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Mission Rural Market: A New Set of Challenges Awaiting Fintechs

Sujith Vasudevan, Assistant Editor, CIO Insider

The evolution of the fintech industry in the subcontinent posts an inspiring anecdote. Started as a value added feature of banking, fintech, during the mid-2000s, manifested its early signs with a banking correspondent (BC) model. Then again, like any other new technology, the new concept had to curate its market first and the BC model with the basic level of tech exposure paved a way for this by bringing financial services to the rural household. But the crux of the fintech industry was molded at the beginning of the yester-decade, thanks to the emergence of the digital marketplace. Then just, bam, we are en route the modern fintech.

The new government coming into power, the launch of the iconic Digital India initiative, demonetization, and India Stack project, all aided in growing fintech as a robust ecosystem in shut-eye time. With UPI becoming more and more mainstream, India Stack opening new avenues, NeoBanks reaching out to the grassroots, the emergence of direct plans of mutual funds, and capital markets continuing its foray into the digital space, the fintech industry today is entering its fine-tuning phase The results are amazing. EY’s Global FinTech Adoption Index 2019 says that India, along with China, leads emerging markets with a high 87 percent fintech adoption rate in 2019.

Of course, startups are the ones who make the most of it. Although, while deciphering the challenges in the new phase, they will have to again stick to the basic market considerations. India’s financial literacy is still in its nascent stage and the market’s attitude itself is a challenge. The digital payments value of $65 bn in 2019 is expected to grow at a CAGR of 20% till 2023, and according to NASSCOM, the Indian fintech software market is expected to reach $2.4 billion by the end of this year. Definitely, it’s good times ahead and Indian startups are up for the challenge.

The already established UPI solutions is a great start

But along with norm industry challenges, there will be niche, post-covid challenges as well as expectations from the fintech world. It’s a sure bet that in the post-covid era, the contactless payment solutions will be an undeniable proposition to the market and it will be more appealing than ever before as the people now know that there is a safer way to transact that posts minimum risk of contracting the virus. Thus, the solution providers will have to find ways to democratize contactless payment, while making their solutions digitally safer, and more efficient & affordable. And there is no better time to do this either. Let’s look into the rationale behind this.

The Raw Rural Market
According to, there are around 696.77 million internet users in India, making it only second to China, which has a whopping 900 million internet population. There has also been an interesting turn of tides when it comes to the proportion of rural and urban netizens. As per a 2019 report, the number of internet users in rural India has surpassed urban internet users by a margin of 10 percent, and this dividend has only grown further in 2020. This in fact is welded to an entirely different set of challenges as far as fintechs are concerned - the need to proliferate financial literacy in a raw market.

The already established UPI solutions is a great start, alongside contactless card payments and QR code based transactions among others. There should be deliberate efforts towards replacing cash transactions and even POS machines with the aforementioned solutions. The key to curating this raw market is definitely specially designed solutions to match the financial needs of rural India.

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