in India

Fintech in India - A global growth story
38
India overview
In India, financial inclusion is projected to be driven
largely by creation of an ecosystem where people get the
opportunities to use financial instruments in their daily
lives and banks make best use of the spread of fintech
and non-financial firms operating in these inaccessible
areas.
At present, the financial inclusion penetration in India is
low, where 145 million households do not have access to
banking services 07 .
In India, rapidly growing penetration of smartphones and
internet has led to the emergence of multiple
technologies for replacing cash, providing credit
information for screening, enabling online lending and
purchasing of financial products through digital means.
Going forward, the recent provision of payment bank
licenses by RBI is likely to aid in monetizing this digital
trend and making technology as the core offering.
RBI has also given licenses to 10 entities for setting up
Small Finance Banks. Through this initiative, RBI aims to
extend the credit facilities to micro and unorganized
sectors. Alongside this, RBI has also come up with a
report on Medium term path for financial inclusion, which
aims to set the path for 90 percent financial inclusion by
2021.
The opportunity for fintech is enormous in the areas of
government-to-person cash transfer. The Direct Benefit
Transfer (DBT) scheme will enable deeper penetration of
financial services and help in achieving financial inclusion
goals as per RBI.
Even Government of India's financial inclusion mission is
working on the same lines with an aim to provide
following banking services to all households with the
following steps:
• Access to bank account with an overdraft facility.
• Unique identifier to every Indian in the form of Aadhar
card.
• Rupay-enabled ATM debit card.
• Accident insurance cover of INR 1 lakh.
Rapidly advancing technology is going to improve the way
banks operate currently in India. Despite concerted
attempts, banks have not been able to cover a significant
chunk of population under the preview of financial
services, which has given an opportunity to fintech
companies to help banks in exploring this opportunity.
Fintech Area
Payments
Peer to Peer
Lending
Microfinance
eKYC
Biometric
Digital Identify
Remittances
Source: KPMG in India analysis, 2016
Application in financial Inclusion
eWallets, UPI, USSD Transfer
Funding for individuals and micro enterprises
Funding for small and medium enterprise
Aadhar enabled KYC
Credit scoring information, account opening, ATM
pin
Aadhaar linkage to account for credit information
Transfer and payments in remote areas
FinTech activity in India has attempted to cover a range of
initiatives for financial inclusion. Example:
• Ezetap’s low-cost PoS devices, helping local stores and
villagers transfer funds and make payments 08 .
• Instarem’s offers on international money transfer with
charges as low as 1 per cent transaction fee for any
transactional value 09 .
• Milaap’s customised credit programmes for to
underserved sections, which leads to social lending 10 .
• Budipay’s innovative solutions around remittances and
direct benefit transfers in India 11 .
In the near future, alternative payments are likely to have a
significant share of payments and transfers, which could
lead to deeper penetration of financial services, thereby,
supporting the overall agenda of financial inclusion.
Many fintech companies are working in different ways to
contribute toward achieving deeper financial inclusion in
areas such as microfinance, digital payments, credit
scoring and remittances. Some of the most relevant
applications of fintech in financial inclusion are explained in
the table below:
07 Financial Literacy and Financial Inclusion – Indian Way, The Reserve Bank of India website,
https://rbi.org.in/rbioecdflc2013/Downloads/FL per cent20and per cent20FI-Indian per
cent20way.pdf, accessed on 10 May 2016.
08 SBI ties up with Ezetap to launch ‘Chota ATM’ for INR 499, Your Story, 03 October 2014,
http://yourstory.com/2014/10/sbi-ties-up-with-ezetap-chota-atm/ accessed on 30 May 2016.
09 Banks are bleeding you dry on your money transfers. A new startup wants to disrupt that,
Tech in Asia, 20 January 2015, https://www.techinasia.com/banks-are-bleeding-you-dry-onmoney-transfers-this-startup-disrupts-that
accessed on 30 May 2016.
10 Make a New Loan, Milaap, https://milaap.org/faq/making-a-loan accessed on 30 May 2016.
11 Budipay, AngelList website, https://angel.co/budipay, accessed on 30 May 2016.
© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.