Challenges faced by a fintech company to reach out to their rural audience
Despite reaching several milestones in the fintech space, India is yet to onboard people in the rural regions onto the digital economy.
Sunday December 19, 2021,
4 min Read
India's financial sector has undergone a paradigm shift from providing traditional services to services based on convenience during the last decade. The financial industry is well-positioned to embrace digitisation and extend its services to urban and rural customers.
The financial sector has expanded its physical presence throughout India because of the proliferation of essential financial services primarily targeted at the rural population, such as the speedy adoption of mobile and Internet banking and other possible strategies.
The financial inclusion and mobile penetration achievements in India have catapulted the country into the age of fintech.
The Indian financial sector made a significant impact by focussing on the availability of equal opportunities to access financial services through its policies and initiatives such as Pradhan Mantri Jan DhanYojana (PMJDY), Direct Benefit Transfer (DBT), among others.
Despite the policies, a large segment of the adult population still lacks access to formal financial services due to the overwhelming size of its people and the apparent disparity between the rural and the cities. Moreover, the accessibility of cost-effective and sustainable delivery mechanisms to rural areas further complicates the situation.
The challenges that the Indian fintech sector is facing are
Lack of Trust
Indian customers tend to have a conservative outlook and traditionally prefer to conduct business through cash transactions. Despite an increasing number of people who have access to banking, those who remain unbanked or underbanked still lack knowledge of banking services. Thus, for FinTech companies, it’s a challenge to build trust amongst people.
The emergence and the exponential growth of fintech is an almost new segment in the Indian market; hence it is yet to win the trust of the commoner as a steady financial services option. The fintech sector needs to change the way consumers perceive and use financial services to gain public approval.
Additionally, fintech enterprises would have to educate the Indian consumers about the benefits of using financial services through fintech , as the responsibility to streamline education and perceptions of its services would be on the FinTech sector.
Approximately two-thirds of India's population lives in rural areas, along with 70 percent of the labor force. Despite the growing rural economy and the increased use of financial services among rural people, fintech firms struggle to meet rural demand.
Decreasing margins on financial transactions, exorbitant working capital and high operating expenses, and lack of financial literacy are critical deterrents in adopting many financial products and services.
As a result, rural Indians lack access to essential financial services such as deposit accounts, credit, remittances, and cash withdrawals.
Lack of proper regulation in the fintech sector
The increase in regulation may threaten Indian fintech companies by stifling innovation and raising operating costs. However, regulatory transparency will bolster the sector in the future by enabling it to earn customer confidence and bring more capital.
Regulators will likely pay greater attention to fintech firms as they grow exponentially, and as regulatory measures, few platforms have already been introduced, such as the Bharat Bill Payment System (BBPS), Payments Bank Licenses, Unified Payment Interface (UPI).
The central regulatory body has also introduced regulations for new sectors, like P2P and aggregators, based on a consensus-driven strategy.
The regulator has the critical responsibility of creating an innovation-friendly environment while adhering to customer protection, data security, and privacy concerns. In response to the rapid acceleration of innovations, regulators typically respond in a knee-jerk manner to some market activities.
There has been widespread growth of digitisation across all sectors encouraged by the Indian government. The surge in digitisation was mostly seen among Indian millennials since they formed a substantial portion of its consumer base open to new technologies and digital solutions.
However, financial and internet literacy challenged older audiences when adopting fintech products and services. The gap in fintech usage is based on people's current abilities, desires, and needs.
The older population prefers personal relationships over services and products offered by fintech enterprises; hence to include them in their targeted audience, fintech companies must establish personal relationships with the elderly rural population over time.
Fintech companies need an omnichannel robust and effective strategy to engage rural entrepreneurs and provide them with the right technology platform and assistance to offer many services efficiently and effectively to succeed in the rural financial sector.
To address the rural challenges, the fintech enterprises have to increase outreach, improve the customer experience of the rural audience by building relationships, decrease hindrance to the execution of strategy, and encourage adoption and usage of the digital channel.
Edited by Affirunisa Kankudti
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)