NBFCs And Financial Inclusion: Reaching The Unbanked And Underbanked

Fintech technologies are playing a critical role in bridging the access gap to formal banking services for billions of underserved individuals around the globe

Technology has caused a revolutionary disruption in the banking industry, but accessibility is still a pitfall. Although there is still a long way to go, the population of unbanked people has decreased by 35 per cent since the creation of NBFCs and fintechs.

By Tashwinder Singh

The inclusion of the unbanked and the underbanked population in the financial system is one of the major challenges that we face today, and NBFCs and fintechs have emerged as potent tools to address it. Fintech technologies are playing a critical role in bridging the access gap to formal banking services for billions of underserved individuals around the globe.

Fintech has undergone a great deal of progress throughout time. Furthermore, it has been predicted that by 2025, the fintech market will expand at a CAGR of 24.57 per cent. Technology has caused a revolutionary disruption in the banking industry, but accessibility is still a pitfall. Although there is still a long way to go, the population of unbanked people has decreased by 35 per cent since the creation of NBFCs and fintechs.  

So, how have NBFCs ensured Financial Inclusion for the Unbanked sector?  This has been achieved through a number of approaches and practices.

Availability of financial and banking services: By offering alternate channels for financial services, such as mobile banking and digital wallets, NBFCs are increasing access to financial services for the unbanked population. Fintech platforms have provided consumers who were previously shut out of the formal financial system with a variety of financial services, such as savings accounts, loans, and insurance. In addition, it includes products that are specifically designed for the benefit of rural areas, such as microlending and the Bharat Bill Payment System.

Affordability: NBFCs have decreased the expenses connected with financial services, such as the cost of infrastructure. Financial services have become easily accessible to those without bank accounts because of the explosive growth of online transactions.

Financial Education: NBFCs have also come up with digital financial education programs to assist the underbanked sector in increasing financial awareness, concepts, products, and risks.

In addition to opening accounts without a minimum balance, investment apps now make it possible for unbanked people to participate in stock trading without paying commissions. Furthermore, fintech apps allow users to establish a credit history by opening a line of credit against a percentage of their savings. The majority of financial disbursements made through the NBFC channel are unsecured. And they are largely for personal money, with a focus on consumer products and services.

The growth of NBFCs has also accelerated collaboration between financial technology businesses, governments, and traditional financial institutions. This alliance has resulted in the development of digital identity systems, which allow individuals without formal credentials to authenticate their identities and gain access to financial services. While the potential of NBFCs for financial inclusion is enormous, obstacles persist.

Concerns about digital literacy, data privacy, and cybersecurity must be addressed in order to empower vulnerable people without exposing them to new risks. In India, a slew of players, including telecommunications companies, small finance banks, payment banks, and financial technology firms, are leveraging technology to reinvent traditional business models and provide underbanked and financially underserved people with faster, cheaper, and more convenient financial products and services.

Overall, NBFCs are altering the course of the financial environment by democratising access to financial services. By allowing the unbanked population to save, transact, and invest, they not only improve economic opportunities but also foster social advancement and empowerment on a global scale.

The writer is the CEO and managing director at Niyogin Fintech Limited.

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