In 2016 the World Bank stated that there are 2 billion people in the world who do not have access to the formal financial system and more than 50 percent of the adults in the poorest household don’t have access to banking services or any other form of financial services. Fintech can fight many troubles of demonetization.
Out of the world population India is home to 21 percent of the world’s unbanked population. Though a considerable increase was seen in the number of opening of bank accounts after the PM rolled out the plan of financial inclusion through Pradhan Mantri Jan Dhan Yojna. Still there is a lot of scope for improvement in terms of providing access to the basic banking services in the country.
Due to the lower penetration of the banks, the unbanked population mostly the poor’s and the ones residing in rural geographies do not go through the formal way and depend on cash transaction. This lowers the amount of currency circulation which in turn has its own economic and financial repercussions. Whereas the social effects of this are thefts and frauds.
ADVANTAGES OF FINTECH
This is where the “Fintech” takes advantage of the situation! As the unbanked is having access only to the traditional tools, “Fintech” makes sure that different sectors are linked to each other so that a convenient, user friendly and transparent financial system is born to help the digitally handicapped population. Mobile payment gateways give financial liberty and micro lending facility while P2P lending received the best environment for its expansion as they provide money on easy terms and lower conditionality’s in the traditional world of high rates.
Globally, $ 1.2 billion has already been invested in “Fintech” startups according to a YourStory Research. Also, according to a report by Citi Group up to 30 percent of current employees in banks of Europe and the US may lose their jobs by 2025, out which major chunk will be lost from Retail banking. This is so because “Fintech” provides a seamless ways to do the same procedures.
While in India the “Fintech” software market is forecasted to touch $ 2.4 billion by 2020 from a current $ 1.2 billion, according to NASSCOM. And this splurge is due to increase in availability of internet services, telecommunication services, e-commerce penetration and availability of cheap technology driven workforce.
HOW IS DEMONETIZATION RELATED WITH FINTECH
The government also plays a major role in the rapid development of the “Fintech” industry in India. The ambition of the Indian government to become a cashless economy along with digitization has also acted a catalyst for its success. The recent step of demonetization gave the “Fintech” firms an unexpected advantage of the scenario. The people who were otherwise averse to use any other means of transaction other than cash has now started to move towards mobile wallets, EDC (card swipe machine) as well as other innovative solutions. Also, this step has built trust among the investors to gain more investment. Though a pull strategy has been used here in the current scenario, the question is will it hold the place in the minds of people as a medium of transaction even after we come out of this situation. We will have to wait to see the answer for this!
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All in all “Fintech” should be considered as a trigger, as it is helping in moving towards a cashless economy with innovative tools and lower pricing and transparent system.
NEXT PART OUT SOON.