FINTECH
SKILL OFFERING ID:2280
AN INVESTIGATION OF THE BENEFITS OF DIGITAL FINANCIAL INCLUSION IN
CHENNAI DURING 2020-2023
PROJECT SUBMITTED TO:
UNIVERSITY OF
MADRAS/ NAAN
MUDHALVAN
YEAR:2023
DEPARTMENT: BACHELOR OF COMMERCE (Accounting and
Finance)
SEMESTER: VI
GROUP NUMBER: BCOM006
MEMBERS OF THE GROUP
[Link].K - [Link]
[Link].R - [Link]
[Link] N.M - [Link]
[Link].P - [Link]
[Link].R- [Link]
GUIDED BY
[Link] [Link].,[Link].,Ph.D
SPOC NAME
DR. P. PARIMALA [Link]., [Link]., Ph. D
CHAPTER .1
1.1 FINTECH INTRODUCTION:
Financial technology (better known as fintech) is used to describe new
technology that seeks to improve and automate the delivery and use of
financial services.
At its core, fintech is utilized to help companies, business owners, and
consumers better manage their financial operations, processes, and lives.
It is composed of specialized software and algorithms that are used on
computers and smartphones. Fintech, the word, is a shortened combination
of “financial technology.”
When fintech emerged in the 21st century, the term was initially applied to
the technology employed at the backend systems of established financial
institutions, such as banks.
From 2018 or so to 2022, there was a shift to consumer-oriented services.
Fintech now includes different sectors and industries such as education,
retail banking, fundraising and non-profit, and investment management,
etc….
CHAPTER.1
1.2 INTRODUCTION:
digital technology has accelerated the pace of financial inclusion through the
introduction of innovative business models and the progressive digitization of
financial systems. In a rapidly digitizing country like India, it is evident that Digital
Financial Services (DFS) hold the promise of bringing financial inclusion to the last-
mile and reaching the most vulnerable, marginalized, and remote populations of the
country. However, several challenges need to be overcome to ensure that these
efforts reach the marginalized and prevent further exclusion.
India’s overall rate of adoption of digital tools is the second fastest in the world
(trailing behind Indonesia) and, in absolute terms, the number of digital users in India
is second only to China. Data from the Telecom Regulatory Authority of India (TRAI)
shows that there are 726 million digital users as of September 2020, which is an
impressive 278% growth from September 2016. The increase is driven by mobile
internet users, who account for more than 95% of total internet users. Yet, in a
country of over 1.3 billion people, these numbers account for little more than 50% of
the population, which suggests that there is significant untapped potential for further
digitization and with the right interventions, the number of “newly digital” users is
likely to increase in the coming years.
CHAPTER .2
2.1 OBJECTIVES OF THE STUDY:
a) Financial inclusion intends to help people secure financial services and
products at economical prices such as deposits, fund transfer services, loans,
insurance, payment services, etc.
b) It aims to establish proper financial institutions to cater to the needs of the
poor people.
c) These institutions should have clear-cut regulations and should maintain high
standards that are existent in the financial industry.
d) Financial inclusion aims to build and maintain financial sustainability so that
the less fortunate people have a certainty of funds which they struggle to
[Link] inclusion also intends to have numerous institutions that offer
affordable financial assistance so that there is sufficient competition so that
clients have a lot of options to choose from.
e) There are traditional banking options in the market. However, the number of
institutions that offer inexpensive financial products and services is very
minimal.
f) Financial inclusion intends to increase awareness about the benefits of
financial services among the economically underprivileged sections of the
society.
g) The process of financial inclusion works towards creating financial products
that are suitable for the less fortunate people of the society.
h) Financial inclusion intends to improve financial literacy and financial
awareness in the nation.
i) Financial inclusion aims to bring in digital financial solutions for the
economically underprivileged people of the nation.
2.2 FEATURES OF DIGITAL:
a) UPI enables personal mobile to be used to be used as a primary device for all
payments including person to person, person to entity, and entity to person.
