McKinsey release a new report supporting FundsTiger mission of “Democratization of Finance”. The report is named – DIGITAL FINANCE FOR ALL: POWERING INCLUSIVE GROWTH IN EMERGING ECONOMIES
It says that Finance is the New Frontier. Digital Finance can boost Indian GDP by 11.2% and add up to $2.1 Trillion to the overall Loan Availability in emerging economies.
Here is the Summary of Executive Summary of the Digital Finance Report for your benefit:
- 2 Billion individuals and 200 Million Businesses lack access to savings and credit in emerging economies, and even those who have access over-pay dearly for these services and very limited range of products. (We know because FundsTiger receives hundreds of applications from genuine small business borrowers who are doing well, are trustworthy but still cannot qualify for the loans from banks and have to look for alternate means!)
- Digital Finance can bump up the volume of Loans available by $2.1 Trillion to these businesses and individuals.
- Widespread use of digital finance could boost annual GDP of all emerging economies by $3.7 trillion by 2025, a 6 percent increase versus a business-as-usual scenario.
- Broadening access to finance through digital means can unlock productivity and investment, generate employment, reduce poverty, empower women, and help build stronger institutions with less corruption—all while providing a profitable, sustainable business opportunity for financial service providers. The benefits for individuals, businesses, and governments can transform the economic prospects of emerging economies.
- India’s share of digital payments is minuscule at just 1% compared with that of Norway which is at 78%. Success of digital payments is essential to make India a cashless (and hopefully corruption-less) society.
- Mobile and Digital Technologies brings extraordinary speed, accuracy of reach and tremendous disrupting power – and now the next frontier is Finance. (FundsTiger is playing at this frontier! Join us at FundsTiger. We are hiring!)
- As individuals and businesses make digital payments, they create a data trail of their receipts and expenditures, that enables financial service providers to assess their credit risk. The information allows providers to underwrite loans and insurance policies for a larger set of borrowers with greater confidence. Providers can also collect digital repayments on an automated basis—and send text messages to prompt borrowers when they have missed a payment. These soft digital nudges work wonders – and I know because FundsTiger is working with a big bank to facilitate this!
- The full suite of financial products – savings, credit, insurance and wealth management becomes cost effective and profitable even for people with low income and small businesses. Unit Economics become better and prosperity spreads.
- More people coming into digital world will create a positive network effect.
- MSMEs and Individuals in South Asia can gain more than $753 Billion in available loan products – much needed, and believe us there shall be huge demand for such loans.
- THREE BUILDING BLOCKS ARE ESSENTIAL FOR CAPTURING THE BENEFITS OF DIGITAL FINANCE: To capture the potential value of digital finance, three building blocks need to be in place: widespread digital infrastructure, dynamic and sustainable financial-services markets, and products that people prefer to existing, often informal, alternatives. Addressing all three can enable broad—and rapid—adoption of digital finance by the majority of individuals and businesses in emerging economies.
- THE NEXT HORIZON: DIGITAL FINANCE UNLOCKS NEW BUSINESS MODELS In the long term, the benefits of digital finance go far beyond expanding access, driving down costs, and increasing the convenience of transactions. There are huge opportunities for FinTech startups and other stakeholders to come up with new business models profitably and impact-fully. Digital Finance and Payments bring these advantages:
- Increased transparency and information about the users. Hence, new credit-scoring models that assess user data can help lenders assess the credit risk of a broader set of customers. Peer-to-peer (P2P) lending platforms can also emerge
- Digital payments allow people to transact in small volumes. Hence, over time they can enable e-commerce and on-demand services, building a wider economy reach.
Think of how many more small businesses might expand if they had access to credit. Picture the smallholder farmers who can finally get loans to buy the seeds, fertilizer, and farming tools needed to improve crop yields and boost incomes. And imagine, too, the enormous new business opportunities for small businesses, banks, telecoms companies, fintech players, retailers, or any company that harnesses the low costs of transacting digitally to serve a much broader customer base of individuals and businesses profitably.
Direct Link of McKinsey Site for Downloading of Full Report