MAJOR RESEARCH PROJECT

ON

ROLE IN FINTECH FINANCIAL INCLUSION

A
Major Research Project Submitted
To
Faculty of Management, Oriental University, Indore
In partial fulfillment of the requirement for the
Degree of
Master of Business Administration (MBA)

Research Guide - Submitted By-

DHEERAJ NIM MANSI
GANGRADE
Professor Enrolment No.: OUI121MBA241

ORIENTAL UNIVERSITY, INDORE

Sanwer Road, Jakhya Opposite Revati Range Gate No.1,

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 Indore, Madhya Pradesh 453555

DECLARATION

I Mansi Gangrade, hereby declare that the Major Research Project titled
ROLE IN FINTECH FINANCIAL INCLUSION is an authentic work done by
me under the supervision of DHEERAJ NIM.

The study was undertaken as a part of the course curriculum of MBA IV

semester (Full Time) of Faculty of Management, Oriental University, Indore.
This project work does not contain any part of any work which has been
submitted for the award of any degree either in this university or any other
university/deemed to be university without proper citations.

Date:

Place: Mansi Gangrade

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 CERTIFICATE

This is to certify that ………………………………is a student of MBA

(Full Time) programme of Faculty of Management, Oriental University,
Indore. He/She has prepared his/her project on the topic
………………………………………………………………………………….
under my supervision.

Date:

Place: Pro. Dheeraj Nim

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 ACKNOWLEDGMENT

I often wondered why the project reports always began with acknowled-
gement. Now, when I have undertaken project myself, did I realize that
project report involves not just the researcher but so many people that
help in making the research possible. Therefore, I take pleasure in
beginning the most beautiful part of the report.
I fall short of words to express my gratitude to my guide Dr. DHEERAJ
NIM who despite their busy schedule were able to find some time to
guide me through trouble and solve my problems to the best of abilities.
Without their unfailing guidance, encouragement, and patience this
project would not have been possible. It has been a learning experience
under him/her.

I am thankful to my faculty guide Dr.DHEERAJ NIM. who gave me

detailed instructions during my MRP

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 INDEX

S.
Page
No Particular
No.
.
INTRODUCTION TO
1. 9
THE TOPIC
OBJECTIVE OF
2. 22
RESEARCH
REVIEW OF
3. 29
LITERATURE
RESEARCH
4. 34
METHODOLOGY
ANALYSIS AND
5. 37
RESULTS
Scope of Future
6. 40
Research

7. FINDINGS 42

8. Conclusion 44

9. Referance

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 Introduction

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As soon as the market gets more globalised and the financial industry
develops, more and more people switch from using cash to a cashless
System, and the cashless transaction system is growing every day. Not
only necessary, but also essential to the current order is the cashless
system. Attempts to promote financial inclusion in India over the past few
years have had varying degrees of success. Strong legislative and
regulatory pressure have led to a significant expansion in access to bank
accounts. It has been incredibly difficult to use these accounts and take
advantage of official financial services outside of savings accounts. The
government's most recent steps, like as demonetization and the switch
to cashless transactions, will encourage innovation and new entrants.
For India to continue growing, industry trust-building is crucial. Banks
and regulators are faced with new problems by emerging technology,
with security being a top issue. The authorities and the bankers would
need to work together to guarantee that control measures are in place as
cyber-frauds are on the rise. A major push from the Indian government
has made it simple for those who don't use banks to get financial
products. The benefits of mobile-led solutions have been proven by
payment companies, and traditional banking institutions are now
attempting to expand into rural India by introducing cutting-edge mobile-
based banking solutions. Large technology businesses are utilising
innovative methods to reach out to rural populations and inform them
about various financial products with the assistance of the government.

There must be an effort to involve as many people from all facets of

society as possible in the growth of the Indian economy, particularly
when the goal is to achieve sustainable development. The country's rural
population lacks financial knowledge and understanding, and the
majority of people do not have access to formal credit, which is a barrier

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to the economy's expansion. This is a significant problem for the nation's
economic development. The banking industry developed certain
technological advances, such as automated teller machines (ATM),
credit and debit cards, internet banking, etc., in order to get over these
obstacles. Even if the introduction of modern banking technology
changed urban culture, the bulk of rural residents are still uninformed of
these changes and are not allowed to participate in formal banking. The
term "fintech" is new and has grown in acceptance since the beginning
of 2015. This phrase is frequently misunderstood as being exclusively
technological and tech-savvy. When in fact this phrase refers to the
blending of financial services offered by diverse clients with
technological breakthroughs.

The fundamental idea is that Fintech evolved more out of need than
innovation, mostly as a result of advances in the field of financing
services and the explosive rise of technology. The combination of
technology with financial services in this case implies that a number of
platforms and applications are being created to make it simple for you to
use financial services, such as applying for online personal loans or
business loans, among others.

Financial inclusion has expanded more quickly due to the booming

fintech industry. According to experts, customers will adopt new
technologies like AI and ML in the future years. Financial inclusion is
taken into account by the World Bank Group (WBG) in terms of "Access,
Usage, and Quality" of financial services.

Fintech can lower costs while increasing accessibility and speed,

allowing for the expansion of more specialised financial services. In the
last ten years, financial services have been available to 1.2 billion adults.
This suggests a 35% decrease in the population of unbanked people.

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Fintech is making choosing technological financial services simpler and
easier, yet 1.7 billion people still do not have access to financial
services.

What is Fintech?

Fintech is a phrase used to refer to financial technology that

complements, streamlines, digitizes, and disrupts traditional financial
services. Algorithms, software, and applications for desktop and mobile
devices are all part of fintech.

It does, however, occasionally incorporate hardware like internet-

connected piggy banks. Check deposits, money transfers between
accounts, bill payments, and financial aid applications are all made
possible by fintech platforms.

Governments have employed digital delivery techniques to rapidly and

securely convey emergency cash to consumers who are most in need of
it, as well as to make it possible to transfer money without much direct
physical contact. Additionally, technology use has the potential to totally
transform international remittances.

Therefore, businesses employ fintech trends to handle accounting, carry

out e-commerce, process payments, and, more recently, support
government assistance programmes like the Payroll Protection Program
(PPP).

