Fintech and MSMEs are together changing the face of digitization
The fintech space has seen tremendous success in the Asia-Pacific region over the past five years and has evolved further during the pandemic.
India offers a dynamic setting for fintech startups to become billion-dollar unicorns and quadruple in the next decade. India’s cash-driven economy has also responded positively to fintech advancements and helped entrepreneurs explore new solutions that could shape the future of fintech.
Fintech companies are also expanding into new categories, divisions and industries. They recognize the immense potential of MSMEs and the influence of small merchants on the financial ecosystem if they have the right tools for digital inclusion.
Small businesses are important but often overlooked. Around 99% of MSMEs are small retailers and contribute one-fifth of India’s GDP, employ much of the global workforce and complement large industries.
While MSMEs offer a billion dollar prospect for fintechs, they often struggle to manage their finances and secure enough investments. However, the financial revolution in India has offered MSMEs the optimism needed for rapid growth and relief from their problems.
The rapid growth of point-of-sale (PoS) platforms from a simple mechanical checkout counter to a digital sales management platform illustrates how fintech can disrupt the MSME sector. Last mile retailers can manage inventory, sales and customer relationships from a single platform. Today’s digital PoS systems are cloud-based, accept multiple payment options, and offer loyalty programs, catalog design, and more.
SoftPoS and mPoS have helped small stores. Other solutions that have changed MSMEs recently include transaction delivery, market finance, payment gateway, digital payment wallet and small loans. Most of these solutions use automation, big data, or machine learning to solve problems and provide a dynamic ecosystem.
Fintech companies go beyond simple innovations to develop all solutions in one place. The goal is to establish a vibrant digital ecosystem that enables last mile retailers to grow using digital tools. For example, tap and pay is a contactless payment mechanism used by merchants to accept credit/debit, UPI, QR codes, and e-wallets. Everything is available on mobile phones, so retailers don’t need physical infrastructure.
Fintechs are also helping small retailers build online catalogs and accept digital orders. After India’s 1.0 unlock phase, these platforms grew rapidly due to customers’ desire for digital transformation.
Small merchants see fintech as a way to access loans, insurance and banking services, not just digital payments. Fintechs can speed up slow finance and cash flow procedures, boosting the growth of MSMEs. No-code APIs support a simple and transparent lending process and can help small businesses access finance.
Neobanks are another growth secret among MSMEs. MSMEs have always been concerned about banking services, including loan repayments and credit financing. Long ago, most MSMEs relied on informal channels to borrow. Those who used the banks had to go through laborious processes that did not meet their needs. Neobanks offer transparent and individualized financial services for small merchants. Neobanks offer digital bookkeeping, tax and bill filing, and other financial services.
Mobile payments are now just one point in the vast puzzle of digital infrastructure for fintech. Fintechs want to contribute to anything that improves the consumer experience and promotes digital financial inclusion. Accordingly, they are betting on the power of AI, machine learning and big data to drive growth and innovation in the MSME sector.
Initially, the main objective of fintechs was to use technology to improve the provision of financial services. However, fintech is beginning to change the way individuals and businesses interact with finance. There will be a significant difference between what fintech provided when it emerged and what it will provide in the next ten years.
Fintechs recognize the untapped potential of MSMEs and are looking for new ways to develop solutions that can change the face of Indian small industry.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)