Fintech for MSMEs The Changing Face of Financial Inclusion in India-Sameer Chugh

The rapid evolution of point of sale (PoS) systems from a simple mechanical cash register to a digital retail management system is the best example of the disruption fintech can cause in the MSME industry.

FinTech – a powerful contraction of finance and technology – has been a huge hit in the Asia-Pacific region over the past five years and has evolved dramatically during the pandemic. India has developed a vibrant ecosystem for fintech startups to thrive into a billion dollar unicorn and lead quadruple growth over the next decade. India’s traditionally cash-driven economy has not only responded well to fintech innovations, but has also facilitated an enabling environment for companies to discover new products that could potentially shape the future of fintech.

Whether it’s deepening categories, exploring new segments, and empowering other industries, fintech companies are chasing multiple dreams. Most importantly, they realize the vast potential of MSMEs and the impact that small traders can have on the economy if they have the right tools that promote digital inclusion. Today’s FinTech companies are ready to design tailor-made solutions that address any problem and allow MSMEs to reach their full potential.

Fintech for small businesses

Micro, small and medium enterprises present a billion dollar opportunity for fintech. Small businesses are a crucial but often overlooked part of the Indian economy. There are around 63 million MSMEs, of which 99% are small traders. They account for a quarter of India’s GDP, employ a large portion of the global workforce, and complement major industries. However, in countries, MSMEs often face the problem of managing their finances and securing sufficient funding. But, the fintech revolution in India has given millions of MSMEs hope to solve all the problems and ensure rapid growth through a favorable regulatory environment.

The rapid evolution of point of sale (PoS) systems from a simple mechanical cash register to a digital retail management system is the best example of the disruption fintech can cause in the MSME industry. Last mile retailers can automate and manage a range of functions including inventory, sales, customer relationships, and more from a single platform. New mobile point-of-sale systems run on the cloud, support multiple payment methods and offer a range of features such as loyalty programs, catalog design, and more.

SoftPoS and mPoS are among the many disruptions that have made life easier for small traders. Other solutions that have recently transformed MSMEs include transaction delivery, market lending or peer-to-peer lending, payment gateways, digital payment wallets, small note lending, and more. Most of these solutions take advantage of automation, big data or machine learning to solve individual problems. points and provide a vibrant ecosystem.

However, fintech companies have recently looked beyond single innovation to develop all solutions under one window. The idea is to offer a dynamic digital ecosystem that allows last mile traders to expand and grow their business activities using digital tools. Take, for example, the tap and pay service, the most advanced contactless payment method. Merchants can take advantage of the “Tap and Pay” service to accept all kinds of digital payments, including credit / debit, UPI, QR code or digital electronic wallets. The most exciting part is that traders don’t have to maintain physical infrastructure; everything is available on smartphone. It’s like carrying the world of digital payments in your pocket.

FinTechs are also facilitating platforms that allow small merchants to create an online catalog for their products and accept customer orders digitally. These platforms have seen tremendous growth after the 1.0 unlock phase in India, typically driven by customer demand for digital transformation.

FinTech beyond payments

Small traders don’t see fintech as a catalyst for digital payments, but rather as a catalyst for a complete digital ecosystem that can empower them with lending, insurance and banking. Fintechs can revolutionize slow and delayed finance and cash flow processes, opening up many growth opportunities for MSMEs. Over the past few years, there has been a significant increase in code-free APIs that promote a convenient and transparent lending process and potentially increase small businesses’ access to finance.

The growing use of neobanks among MSMEs is another secret ingredient for growth. MSMEs have always had significant concerns about banking functions, including loan repayments and credit financing. Therefore, for a long time, most MSMEs have used informal channels to meet their credit needs. Even those who used banking services were caught in tedious processes that did not meet their financial needs. Neobanks offer transparent, often personalized banking services, taking into account the individual needs of small traders. In addition, neobanks also offer various digital tools for keeping books, filing taxes and invoices, and other relevant financial services.

For fintechs, digital payments have only become a tiny part of a huge digital infrastructure puzzle. Fintechs want to facilitate anything that can improve the customer experience and drive digital financial inclusion. Therefore, they are leveraging the power of artificial intelligence, machine learning, and big data to drive innovation and growth in the MSME sector.

Initially, the main goal of fintech was to leverage technology to improve the delivery of financial services. However, now fintech is starting to change the way businesses and people interact with finance. There will be a sea change in what fintech offered when it first started out and what it is set to deliver over the next ten years. Fintech are realizing the untapped potential of MSMEs and exploring new opportunities to develop solutions that can change the face of Indian small industry.


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