More and more companies are using fintech to accept contactless

payments and other technological improvements since the outbreak.

Role of Fintech in Financial Inclusions :

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Many consumers now find it simple to use financial instruments thanks
to fintech. Fintech has paved the way in areas like cross-border transfers
and payments from the government to individuals in addition to mobile
money. The function of fintech in financial inclusions is described below.

Improved Credit Access :

In contrast to traditional banks, fintech startups require less paperwork

before providing money. This facilitates quick and easy borrowing.
Fintech companies use artificial intelligence (AI) to assess the risk of
customers with little to no credit history using variables like income and
spending habits.

Small-ticket borrowers and local enterprises can now use microfinance

services for large purchases and capital projects.

Innovation with Speed and Compliance :

When compared to their traditional counterparts, fintech companies

generally have fewer regulatory obligations, such as capitalization,
identity verification, and consumer complaint redressal.

For instance, the Reserve Bank of India (RBI) allowed fintech companies
to utilise video-know-your-customer (KYC) and e-Aadhaar verification in
order to promote digitization and lower client acquisition expenses.

By testing new ideas in secure sandboxes while maintaining legal

compliance and data protection, fintech companies can quickly roll out
new features and products. Fintech companies may now swiftly and
safely offer cutting-edge products and services.

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The term "fintech" is new and has grown in acceptance since the
beginning of 2015. This phrase is frequently misunderstood as being
exclusively technological and tech-savvy. When in fact this phrase refers
to the blending of financial services offered by diverse clients with
technological breakthroughs.The fundamental idea is that Fintech
evolved more out of need than innovation, mostly as a result of
advances in the field of financing services and the explosive rise of
technology. The combination of technology with financial services in this
case implies that a number of platforms and applications are being
created to make it simple for you to use financial services, such as
applying for online personal loans or business loans, among others.

Promotes Cashless Economy :

Electronic payment methods are now swift and secure thanks to fintech
innovations. Due to the use of AI in this, Fintech companies can instantly
authenticate and transfer digital payments.

Everyone's access to essential goods and services is improved by the

flexibility, convenience, and ease of online payment methods.
Customers can order LPG cylinders online and pay their utility bills from
the comfort of their homes, for example. In addition, the corporate sector
and fintech industries are crucial to global digitization.

Extending Financial Services to the Most Remote Areas of

the National :

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Due to rising internet use and improvements in online banking, fintech
companies can reach out to rural areas where physical bank branches
cannot be constructed.

Fintech businesses make it possible for unbanked, low-income, or rural

residents to save and grow their money. By providing access to basic
goods or services, such as financing or savings instruments, this also
aids in utilising government support and programmes.

Disruptive Potential in the Traditional Finance and Banking

Sector :

Through the innovative and creative use of technology during the loan
procedure, fintech companies are establishing new ground in the formal
financial sector. Using machine learning algorithms and additional data
sources including social media footprints, call logs, purchase histories,
and utility service provider payments, fintech organisations increase
efficiency and broaden the loan availability.

Additionally, loans are approved and disbursed by Fintech companies

much more swiftly.

Future Fintech Prospects for Financial Inclusion :

The importance of MSMEs as a significant economic force and a crucial

employer cannot be overstated. Additionally, Fintech has access to a
vast market of underprivileged demographics.

In order to address problems like constrained regulatory policy and a

lack of financial and digital literacy, innovation for the mass market is

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desperately needed. Additionally, a Fintech company is the only one with
the responsibility of keeping ties with SME clients despite defaults. The
problem of payment delays in financing, especially in the MSME sector,
is analogous to an unavoidable work hazard.

The key components of the process, however, are continuing

cooperation, remaining resilient, and keeping an eye on the big picture.

This is a significant problem for the nation's economic development. The

banking industry developed certain technological advances, such as
automated teller machines (ATM), credit and debit cards, internet
banking, etc., in order to get over these obstacles. Even if the
introduction of modern banking technology changed urban culture, the
bulk of rural residents are still uninformed of these changes and are not
allowed to participate in formal banking.

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 Objective Of Research

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Being unable to participate in the formal economic system is now widely
acknowledged as a hindrance to the eventual abolition of poverty. A
combination of cultural and procedural limitations provide challenges for
the stakeholders in the fintech ecosystem. Additionally, there is no
general agreement among experts as to whether or not mobile payment
systems can achieve their full growth potential in rural areas. The study
of financial inclusion for those at the bottom of the pyramid (B.O.P.) in
Indian society needs to improve, and emphasis needs to be given to
developing technological solutions for underserved groups. Therefore,
coming up with novel ways to provide financial assistance to individuals
who are in need is currently a crucial concern.

According to Table 1, the social and cultural contexts in which these

technologies are used have received very little attention from scholars
thus far. Additionally, there is a dearth of empirical research that
pinpoints the most crucial element in the effectiveness of utilising
technology to expand financial services in the context of India. The
purpose of this study was in part to highlight the need for more research
on the inclusion and empowerment of those who are economically
disadvantaged. Through an empirical investigation of business ventures
from economically challenged neighborhoods, this study also examined
how digital technology has helped to alleviate poverty and create jobs.

There haven't been many empirical research focused on developing

nations that try to identify the key to mobile technology's success in
promoting financial inclusion. These studies appear to address the
reduction of poverty in less developed areas with a more contextual
perspective. In this complicated and dynamic industry, it's critical to
identify best practises for policymakers. This article's goal was to fill a

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research gap on financial inclusion and the use of financial technology in
the provision of financial services.

In order to evaluate the impact of technology on the encouragement of

entrepreneurship in undeveloped regions, the current study used an
empirical methodology. It also looked at the crucial factors that will
determine whether financial technology is successfully adopted in rural
areas in the future (Anagnostopoulos 2018; Li et al. 2021). In this study,
both qualitative and quantitative techniques were employed. The
qualitative approach was used to gain an understanding of the
numerous adoption theories and psychological factors related to
technology adoption.

Inferential statistics are frequently used in the quantitative method of

testing hypotheses. In order to identify the factors, confirmatory factor
analysis was done, and structural equation modelling was used to
calculate the impact of fintech on the expansion of financial inclusion in
rural India. Consequently, the model shown in Figure 1 was put forth.