Using UPI. users can seamlessly make or request payments with ease and
security to/from friends,merchants or pay their bills etc. without the need to
share banking credentials. User can consolidate multiple banking
relationships using a single UPI App which makes for good user experience
for users.
b) The payment can be initiated both by sender (payer) and receiver (payee).
this enables a personal mobile to be used to “pay” someone (push) as well as
“collect” from someone(pull).
c) UPI allows users to create their unique virtual payment address thus enabling
users to make payments only by providing a payment address without the
need to provide sensitive details like bank account numbers or credentials on
third party applications or websites.
d) The payments can be done using multiple identifiers like virtual payment
address, Aadhaar UPI provides a standard set of APIs to enable transactions
on UPI platform, thus enabling a fully interoperable system across all banks,
financial institutions and payment systems without having silos across all
banks, financial institutions and payment system without having silos and
closed systems. These minimalistic and fully functional APIs allows
innovations by payment service providers to build customized payment
solutions for businesses and functionality rich mobile apps for consumer’s
without having to change the core API structure.
e) UPI uses One-click 2-factor authentication for safe and secure payments
using a personal mobile phone without the need for any separate acquiring
devices or physical tokens.
2.3 SCOPE OF THE STUDY :
the Indian Banking sector has witnessed the scaling of Fintech to new heights with
varied banking products and services assisted with technology. One among them
being the digital payments and lending. Chennai is also catching the pace to the role
of fin tech in banks services by including to the list of fin tech hubs of Delhi, Mumbai
and Bangalore, the tech city of India, Chennai was seen quite successful with start-
ups like [Link], Bank Bazaar, Credit mantra, Kaleidofin, FundsIndia.
However, the banks are looking at Digital Fintech services as a strategic tool to bring
financial inclusion and for this bank need to be strong enough to overcome the
challenges. limitations in credit, smart automation, financial planning, cybercrime,
crossing digital divide etc. Customers need to be made aware of the benefits like
transparency, payment methods which are easy to use, most importantly being the
smooth banks quick and faster lending.
2.4 NEEDS :
a) Digital platforms enable clients to send and receive payments and as well as
store information electronically through the digital transfers device that
transmit and link to a bank or non-bank authorized to save electronic value.
b) Customers can utilize mobile banking services that transfer information to a
digital device like a point-of-sale terminal.
c) Through retail mediators who have a digital connected device to transfer the
information, customers can change cash into electronic storage value ("cash-
in”) and subsequently change stored value in return into cash ("cash-out").
CHAPTER.3
3.1 RESEARCH AND METHODOLAGY :
Banks have started to invest their own capital in FinTech start-ups thereby creating
in house venture capital. But this has given banks a challenge to tackle the
traditional structures and legacy systems, which is quite expensive to develop and
maintain as it requires technology and specialists to operate the new system.
Technology has always been an enabler for banks to bring in innovative products,
but this has been slow due to the complexity of business and strict regulatory and
compliance environment Banks need to have good management of the cyber
security regulations and management of data. Employee's feel cyber security is the
major problem for the use of fin tech in lending. As per the factor loading, employees
perceive use of big data and integration and the use of artificial intelligence to be an
issue. Security issues and data privacy, block chain integration, emergence of new
risk like strategic risk, compliance risk. operational risk, cyber risk along with the
digital divide between the traditional methods and customers has aroused doubts on
the reliability of the new system. New methods have made the regulations quite
stringent and strict. Banks find it difficult to comply with the government regulations
for all their loan disbursements. Technology is not new to customers now and they
find lack of mobile and technological expertise not to be causing much harm to the
employees. Shift in consumer expectations and the focus on technology has given
new lead to the fintech companies: They have spread the gains of economic growth
to other sectors by offering unique financial products.
3.2 TYPES :
a) online banking, online payment and transfer services.
b) peer-to-peer lending.
c) personal investment advice and services.
3.3 DATA COLLECTION TOOLS
a) Access to real-time information.
b) Better decision-making.
c) Freedom.
d) Ease and efficiency.
e) Flexibility.
f) Transparency of information.
g) Integration of financial management into other business operations.
