[The following post has been authored by Harshita Lilani, a third year student of NALSAR University of Law. This essay is part of an ongoing collaboration between r – TLP and the NALSAR Tech Law Forum Blog and is the fourth post in the series. The first entry can be found here, and the rest of series is available here.]
Financial inclusion and inclusive growth have emerged as one of the main agendas in the past decade as several nations have become aware that sustainable and inclusive growth of all the sections of the society is important for a nation to prosper. By working parallelly with traditional financial institutions like banks, credit unions and insurance companies, Financial Technology or ‘FinTech’, claims to enhance financial inclusion by offering novel products that are better tailored to consumers’ needs at a lower cost. However, a wide ‘FinTech gender gap’ shows that women are significantly less likely to use fintech products or services offered by the fintech entrants than men. This article discusses this gender gap in the FinTech industry and analyses the existing government policies and initiatives that claim to regulate fintech with an aim to bridge this gap. Finally, it highlights the key regulatory and policy changes that are required to create an enabling environment for financial inclusion in India.
The FinTech Gender Gap
Women make up 1 billion of the 1.7 billion globally unbanked population, with a wide regional disparity in access, usage and persistent financial exclusion. According to a study, the global gender gap in access to financial services and FinTech in the emerging markets has remained stagnant at 9% for over a decade. Though there has been an increase in women’s share in bank credit in India in the recent years, bank credit to women has not grown as fast as credit given to men, resulting in a widening gender gap. This gender gap can be attributed to various barriers that exist for women though not limited to age, lower educational attainment, lack of financial literacy, low income, lack of documentation, trust in financial institutions, and the prevalence of different, often restrictive, social norms.
Although, Women’s World Banking has worked for years with financial service providers to design solutions with women in mind, these financial service providers use a gender-agnostic approach to product development. This approach focuses on ‘equal opportunities’, thereby missing the specific barriers that women face, leaving them unserved and left behind. As a result, financial service providers often default toward men’s needs and preferences, causing women to worry more about their privacy when dealing with companies online, and they are less willing to share their data with FinTech companies for better offers or more innovative products.
Policy and Government Initiatives
Interventions focused on improving gender-transformative outcomes need to explore the reasons behind barriers faced by women. For women to derive the benefits of improved income, prosperity and well-being, financial products and services need to be designed, delivered and serviced in targeted ways. The use of new technology alone cannot close this gender gap, and it needs to be accompanied by inclusive public policy that will determine the causes of the observed gap.
Through the introduction of a national identification system in the form of Aadhaar, e-authentication and other constituents of the India Stack and the JAM trinity, as well as impetus for digital transactions spearheaded by the National Payments Council of India and the Pradhan Mantri Jan Dhan Yojana, there has been development in infrastructure allowing rapid gains in improving access to financial services to the unorganized and underbanked segments of the population, especially women. However, certain enabling clarifications in the regulatory framework are required to augment the efforts of financial inclusion in India.
The RBI released guidelines for a regulatory sandbox, following the recommendations of the working group. These regulatory sandboxes allow financial regulators to mitigate future risks and potential problems by working with financial innovators. These sandboxes could promote gender-inclusive FinTech.
Utilizing government programs based on G2P (government to people) transfers, like CCT (conditional cash transfer) payments, pensions or other social transfer programs, to help catalyse fluid interactions between women and the financial sector, could support the use of more financial services, particularly for women in lower-income segments.
In light of the eight High Level Principles (HLPs) for Digital Financial Inclusion given by G20, a target driven policy needs to be framed for tackling the existing ‘FinTech gender gap’. This would include expanding the digital financial services ecosystem for safe, reliable and low-cost provision of these services to all relevant geographical areas, especially the underserved rural areas. Additionally, a comprehensive approach to consumer data protection that focuses on issues of specific relevance to digital financial services needs to be established. This is because women have been found to be more concerned about digital privacy and they also are less aware about potential threats posed by technology, data and interface design.
Lastly, there should be an urgency to enhance digital and financial literacy, in light of the unique characteristics, advantages and risks of the digital financial sector. Government programmes, like the Digital India and the National Digital Literacy Mission, are already in place to facilitate this goal of a ‘digitally empowered society’.
The COVID-19 pandemic and the resulting economic crisis have only emphasized the vulnerability of women – especially those from the low-income households, making financial inclusion critical as a means of recovery and building resilience in the long term. Women’s World Banking firmly believes that digital innovation and Fintech companies are the future of financial services, offering tremendous opportunities to drive access, and overcome several persistent obstacles to women’s financial inclusion. A gender-inclusive focus can contribute to successful business growth for FinTech companies, while also allowing them to deliver on the promise of expanded financial inclusion by ensuring that women are not left behind.
The promotion of micro-entrepreneurship through FinTech can further integrate women into the economic cycle. A few Indian FinTech platforms are already supporting MSMEs and SMEs that are working with women in rural areas in handicrafts, food, and healthcare. FinTech start-ups are using technology to promote entrepreneurship among rural women by extending differential financial solutions and enabling them to invest through low-interest microcredit; they also give out loans to small and medium businesses.
Finally, regulators, financial sector businesses and FinTech companies need to improve the presence of women in leadership positions. Gender parity in key decision-making bodies of corporations and institutions will help in realigning the focus towards increasing financial access by using technology.
FinTech-enabled financial inclusion can help women by enhancing their sense of self-worth, financial independence and the right to control their lives. This should be done in an enabling regulatory environment with appropriate security measures to ensure ethical and secure data handling.
Women are a vital part of economic recovery and growth, moving forward, and when given the appropriate financial tools, they can fuel the world economy. Now is the time to work together to champion support and invest in gender-inclusive fintech initiatives to chart a different course, one that breaks down the barriers women face in accessing financial services so that together we can build a more prosperous and equitable future for all.