low value, high volume personalized transactions. Take the case of telecommunications; smaller refill packs are in demand compared to higher value refills.

Accessibility, user-friendliness, user-friendliness, interoperability, rapid decision-making and rapid processing are key factors in delivering financial services in a bag. It would also require a change of approach in the mindset of suppliers, moving from a push-based offer to a pull-based one. The process will help meet specific and contextual needs by modifying the commodity offerings.

This cohort, although often underbanked and unbanked, but very ambitious, is exposed to trends through internet connectivity and smartphones. At a time when large corporations have been notoriously hit by a series of defaults, which are typically recipients of large bank loans, rural areas are emerging as the rescuers of the economic flow by stimulating consumption and it’s on the way. banking ecosystem to ensure that it has a multiplier effect. Ultimately, it is only through Gramodaya and Antyodaya that we can bring about an era of Sarvodaya. And bagging is the way to go!

Anand Kumar Bajaj is the Managing Director and CEO of PayNearby. The opinions expressed are those of the author.

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