Plugging gaps in basic infrastructure, such as creating a robust credit bureau system, is crucial for financial inclusion, said panelists at News Corp VCCircle FinServe 2016 held at Taj Lands End in Mumbai on Thursday.
There is a need to create a credit evaluation system for lending in the absence of data, said Kshama Fernandes, managing director and CEO, IFMR Capital. A lot of work needs to be done in the legal context to deal with situations where there are delinquencies. The government also needs to put in place a clear regulatory framework, she said.
Small finance banks and payment banks need to create physical infrastructure which other financial services can ride on in order to build scale towards inclusion, said Nilesh Shrivastava, who manages the financial institutions portfolio for South Asia at International Finance Corporation (IFC).
The panelists said there is a need to fight the perception that infrastructure would be created top-down led by Reserve Bank of India (RBI). Instead, all participants including the NBFCs and small banks would have to take the responsibility to build the infrastructure.
Delivering a keynote speech on ‘The role of capital and technology in taking financial services to a billion people’, Sushil Muhnot, chairman and managing director of Bank of Maharashtra, said mobile technology could reduce the cost of transaction for banks and contribute towards greater financial inclusiveness.
“A transaction at a bank branch costs Rs 37 which drops to around Rs 17 at an ATM. This drastically drops to Rs 1.5 for online transactions and to around 30-50 paise per transaction for mobile banking,” Muhnot said.
Mobile technology would therefore help the banks be more profitable and fintech companies can help banks reduce costs by avoiding cash transactions, he said.
Muhnot drew a comparison between banks and the FMCG industry, which has 10 million outlets in the country and has tackled the problem of last mile connectivity. Banks, on the other hand, have less than half a million outlets.
“For ensuring greater financial inclusion, banking has to be as simple as a recharge,” Muhnot said, adding, partnerships would help banks immensely in achieving its goal of financial inclusion.
V Vaidyanathan, founder and executive chairman of Capital First said changing consumer behaviour – an average user looks at his mobile nearly 81 times a day – can make fintech a great opportunity.
Fintech-based lending is likely to be a big trend by 2019-22, he said. However, a lot of back-end infrastructure development needs to happen—especially in the realm of data validation—to make this system work.
Several factors have facilitated the progress seen in the fintech space. “These include high internet and mobile penetration and an ecommerce system that is taking off, along with a relatively unbanked population and supporting infrastructure mechanisms like the Aadhar card,” he said.
The day-long event saw participation from nearly 250 delegates.
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