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 Review of Literature

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By examining how the excess fund is utilised to meet short-term, long-
term, and emergency requirements, it was attempted to understand the
financial needs of the poor in the long- and short-term in order to build
strategies for financial inclusion and construct financial products. Rural
households manage their cash according to their own systems, and by
taking advantage of this, a number of unofficial financial institutions and
tools are available to this group of the population. According to the RBI's
recommendation, the report looks at 107 homes in Kerala's Ernakulam
district. Understanding the type of cash inflows and outflows of a sample
of low-income households in the district was the study's main goal. The
project also examined the disadvantaged households' methods for
managing their cash flow. The structure of the poor households' financial
assets and liabilities underwent further analysis. The research focuses
on the saving habits of low-income households and investigated the
causes of how dependent the poor are on formal and unofficial financial
tools and organisations for loans and savings. In this experiment, data
were gathered using two different techniques. First, a sample of
impoverished households was used for the questionnaire, and the same
sample was used for the financial diary technique of tracking results.
Second, the investigation put a focus on both rural and urban areas.

CRISIL (2013) created an index to gauge the level of financial inclusion

in India. The non-monetary aggregates are used to calculate financial
inclusion. The CRISIL Inclusix's specifications took into account the
numberFinancial Inclusion: Digital Financial Services and Fintech in
India Instead than concentrating on the loan amount, 87 of the people
have access to other financial services.

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The provision of financial services to small enterprises and low-income
households was the main focus of RBI (2014a). The committee's primary
goals included developing guidelines for maximising financial inclusion,
financial deepening, and formulating regulations for tracking the
development of financial inclusion in India. The committee therefore
suggested the following actions in order to achieve the objectives of
maximum financial inclusion and increased access to financial inclusion:
provision of full-service electronic bank accounts; distribution of
Electronic Payment Access Points for convenient deposit and withdrawal
facilities; provision of credit products, investment and deposit products,
insurance and risk management products by formal institutions. The
report's primary conclusions emphasised the following important issues.
First off, the vast majority of small businesses weren't dependent on
regulated banking institutions to function. Second, a majority of people in
both urban and rural areas lacked access to a bank account. Third, GDP
savings in 2011–12 have decreased. The Committee suggested that
each person should have a Universal Electronic Bank Account while
applying for an Aadhar card in order to address these challenges. The
committee also advocated for the establishment of payment banks to
offer low-income households and small companies deposit products and
payment services. In order to manage their credit exposures, banks
should also obtain portfolio insurance. The Committee also proposed
that a State Finance Regulatory Commission be established, where all
state-level financial regulators will cooperate. The committee
recommended the establishment of the Financial Redress Agency
(FRA), which would work in tandem with the relevant regulator to resolve
consumer complaints over all financial goods and services, in the
interest of bank account holders.

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The RBI (2014b) released a report to investigate various issues and
assess potential technological solutions that could support the wide-
scale adoption of mobile banking throughout the nation. The report
separated the concerns into two major categories: technical issues and
issues relating to customer enrollment. Mobile number registration, the
creation of M-PINs (mobile pins), security-related worries that affect
client onboarding, staff education at the bank, and customer education
are all difficulties related to customer enrolment. On the other side,
technical challenges in a mobile banking eco-system include cooperation
with MNOs (Mobile Network Operators), access channels for
transactions, and a laborious transaction procedure. Four mobile
banking channels are compared in-depth in the report: SMS (Short
Message Service), USSD (Unstructured Supplementary Service Data),
IVRS (Interactive Voice Response System), and Mobile Banking
Application. Each channel is assessed for usability, accessibility, and
security. The paper advises creating a standard mobile application using
SMS and GPRS channels for all banks and telecom operators in order to
address the many issues found. The aforementioned application should
allow the user to carry out fundamental mobile banking tasks including
checking their account balance and transferring and remitting money.
The programme should be created in a way that gives users a
straightforward menu-driven, interactive interface. Banks and telecom
companies can work together to create such an application. All new SIM
cards could have the software integrated into them so that anyone
purchasing a new card would already have it installed. Customers who
already have SIM cards can transfer the application "over the air" (OTA)
with the use of a dynamic STK (SIM Application Tool Kit) feature.

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 Research Methodology

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Inferential statistics were used in the quantitative approach to examine
the hypotheses. Researchers in India are utilising structural equation
modelling to analyse the data and confirmatory factor analysis to
determine the most significant contributing elements in order to quantify
the role that fintech plays in boosting financial inclusion in rural areas.
The results show that social influence factors positively affect
behavioural intention to use technology in India's rural sector. Users who
are accustomed to using financial technology services and systems are
more likely to accomplish their stated objectives.

This is why a confirmatory factor analysis was so important in the early

stages of this study to identify the variables influencing the adoption of
financial innovations. Statistical tests were employed at this stage of the
study process to establish whether or not the correlation exists and, if so,
how strong it is. The primary statistical technique used to test the
hypotheses and examine how fintech affects financial inclusion through
mobile money services was structural equation modelling.

The group that was the focus of the poll was made up of both users of
financial technology and owners of rural businesses that use mobile
money and other services offered by financial technologies. There are
130 billion people on the earth, making it hard to get the views of
everyone. As a result, the sampling strategy became established. The
sample frame was composed of respondents from three randomly
chosen districts in the state of Haryana, namely Gurugram, Hisar, and
Jhajjar, using a technique known as stratified judgmental sampling.

There were 400 respondents in all that took part in the poll. As the
respondents were not very familiar with Google Forms, they were given
closed-ended questionnaires, and data were gathered between July
2022 and September 2022 by one of the researchers himself.

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In the process of acquiring data, primary information was mostly utilised,
including the use of surveys for this purpose. The primary data was
collected using stratified sampling techniques from the more rural areas
of India's major regions. A structured questionnaire was tested using
results from a pilot study of users of mobile money and other financial
technology. In order to facilitate data scaling, a Likert rating scale,
nominal scales, and rank-order scales were employed in the creation of
the questionnaire.

