The FinTech Route: Reaching India’s Unbanked Population

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The FinTech Route: Reaching India’s Unbanked Population

The conventional cash-driven Indian economy has responded well to the FinTech opportunity, mainly triggered by burgeoning e-commerce and smartphone penetration.

Over the decades, India’s banking realm has hinged upon the legacy approach of brick-and-mortar divisions – and alternative banking outlets later on – to broaden the reach of existing financial services. Although a substantial chunk of people has been brought under the scope of the formal financial framework, complete financial inclusion (FI) is a mission yet to be accomplished.

According to a survey, India is home to 190 million unbanked people. And among those who have bank accounts, nearly half of them are inactive – the highest across continents. This means that these people still use cash for regular transactions. These numbers clearly indicate that FI in India is still an unfinished task.

Here’s how India’s FinTechs are making critical innovative interventions to build a sustainable banking system to serve the untapped sections of society.

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Drive Financial Literacy


When it comes to availing of financial services, education is of paramount importance. Awareness about the benefits of digital financial services is still in the nascent stages across India, especially in the rural areas and unorganized sectors. To tackle the situation, FinTech firms are using various services and tools to educate the debtors about the wide range of financing options.

For instance, some FinTech companies are driving this trend through digital channels, merchants, and at-scale online promotion. Besides, certain FinTech companies are leveraging a fraction of their corporate social responsibility (CSR) expenditure to pair with NGOs and run financial literacy programs throughout India.

Higher Reach through Mobile-phone Penetration


Online payment channels are a convenient, easy, fast as well as a rewarding way to transfer money. The ever-growing payment industry has kept on innovating and improving its offerings to include the last mile of financially underserved in the digital economy.

Rural markets where ATMs and bank outlets are not functionally profitable, the unified payments interface (UPI), payments banks, and mobile wallets have entered to serve people excluded from the digital world.

Digital channels have gained steam given the tremendous smartphone penetration within the underserved segment, alongside a customizable interface for different phone types. This, in tandem with a notable rise in rural point of sale (POS), has set the tone for payments service providers (PSP) to reach the underprivileged sections through online platforms.

At present, over 300 million smartphone users in India use online payments. By 2026, the Indian mobile payment sector will surpass $3 Tn

Neobanking for Microfinance


Neobanks have been making stunning strides despite being a relatively recent entry into India’s FinTech space. Today, Neobanks are going past the tech-savvy segment of the Indian population and focusing on delivering personalized and targeted services to the financially underserved, both in retail and MSME.

Multiple Neobanks are coming up to offer an integrated platform to MSMEs – a blend of payments, banking, compliance, and accounting. These Neobanks provide MSMEs with critical financial pillars of services essential to operating businesses. As such, MSMEs can focus on core business activities. Additionally, these Neobanks are not just ensuring smooth payment transactions but also providing customers with a single access point for instant loans and managing operations.

Furthermore, Neobanks are combining the power of online and offline acquisition strategies to ensure an effortless onboarding experience, thus enabling digitization and FI of MSMEs in the unorganized economy.

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Embedded Finance for More (Unbanked) Customer Acquisition


Embedded banking or finance is an emerging theme and will flourish exponentially over the decade ahead. It integrates financial services into a non-financial service model and facilitates customers with relevant financial services within an organization’s app/platform. This can fundamentally turn any company into a FinTech firm.

An example of embedded finance would be online travel portals providing travel insurance by tying up with insurance providers. Additionally, various e-commerce heavyweights are offering sachet insurance for white goods, smartphones, and other such appliances. Insurance is usually an overlooked market in India. Hence, such small-ticket insurance options, coupled with a product, help organizations acquire potential insurance customers.

Besides making operations more straightforward, faster, and smoother, embedded banking also holds the potential of driving FI in India and thus helping people become more familiar with new financial offerings. 

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