Fintech impact on Indian Economy and Traditional Banking Systems – Sachin Mandloi

India is still waiting for a right Fintech enabler who can bridge the gap between Urban and Rural India and help Mr. Modi’s vision of Digital India

As I mentioned in one of my earlier posts where I Introduced my blog to all, As on today India (Republic of India) consists of two very different India. One is the Modern India which commutes in Metro Trains, waits for Bullets trains and there is another part of India mainly rural India where people still do not have basis necessities such as electricity, water, roads to connect them to other villages, etc. The Rural population in India according to the World Bank and Trading Economic data was 67% in 2016. The data also stats that in 2016 India’s total population was 1,326,801,576. That means approximately 88,89,57,055 People were living in Indian villages last year.

If the population of the world was 7432663275 in 2016, then 888957055 amounts to 11% of total world population living in Rural India.  I am not trying to be a mathematician here, neither trying to represent or prove any numbers. I just want to present a simple statistical fact; a large portion of the world’ current population is in India and within India a large number and percentage of people live in Rural India what is being known as developing India.

What this means ? Well, the above number could mean a lot to a different people from different perspective, but one thing is sure that they do attract a wider audience around the globe for aplenty of reasons.

With India’s Prime minister Narendra Modi’s digital India campaign on the roll, which wants to transform the entire ecosystem of public services through the use of information technology, the vision is also to transform India into a digitally empowered society and knowledge economy which also includes transacting through digital mediums.

While this India’s rural market is still unorganised, unbanked, out of the financial accounting systems and many people do not have the bank accounts yet. The first step towards enabling them to transact digitally should be to bring them in the banking channel. Mr. Prime minister has made numerous efforts and launched various schemes to tempt people/force people to open a bank accounts. Demonetisation, revoking subsidies of people who do not have a bank account or directly submitting the government subsidies in to the bank accounts, zero Balance Account through PM Jan Dhan Yojana, etc are the schemes and government policies which literally forces/tempts people to open a Bank account. The bank account scheme is a pet project of the PM, and the PM had asked both government and private banks  support the plan.

Mr Modi announced the programme in his first Independence Day speech on 15 August after sweeping to power with a landslide victory in general elections in May, four years have passed since then and I do not see much difference on the ground apart from some voices in favour and some in oppose, while the ground reality and data says otherswise. While the government banks have their own financial/institutional/etc  hurdles to solely work on this, the private banks are too busy keep their existing customer base happy and attracting new corporate customers where the big money is. Either of them do have the will and the resources to enable and bring the Rural India to digital platform.

 

The urban India and people carrying debit cards/credit cards also have their own challenges transacting using the digital Money with additional charges levied by banks , everytime they use their card to make a purchase. The GST on Credit Card payments is another ghost which haunts these card users. The digital transactions are not yet user friendly for both shoppers and merchants and there is a lot which needs to be done there in order to facilitate hassle free transactions.

I believe the only way to bridge this gap is through the public/private fintech solutions. FinTech is an industry comprising companies that use technology to offer financial services. These companies operate in insurance, asset management and payment etc. We have witnessed a lot of fintech companies entered in the markets in recent past years and some of them really tried to deliver what was expected from them.

In the competition for India’s financial services future, fintech companies have scored thrice when the traditional banks are still struggling to retrieve the ball they grazed into their own net. It’s just the start of what looks like a blooming tough competition for traditional banks.

Banking had existed when today’s banks were not there and it will exist even if today’s banks don’t, A right financial technology solution can altogether eliminate conventional banking. We see something new in the fintech space every day. Every new introduction is considered to be disruptor but later on it is considered as innovation and an enabler.

There is a long way to go before this gap can be filled and India becomes a true digital nation. The only vehicle which can deliver this is technology which is affordable, simple yet complex enough to handle the peculiar requirements of every Indian citizen and institution in the most cost affordable and convenient way.

 

Sources:

https://data.worldbank.org/indicator/SP.RUR.TOTL.ZS?end=2016&start=2016&view=map

https://tradingeconomics.com/india/rural-population-percent-of-total-population-wb-data.html

https://en.wikipedia.org/wiki/Demographics_of_India

http://digitalindia.gov.in/

http://www.bbc.com/news/world-asia-india-28962762

http://www.indiablooms.com/ibns_new/news-details/N/3777/modi-launches-scheme-to-ensure-bank-account-for-everyone.html

 

– Sachin Mandloi

Author: Sachin Mandloi

I'm a technocrat and entrepreneur. I've co-founded a couple of weird companies and will probably co-found a couple more.

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