The indicated variables have been coerced. For the model to be deemed
valid, both CFI and TLI must be at least 0.90, and both requirements
were satisfied in this investigation. The values of CFI and TLI were
discovered to be 0.997 and 0.996, respectively.

gives parameter estimates for the four predictors (behavioral intention,

service trust, usability, and social influence) and their effects on financial
inclusion as a result of the disruption brought on by fintech companies,
particularly over the past ten years. Service trust (0.3823) was calculated
and observed to be the most important factor since it significantly
impacted financial inclusion. This indicates that consumers do think
fintech services are reliable and capable of handling their financial
activities. Although the value was not determined to be significant, social
influence (0.2304) was the second most significant indicator of financial
inclusion. The third main factor was behavioural desire to use fintech
solutions, and value was also found to be important. The most important
factor identified to affect financial inclusion was usability (0.0839). All of
the constructs' threshold values were found to be significant, with the
exception of social influence.

A structural equation model is composed of two models: the

measurement model and the structural model. The measuring devices

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model the relationships between the observable data and the latent
variables. The structural model demonstrates the relationships between
the latent variables. As can be seen in Table 5, the measurement model
was employed in this investigation to essentially quantify the association
between latent and observable variables. The latent observable variable,
behavioural intention, was shown to be substantially linked with BI4
(3.030), whilst BI2 (0.814) was found to be the least associated.

Service trust was shown to have the strongest correlation with ST2
(1.183), which was determined to be more significant than ST3 (0.915).
There were only two variables in the usability instance, and both were
discovered to be linked, however UB1 had a larger correlation than UB2.
The third latent variable was social influence, and SI1 (1.313) was
discovered to be related to its construct whereas SI3 was discovered to
be most correlated. Fintech for Financial Inclusion (FTFI2) was shown to
be substantially associated, whereas FTFI was found to be less
associated, with the final latent variable.

The structural equation modelling graphic in Figure 2 displays the

causative hypotheses. If the model's parameters were known, one
parameter for each arrow in the diagram was estimated using a
covariance or correlation matrix.

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The 12 manifest variables are represented by rectangles in the path
diagram, while the four latent variables (behavioral intention, service
trust, usability, and social influence) are represented by circles. It is clear
that not all of the latent variables have a substantial correlation with one
another. Despite having a low degree of association, the relationship
between social impact and usability of fintech products (0.09) was the
highest of all the latent variable correlations. Although there was a
correlation between usability and service trust (0.02), it was not as
substantial as the correlation between social influence and usability
factors. In comparison to the links between social influence and usability
and usability and service trust, the relationship between service trust and
behavioural intention (0.01) was determined to be the weakest of all the
latent variable associations. Although it was stronger than the
correlations between service trust and usability as well as service trust
and behavioural intention, the relationship between social influence and
behavioural intention was not statistically significant.

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Government’s role in fintech growth :

The government first showed its interest by swiftly announcing the

prohibition on the usage of the Rs. 500 and Rs. 1000 currency notes.
Later, a new version of the Rs. 500 note was introduced, and the Rs.
1000 note was replaced by Rs. 2000 notes. Demonetization was
intended to stop the circulation of dirty money, but it instead caused
instability throughout the nation and drove people to use online financial
services, increasing the potential of the FinTech sector. Additionally, the
Covid-19 pandemic epidemic hastened the development of FinTech in
India by forcing individuals to use contactless and paperless payment
methods.

Despite having a very dispersed population, a sizable portion of Indians

are still unbanked and underserved. The RBI is using a number of
strategies to continuously alter the regulatory landscape and address
issues that could improve the industry. The introduction of Unified
Payments Interface (UPI), Bharat Interface for Money (BHIM), and
numerous other financial services has resulted in a significant
improvement in the infrastructure of the Indian financial sector in recent
years. The 'Digital India' and 'Make in India' campaigns, which are in line
with the RBI's goal of accelerating FinTech adoption, have given it even
more of a push.

The RBI's efforts to promote and facilitate the expanding usage of

electronic payments in creating a cashless society are a crucial factor
driving adoption. A staggering 20.57 billion transactions were made
between April and June 2022, valued at an estimated Rs. 36.08 trillion,
using a variety of fintech platforms, including UPI, debit and credit cards,
mobile wallets, etc.

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Digital lending landscape in India :

Numerous socioeconomic reasons over the past ten years have

contributed to the positive expansion of the Indian digital lending
business. The market opportunity is anticipated to increase at a CAGR
of 22% from $270 billion in 2022 to $1.3 trillion by 2030. According to
other data, the Indian FinTech business will be 60% made up of digital
financing by 2030. There are 33 unicorn companies in India right now,
and 39% of them are in the digital lending industry.

The RBI has stressed that goods and credit delivery methods should
promote orderly growth, preserve financial stability, and safeguard the
protection of depositors' and consumers' interests in light of the rising
number of soonicorns and fostering innovation in the FinTech scene.
Having said that, several worries have also surfaced that, if they are not
addressed, could make it difficult for the general public to have faith in
the ecosystem of digital lending. The main issues include the
involvement of third parties, misspellings, dangers to the security and
privacy of personal information, lending for unfair business activities, and
unethical recovery procedures.

The RBI also established a working group on digital lending and

provided legal and secure credit facilitation services in an effort to
safeguard consumers' interests in the digital lending ecosystem.

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PM on financial inclusion :
India is a very diverse nation, with the majority of its citizens living in
hard-to-reach places. PM Modi has announced the opening of 75 digital
banking units (DBUs) in 75 districts nationwide to guarantee that banking
services are accessible to everyone in the country. Due to RBI's prompt
approval, this has created a whole new universe of opportunities for
FinTech businesses to take advantage of, strengthening the Indian
financial system.

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 Analysis And Results

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Analysis :

1. Exploratory Research at Stage I An Exploratory Factor Analysis

(E.F.A.) was a crucial technique in the early stages of the study for
determining the drivers of financial technology adoption.

2. Conclusive Research at Stage II At the definitive research stage,

statistical tests are used to determine whether the association
exists and how strong it is. Structure Equation Model (S.E.M.)
analysis of the impact of FinTech for financial inclusion utilising
mobile money services is the main statistical approach utilised to
assess the hypotheses.

