SUMMARY
Fintech in India today possesses the potential to bring about a digital transformation in the furthest corners of rural India
Neobanks are bridging the gap by making banking services more accessible to people in remote areas
Emerging fintechs and neobanks should begin to look into developing strategies for utilising the 5G network to serve the remote customer base in India
With technological progress, the financial ecosystem has become highly digital. Mobile devices have become an inseparable part of day-to-day life. Today, mobile devices with 5G technology are capable of performing a variety of tasks that were once possible only, if at all, on a personal computer.
However, the digital revolution in India is largely led by the urban population. Rural areas have been lagging behind in terms of digital penetration. Relatively speaking, the internet is still an experience enjoyed primarily in urban areas due to poor connectivity in the rural part of India.
5G has the potential to solve this challenge when the infrastructure is in place. Fintech in India today possesses the potential to bring about a digital transformation in the furthest corners of rural India, similar to what the rest of the country has seen in the past couple of decades.
Why 5G For Rural Areas?
5G is different from 4G in terms of speed, capacity, and latency. It will be much faster than 4G, with a speed of up to 10 gigabits per second. It will also have greater capacity, meaning that more devices can be connected to the network at the same time. Finally, it will have much lower latency, meaning that there will be minimal delay in communication.
5G will help rural areas in terms of finances by providing them with access to high-speed internet. This will allow businesses to connect to customers in rural parts of India. In addition, 5G will allow for the development of new applications and services that can be used by businesses in rural areas.
Due to the lack of internet penetration in tier III and tier IV towns, there is a lack of awareness amongst the rural dwellers about the convenience that technology enables for financial services such as getting a loan in a few clicks or paying electricity bills through UPI apps.
With access to high-speed internet, digital financial service providers will explore opportunities to bring the next billion people into the digital ecosystem and hence make economical benefits in the process.
This will naturally lead to a greater extent of financial inclusion since it will serve the underbanked and unbanked population of India.
Another benefit of 5G deployment in rural areas is its transmission in long-range, low-bandwidth frequencies. The high end of this spectrum will result in a raging download speed, fast enough to transfer video of 1 GB within a minute. This increase in video streaming speed can be used by fintechs in doing video KYC verification as most rural dwellers may not have digital copies of all their documents.
This network will allow a higher density of mobile broadband connections and will process high volumes of data per unit of time. Most importantly 5G can download the same data in a fraction of the time 4G can which is a big use case for rural areas where power cuts are common. All these factors will contribute to lowering the cost of data and hence greater adoption.
As for businesses, 5G will make it easier to access cloud services thus enabling faster development of fintech products. This increase in speed will also minimise the wait time taken by the banking applications to perform complex processes such as ID verification, customer onboarding, and transaction tracking.
How Neobanks Are Bridging The Gap
Neobanks are digital alternatives to traditional branch-based banks. With the advent of the Digital India movement, urban millennials have gotten used to doing all their banking activities via mobile applications. Whether it be a small businessman migrating from a physical khata to a mobile app to maintain a ledger, or a student sending money abroad for education fees; most things are possible via mobile applications.
The story of rural India’s banking is different than that of urban India. There is a limitation in accessibility in remote areas as banks don’t find it economically viable to set up branches in remote regions. With the emergence of 5G, a wide range of products and services will become available to regions with sparse populations, thanks to better unit economics in operating digital platforms vis-a-vis physical branches.
According to a survey by Gaon Connection, loan schemes don’t reach more than 60% of the rural population. One of the biggest reasons rural dwellers aren’t able to get business loans when needed is that they do not have a savings account.
Most rural populace prefers keeping all their savings at their home as most times they have difficulty accessing a bank branch. At the same time banks typically require collateral in the form of a savings account before they will give out a loan. Without a savings account, villagers are not able to get loans to start or expand their businesses.
This lack of access to capital is one of the biggest reasons why poverty is so prevalent in rural areas. Neobanks are changing this by providing banking services to villages and small towns digitally and by not being tied to traditional brick-and-mortar banking infrastructure.
This means that they can offer banking services in areas where the penetration of physical banks is low due to the higher cost of operation. The catalyst for this transformation will be 5G which can be used by the rural population to easily access banking services via fintech mobile applications.
Way Forward
Neobanks are bridging the gap between villages and cities by making banking services more accessible to people in remote areas. By doing so, they are empowering people in these communities to participate in the formal economy and to access financial services that can help them to improve their lives.
The emergence of 5G will give birth to many possibilities for the inclusion of rural communities in the fintech market. Though it is hard to say exactly when 5G will be available everywhere in India, the deployment of the 5G mobile network has already started. Emerging fintechs and neobanks should begin to look into developing strategies for utilising the 5G network to serve the remote customer base in India.