CHAPTER 4
4.1 ANALYSIS & DISCUSSIONS
a) I Impact of demographic variables on the various challenges of fin tech.
b) In order to test whether there is any significant difference between the male and
female employees towards the various challenges of fintech.
c) students t test was performed on the four factors identified, employee’s response
towards digitalisation and technology adoption, external concerns relating to
fintech, problems associated with the employees and problems associated with
the customer. Objectives of Financial Inclusion
d) Financial inclusion intends to help people secure financial services and products
at economical prices such as deposits, fund transfer services, loans, insurance,
payment services, etc.
e) It aims to establish proper financial institutions to cater to the needs of the poor
people. These institutions should have clear-cut regulations and should maintain
high standards that are existent in the financial industry.
f) Financial inclusion aims to build and maintain financial sustainability so that the
less fortunate people have a certainty of funds which they struggle to have.
g) Financial inclusion also intends to have numerous institutions that offer affordable
financial assistance so that there is sufficient competition so that clients have a
lot of options to choose from. There are traditional banking options in the market.
However, the number of institutions that offer inexpensive financial products and
services is very minimal.
h) Financial inclusion intends to increase awareness about the benefits of financial
services among the economically underprivileged sections of the society.
i) The process of financial inclusion works towards creating financial products that
are suitable for the less fortunate people of the society.
j) Financial inclusion intends to improve financial literacy and financial awareness in
the nation.
k) Financial inclusion aims to bring in digital financial solutions for the economically
underprivileged people of the nation.
l) It also intends to bring in mobile banking or financial services in order to reach
the poorest people living in extremely remote areas of the country.
m) It aims to provide tailor-made and custom-made financial solutions to poor people
as per their individual financial conditions, household needs, preferences, and
income levels.
n) There are many governmental agencies and non-governmental organisations
that are dedicated to bringing in financial inclusion. These agencies are focussed
on improving the access to receiving government-approved documents. Many
poor people are unable to open bank accounts or apply for a loan as they do not
have any identity proof. There are so many people who live in rural areas or tribal
villages who do not have knowledge about documents such as PAN, Aadhaar,
Driver’s License, or Electoral ID. Hence, they cannot avail many of the services
offered by governmental or private institutions. Due to lack of these documents,
they are unable to avail any form of subsidies offered by the government that
they are actually entitled to.
o) Goals of Financial Inclusion for Women Empowerment
p) Financial inclusion is very particular about including women in financial
management activities of a household. Financial inclusion believes that women
are more capable of handling finances efficiently when compared to men of a
house. Hence, financial inclusion activities target women by helping them get
started engaging in financial management. There are many houses where
women are not permitted to be involved in managing money. They are controlled
by the men of the house and are asked to take care of only the domestic .
q) Many conservative people in India believe that women are not capable of
handling money. With the help of financial inclusion, the government, as well as
non-governmental agencies, intend to get rid of this mentality.
r) Financial inclusion is encouraging women to take up more employment
opportunities and be financially independent. It also explains that women will not
have to rely on men for money.
s) They also do not have to wait for men’s permission to do anything.
t) Financial inclusion intends to empower women belonging to low-income groups
by increasing financial awareness among them. Women are also taught in simple
ways to save their money for future purposes. They are provided with exposure
to multiple affordable savings instruments. They are also taught about the various
forms of credit available in the market. These forms of credit will help them start
up a new small business venture or take up a training course to apply for
a new occupation
HO: There is no association between demographic variables and the positive
impact of fintech in lending.
CHAPTER.5
5.1 CONCLUSION
The entry of fin tech has paved the way for building a strong banking system with a good
indication for financial inclusion. However, the other side of the fin tech explains the
predicament faced by the system. The first round of fin tech revolution was spear headed by
the various financial institutions, but the second generation of fin tech has to be implemented
with a slight hesitation on the part of the authorities. Whatever radical measures are
introduced it may not yield the desired results, unless the management of these start-ups are
strengthened, and the procedures are tightly plugged off. The implementation of fin tech has
given various benefits like use of artificial intelligence, chat bots, faster service, user of block
chain etc. In spite of these benefits from fintech, start-ups are encountering various hurdles
like resistance form the employees and customers, lack of training, limited infrastructure,
capital, increased customer expectations, cyber security followed by global competition, poor
maintenance, inadequate control etc. These problems have created boule necks in the
proper implementation and benefits have not been enjoyed to the full extent. Fintech start-
ups need to become conscious that they are entering a challenging environment and will
have to redefine their position with the Banking sector. Forward planning, continuous
research and leveraging consumer data while making financial products and services can be
vital to establish a strong market with Finte1.
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