Data Interpretation And Analysis :

In a context of changing financial conditions, the current study offers

freshly developed best practises for use by policymakers, regulators,
and investors. It offers empirical evidence to identify another growth
driver for fintech services as well as a critical success factor. Decision-
makers can construct a plan to handle the current barriers to inclusive
financial development with the help of the research's findings. Policy-
makers and other industry participants may use mobile phone
technology to build new service offers and policies with the aim of
improving job prospects, income, and the general wellbeing of residents
after taking the research's findings into consideration. This study adds to
the effort of creating a citizen dataset of financial technology benefits.
The results would help the mobile service industry establish an economy

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of scope that would enable the delivery of services at lower prices while
maximising their beneficial effects on society.

The availability of financial resources is viewed by sizable populations in

emerging nations like India as a major barrier to growth. The outcomes
of this study have two distinct effects that improve society. People's
understanding of readily available financial services, such as payment
and transfer systems, microcredits, insurance, and savings accounts, will
increase first. The second advantage of financial inclusion is that it
opens up opportunities for economic growth for previously marginalised
groups. By attracting more participants to the economy, the development
of an inclusive financial sector provides additional contributions that,
over time, support the expansion of rural areas. Entrepreneurship has a
tremendous impact on society in addition to its relevance in the
commercial sphere (Russell, 1980). The financing of growth drivers,
such as the mobilisation of savings and the provision of access to
services for those with low incomes, as well as the enhancement of
social welfare and the lowering of vulnerability, can all help to reduce
poverty.

The larger goal of FinTech is to fill the unmet financial needs of the
demographic groups that traditional financial services models do not
primarily target. Therefore, FinTech seeks to support the overarching
objective of financial inclusion.

 birth of a new era Innovative solutions are being offered by

FinTech startups employing low-cost technologies.
 Partnerships between incumbents and FinTechs that are strategic

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  Existing businesses launching new digital products or digital-only
banks
 Government intervention includes the development and
implementation of FinTech legislation, the introduction of
programmes like smart cities and websites for speedy loan
clearance for small and medium-sized businesses (SMEs), among
other things.

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 Finding

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Fintechs are renowned for providing quick, secure solutions for routine
banking tasks. However, as the world becomes more mobile due to
global events, consumers are seeking for even faster, more secure
options, and businesses are finding it difficult to stay up.

Due to this, fintechs trying to provide the best possible consumer

experience nevertheless face numerous commercial and security
problems, such as:

 How can you make onboarding as quick and simple as possible

after user acquisition?
 How can you guarantee that doing your banking online is a simple
process rather than a frustrating one?
 Costs: Will there be an increase in expenses if your security is
upgraded?
 How can you stop hackers from accessing accounts or devices?
Fraud and account takeover.

However, speed and transaction volume are more important indicators of

fintech success than income. Additionally, due to the hurdle of being
heavily regulated, fintechs hoping to advance must have effective
authentication procedures in place if they want to boost conversion rates
and cut costs.

Implementing greater security without degrading the user experience is

the most difficult component for most fintechs, which is one of their
biggest advantages over traditional banks.

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Financial Inclusion Obstacles :

The following are the primary challenges facing policymakers in

achieving a higher rate of financial inclusion

1. The Necessity Of Enhancing Financial Literacy : Studies on

remittance services for migrants and surveys by the World Bank
Group in Morocco and Mozambique have revealed that the study
group was not aware of the proper products and services that
would have best matched their individual needs. By raising these
people's financial literacy levels, it will be easier for them to make
wise financial decisions and choose the products that will best
meet their needs. Additionally, they will learn how to use the
different channels at their disposal for banking needs more
effectively. In other words, it is possible to enhance the acceptance
of new bank accounts through the use of more cost-efficient and
successful strategies, which will ultimately increase savings.

2. Insufficient Official Identification Documents : Lack of official

identification documents is one of the main barriers preventing
those without bank accounts from using basic financial services. A
valid ID is typically needed before someone may create a bank
account in most nations. IDs are also required to transfer money
and apply for social assistance. Therefore, government agencies
must streamline and simplify the procedure for getting a formal ID
card in order to increase access to banking services for the
unbanked.

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 3. Consumer Defense : Although financial services like mobile
money and virtual currencies have proliferated in an effort to
increase financial inclusion, there is still a lack of customer
confidence in the security and dependability of these recently
developed platforms. Authorities must issue clear guidelines and
laws that will guarantee that consumers are sufficiently protected
and have access to critical product information so they can make
educated decisions in order to foster confidence in these new
means of payment services.

4. Gender Inequality and the Rural Poor : Approximately 1.1 billion

of the 2 billion unbanked people worldwide are women, according
to the most recent data from Findex. When attempting to access
financial services in emerging nations, the rural poor and women in
general confront special challenges. According to World Bank
study, women have a lesser likelihood of obtaining loans from
banks even though they make up a higher portion of the self-
employed population in developing nations. According to IFC
research, this is mostly because of a lack of collateral or a bad
credit history, which causes financial institutions to deny credit to
more women.
Even if the banks granted these women formal credit, they
frequently have to pay higher interest rates than men.
Stakeholders must devise strategies to eliminate the barriers that
the rural poor and women confront when attempting to obtain
financial services in order to increase financial inclusion among
these two groups. These initiatives may involve giving this target
population an ID so they can start a savings account and establish
a credit history from a young age. To support the ability of women

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 and the rural poor to make better financial decisions, additional
investments might be made in financial awareness programmes.

5. Encouragement of Transaction Account Use : The majority of

policymakers' actions have been designed to spur the opening of
more new bank accounts among the unbanked. However, it is
important to keep in mind that registering an account is only the
first step and not the final goal. Of the 355 million individuals in
developing nations who said they had a bank account, it has been
highlighted that many still send money by cash or over the counter.
A bank account must be helpful and serve as a portal to other
financial services that can increase these people's overall financial
welfare in order to be relevant in their lives.

6. Financial Inclusion And Smartphone Adoption In Developing

Countries : The commercial sector and governments can play a
significant role in accelerating the use of bank accounts by putting
their employees' paychecks into their accounts rather than in cash.
The Indian Pradhan Mantri Jan-Dhan Yojana (PMJDY) scheme,
which pays participants' social benefits and subsidies directly into
their bank accounts, is a notable illustration of this concept.

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Result :

To understand the respondents' responses, each FinTech-related

question was posed in the assessment, and the mean and standard
deviation for both measures were duly computed. In terms of effort
expectation, performance expectation, social influence, facilitating
conditions, habit, and perceived risk, the values show a positive
perspective.

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Suggestion :

The majority of these fintech issues might be resolved with the proper
digital-first technologies.

Recently, we discussed the best way to offer user-friendly authentication

via quiet smartphone verification. We also provided information on SIM
swapping and how our Mobile Identity solution makes use of it for the
purpose of safeguarding user data.

Most of the client difficulties we listed above can be simplified with the
help of these quick, covert solutions, which prioritise fraud protection and
keep costs down.

Higher User Acquisition :

Business Insider estimates that by 2020, 63% of European consumers

will have given up on the process of installing a digital banking app.
Consumers' shift to digital solutions as a result of the pandemic is mostly
to blame for this 25% rise compared to 2019, yet online banking
technology is still lagging behind customers' expectations.

You may assist your clients have an uninterrupted onboarding

experience by using silent smartphone verification. Silent mobile
verification authenticates your app users in less than 5 seconds without
requiring further action, as opposed to waiting for an email or SMS to
arrive with a 5-digit number.

Even said, SMS is still a wonderful failover choice because the worst-
case situation is that your customer abandons the transaction altogether.
But by making the onboarding process for app users shorter, you give

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them less time to drop the app, which increases the likelihood that they'll
become a devoted customer.

Increased Client Satisfaction :

The customer experience is a crucial competitive advantage for fintechs

over traditional banks. With the value proposition of enabling clients to
do standard banking transactions in the palm of their hands rather than
going to a branch or phoning a contact center, fintechs entered the
industry.

However, the danger of sacrificing on customer experience increases as

you add additional levels of security to your customer journey.
Customers don't want to use your app, check their SMS, and then return
to it to enter a confirmation code. All customers have to do is open your
app, sign in, and wait a short while (less than 5 seconds, to be precise)
before continuing to finish their transaction because silent mobile
verification takes care of this for them.

Before sending a customer any important messages, you should perform

a SIM swap check as another approach to enhance the customer
experience. This will assist you ensure that the client for whom the
account-related information is meant really receives it and will stop any
potential fraud or identity theft actions.

Prevention Of Fraud And Account Takeover :

No matter what security measures you have put in place, it appears like
hackers are constantly coming up with new ways to break the code.
According to the US Federal Bureau of Investigation, SIM switching

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assaults cost Americans more than $68 million in 2021.You can lessen
the likelihood that someone may intercept your authentication procedure
by combining mobile security tools like SIM swap checks and quiet
mobile verification.

One benefit of silent mobile verification is that it can protect client

information since the authentication procedure is totally carried out in the
background and isn't visible to anyone around while the consumer is
signing into their account. SIM Swap checks, on the other hand, aid in
the verification of transactions when money is transferred to a new
account, when the transaction amount is more than usual, or when a
new device is discovered. In this situation, the transaction will be
rejected if it is determined that a SIM has been switched.

To avoid fraud and account takeover, check with the mobile network
operator for the following important account details:

 When the SIM card was first activated

 If a new user received the phone number
 Whether unconditional call forward is enabled or disabled
 If a lost or stolen report has been filed for the phone
 When was the SIM card last replaced?

Reduced costs :

The fact that fraud protection is a high priority for fintech

companies is why security solution vendors charge so much for
their products. However, there aren't many additional setup

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fees or continuing expenses because SIM switch checks and
silent mobile verification rely on already-existing data and
technology.

Silent mobile verification verifies a user's details with the mobile

network operator (MNO) when they sign into their account. The
user is logged into their account if the MNO verifies that the
information fits. It takes less than five seconds to finish and
doesn't involve any other forms of identification, such
usernames or passwords.In the long term, setting up rapid,
silent user authentication decreases fraud-related financial loss,
client acquisition costs, and manual security intervention costs.

Begin using Mobile Identity :

In today's digital environment, it is crucial to prioritise user authentication

and financial app security. Adding security layers without sacrificing
customer experience might become a competitive advantage as
cybercrime increases.

Sim swap checks and silent mobile verification are two strategies that
help stop typical fraudulent operations. Mobile Identity is designed to
assist you in resolving common fintech issues and seizing new
opportunities. It was built on the foundation of collaborating with more
than 300 banks and financial institutions and being connected to more
than 700 mobile network operators.

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Financial Inclusion for Women's Empowerment Objectives:

Women's participation in home financial management is a key

component of financial inclusion. According to financial
inclusion, women are better equipped than males to manage
household finances effectively. Therefore, financial inclusion
initiatives focus on women by assisting them in beginning to
handle their finances. Women are frequently prohibited from
handling finances in many homes. The males of the house
control them and instruct them to do solely household duties.

In India, a lot of conservative people think that women can't

handle money. The government and non-governmental
organisations want to eradicate this mentality with the aid of
financial inclusion. Women are being encouraged to pursue
greater career options and achieve financial independence as a
result of financial inclusion. It also illustrates how women won't
need to rely on males for financial support. Additionally, they
are not need to wait for approval from men before acting.

By raising financial awareness among low-income women,

financial inclusion aims to give them more influence. Women
are also given advice on how to effectively save money for the
future. They are exposed to a variety of readily available
savings options. Additionally, they learn about the many kinds
of credit that are offered on the market. They can use these
loan options to launch a new small business or enrol in a study

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to prepare for a new career. Their monthly revenue will rise as
a result of this.

Many women are also purchasing mobile phones for their

personal use as a result of financial inclusion. Only men were
allowed to own cell phones in some regions of the country,
forcing women to rely on these guys. Women have begun to
purchase mobile phones in recent years, and they have begun
to use them for employment, business, and financial needs.
Many of them have started to exploit digital modes of payment
and other financial activities with the help of mobile phones.
This has made their transactions easier and faster.

Banks and other financial institutions are being urged to help

the unbanked segments of society as part of the concept of
financial inclusion. By offering unique rates, exclusive
discounts, or other incentives, many of these institutions are
likewise focusing on helping women become financially
independent. For certain lending products, many banks provide
women subsidised or discounted interest rates. Women
depositors earn more interest on their deposits than males do
for savings accounts provided by specific banks and non-
banking financial corporations.

Financial technology (Fintech) and Financial Inclusion :

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Fintech, often known as financial technology, is the use of
cutting-edge technology in the financial sector or industry. The
emergence of financial technology, or fintech, has greatly
increased financial inclusion throughout the world. Numerous
fintech businesses in India are also working hard to streamline
the process of offering potential customers financial services.
Successful fintech businesses also provide financial services
and goods at low prices. Customers benefit greatly from this
because their costs are minimal and they can use their savings
to meet other demands.

Through the use of mobile phones, financial technology

businesses are enabling residents of rural areas to apply for
loans or open bank accounts. Many people in rural areas of
India have mobile phones, and some of them have access to
mobile internet, so they can use fintech services to obtain
trustworthy financial services.

Crowdfunding, digital payment systems, peer-to-peer (P2P),

electronic wallets, and other recent fintech innovations are just
a handful that people employ. Many people in both rural and
urban places are utilising these enhanced possibilities of
banking. But there are still a lot of untapped people who have
never dealt with a bank or any other type of financial institution.
It is challenging for these individuals to use any financial mobile
service.

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Many of these low-income individuals frequently fall victim to
financial con artists when they conduct financial transactions
using checks or cash. Additionally, when people go to bank or
NBFC branches to open an account or seek for a loan, they
can find up paying exorbitant branch fees. These costs may
include transaction costs, processing costs, money order costs,
etc. Banks, NBFCs, and fin tech firms are working together to
develop faster, easier banking procedures that will reduce extra
fees and charges in order to protect the poor from paying such
high prices for financial services. As these procedures develop,
it will be easier to include the underbanked or unbanked
members of society.

Financial Equality Using Digital Payments :

They can also use electronic payment wallet systems to pay for goods
and services in their local neighbourhoods. The Indian government has
introduced numerous electronic wallet platforms via smartphone apps,
including Bharat Interface for Money (BHIM), Aadhaar Pay, and many
others.

Wallets that can be used electronically, such mobile phones, are referred
to as electronic wallets, or e-wallets. Physical wallets are replaced by
these ones. Both online and offline methods are available for users to
use to make cashless payments. To conduct transactions, he or she
must download the e-wallet application to their smartphone. These e-
wallets can be used to pay for groceries, e-commerce sites, mobile
recharges, utility bill payments, etc.

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When customers use many digital financial instruments, they often come
with alluring deals and discounts. For the portions of society who are
less fortunate economically, these are both immensely beneficial and
new. They may take advantage of deals, get cashback alternatives, and
get incentives. These bonuses will enable users to make significant
financial savings.

Scope of Future Research

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Since new firms and technologies have altered the way people think
about banking and money, the fintech industry has grown rapidly.
Experts predict that the future of fintech will involve even more
innovation, with a greater focus on providing seamless, all-
encompassing financial services and removing traditional barriers like
high fees and onerous regulations. Therefore, in the future, as this shift
occurs, researchers can examine how commercial banks perceive their
involvement in producing this intriguing new environment. By working
with innovative businesspeople and utilising their own resources to adopt
new technologies, banks should make sure they remain at the forefront
of the financial services industry.

Future Fintech Prospects for Financial Inclusion

It is impossible to emphasise the significance of MSMEs as a key

economic engine and provider of jobs. Additionally, Fintech can reach
out to a big market of underserved/unserved populations. Elite
consumers in Tier-I and Tier-II cities in India are currently the only places
where this game-changer for inclusion is available. Innovation for the
mass market is urgently required in order to overcome issues like
restricted regulatory policy, a lack of financial and digital literacy, and
others. A Fintech organisation is solely responsible for maintaining
relationships with SME consumers despite delinquencies. The issue of
late payments in finance, particularly in the MSME sector, is comparable
to being an occupational hazard that cannot be eliminated. The secret,
though, is in keeping an eye on the wider picture, making sure that
partnerships continue, and remaining resilient. In addition, a lot of foreign
investors are interested in the Indian Fintech market since they want to
profit from the GDP growth of the nation. Strong foundations are being

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laid for synergies between Fintech and MSMEs by initiatives like "Digital
India," "Make in India," the recent demonetization drive, and the effort to
make India a cashless economy.

The Indian Market for Financial Services and Technology

Simply said, Fintech refers to the range of financial services that can be
made accessible through digital channels. There have been numerous
effects of this recent disruption in the banking and financial services
industry.

Scope for Growth in India

Currently, fintech service providers are altering how businesses and

consumers deal on a regular basis. The amount of money invested
globally in Fintech businesses has been growing at an unprecedented
rate, tripling to US$ 12.2 billion in 2014 from US$ 4.05 billion in 2013,
and reaching US$ 19.1 billion in 2015. The size has been significantly
less in India, but growth rates have been comparable. Investment in the
country's Fintech sector increased by 282% between 2013 and 2014
and reached US$ 450 million in 2015.

Additionally, India has a sizable untapped market for financial service

technology businesses because 87 percent of payments are performed
in cash and 40 percent of the population is not already connected to a
bank. The development potential for fintech in India cannot be
overestimated, since internet penetration is rapidly rising and mobile
usage is anticipated to rise from current levels of 53 percent to 64
percent by 2018. Additionally, according to some estimates, up to 90%
of small firms are not affiliated with conventional banking institutions.
These institutional and service access gaps present significant

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opportunities for the development of Fintech solutions (such funding and
finance management) and the expansion of the market.

Electronic Identification

Aadhaar, which means "foundation" in Hindi, was the name given to the
biometric digital ID system that was introduced in 2010 as the initial
stage in the stack's development. At enrollment centres across the
nation, the government launched a campaign urging citizens to get their
photos, fingerprints, and other biometric data recorded. A 12-digit
identification number was given to each person that they could use to
access a variety of services. Surprisingly, in less than a decade, 1.2
billion people—nearly 90% of India's population—registered for a digital
ID, with about half of them connecting their new ID to their bank account
(see chart 1). Legal restrictions on the required use of digital IDs helped
safeguard individuals' right to privacy.

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Prior to the implementation of Aadhaar, sporadic record-keeping left
almost half of the population without a widely recognised ID card.
Authentication for a patchwork of services could be provided by
documents like driver's licences and voter identification cards. However,
providing banking and other services was expensive due to the difficulty
of identification verification. Who would lend money to a person whose
identity was unknown, after all?

Aadhaar has the potential to revolutionise banking, according to India's

central bank. It created an electronic process that allowed commercial
banks to instantaneously confirm a new customer's identity using the
Aadhaar database. These biometric checks reliably confirm the holder's
identity, lowering the possibility of fictitious identities and fraudulent
claims. To give every household in India access to a bank account, the
Pradhan Mantri Jan Dhan Yojana, an ambitious financial development
initiative, was introduced. 166 million people opened accounts through
the programme in just one year. By 2019, it had increased to
approximately 384 million.

People may receive government benefits straight into these newly

created accounts, and they could easily access their money using debit
cards or smartphones. It demonstrated a remarkable acceleration of
conventional financial development. In India, only one in three citizens
held a bank account a decade ago. It has taken over 50 years for similar
financial access increases elsewhere (D'Silva and others 2019).

But convincing individuals to open bank accounts was just the

beginning. According to Demirguc-Kunt and others (2018), India has the
largest percentage of dormant bank accounts in the world, meaning they
never receive a deposit. The stack needed to be expanded in order to
advance farther.

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Interoperable Payments

While the government was extending access to bank accounts, India's

rapidly expanding fintech companies were introducing mobile money and
digital wallets. Even for people without a bank account, these
advancements made it affordable and convenient to keep and transfer
money digitally. The authorities responded by coming up with a new
idea. They added a new layer to the retail payment system called the
Unified Payments Interface (UPI) so that banks and nonbank companies
could communicate and exchange payment orders. This created India
Stack's second tier.

With the new system in place, small business owners and street vendors
who don't have bank accounts could still be paid for their goods and
services using a digital wallet. As long as the recipient also had a digital
wallet, they could send money instantaneously to someone else—say, a
poor relative in a far-off village. Transfers like these would typically take
days or even weeks in many other nations, especially those with
emerging economies, and involve depositing money at a faraway bank
office and paying exorbitant transfer fees.

A key component of the system, just like with the Aadhaar digital ID, was
interoperability: users may conduct transactions with any financial
system actor, big or little, public or private. Fintech companies had to join
with banks or secure unique licences in order to take part in the UPI. The
central bank was able to promote financial inclusion while preserving
stability by keeping all players under the regulator's watchful eye. The
system has quickly grown, and major tech companies have entered it
with speed. In India, the UPI is now the primary method of small retail
payments.

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53 | P a g e
 Conclusion

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The reduction of poverty, the encouragement of balanced economic
growth, and the maintenance of economic stability all depend on
financial inclusion, it is commonly accepted. Many people in developing
countries lack access to even the most basic banking services. They
originate primarily from Asian and Middle Eastern nations. For millions of
people, especially those who reside in India's most remote and rural
areas, the provision of basic financial services like banking is still mostly
out of their grasp. In order to accomplish financial transactions and raise
one's standard of living through investing in the establishment of new
businesses or initiatives linked to self-employment, one must utilise
financial technology and services related to mobile money. The quick
progress being made as a result of these activities is being aided by the
sharing economy, regulation, and information technology. Despite this,
the discipline of fintech research is still in its infancy. Financial inclusion
is seen by policymakers as a top development goal in the majority of
still-developing countries.

This research adds to the body of knowledge about the challenges of

utilising fintech for financial inclusion, especially for those living in rural
India who are economically disadvantaged. The most significant result of
this empirical study was the model that included rural communities'
involvement into financial decision-making. Additionally, the researchers
came to the conclusion that customers who are intended to use fintech
services to participate in financial inclusion should always try to conduct
transactions using fintech-based mobile services. This conclusion was
supported by results from the structural equation modelling and route
analysis. They enjoy how user-friendly these services are and have no
intention of ceasing to embrace fintech for financial inclusion. The
majority of respondents use financial inclusion services based on fintech

55 | P a g e
on a regular basis, and they believe that doing so has improved their
profitability and savings while also allowing them to send money to
anyone in the world at a reasonable cost. People who live in rural India
believe that fintech may be used to boost rural income and improve
access to financial services for rural citizens. An earlier study also
revealed this.

Fintech is perceived as being easy to understand in rural India. They

have also been influenced by the people around them, especially those
who anticipate them to use fintech-based financial inclusion services.
Many users agreed that utilising the services for financial inclusion
provided by fintech companies has become routine. People believe that
the service charges related to financial inclusion based on fintech are
reasonable and offer good value for the money paid. When it came to
the delivery of fintech services, they also demonstrated faith in
situational facilitators. However, they both agree that it is crucial to
proceed with the utmost caution when dealing with fintech-based
financial inclusion programmes. The findings of this study suggest that
fintech is significantly contributing to rural Indians' financial participation
in the economy. In fact, the use of fintech services is significantly
influenced by behavioural intention, service trust, usability, and social
influence.

Compared to other industries, trust issues are especially significant in

the fintech sector. The financial well-being of people is directly correlated
with the digital services that manage their money.

Trust is therefore essential, and fintech is providing it. This study's

findings are consistent with past studies.

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Only behavioural intention, service trust, usability, and social influence
were considered in this study. As a mediating factor, government funding
may have been brought up given how impressive it has been for Indian
fintech businesses.

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 Reference

https://www.imf.org/external/pubs/ft/fandd/2021/07/india-stack-financial-
access-and-digital-inclusion.htm
https://www.opengrowth.com/resources/role-of-fintech-in-accelerating-
financial-inclusion

https://www.financialexpress.com/money/rbi-promoting-financial-
inclusion-through-fintechs-in-india/2872117/

https://www.opengrowth.com/resources/role-of-fintech-in-
accelerating-financial-inclusion

http://data.world bank.org/products/data-books/little-data-book-
on-financial-inclusion

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extension://efaidnbmnnnibpcajpcglclefindmkaj/https://serialsjournals.com
/abstract/22608_8rajat_hari_om_mehrotra.pdf

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