How will digital payment change the future scope of microfinance? (2024)

All financial institutions, like banks, stockbrokers, insurance companies, and micro-lending companies, are at the top of their performances. The credit goes to digital payments. Digital payment systems have brought a revolutionary change to the mindset of people around the world. The level of convenience in exchanging economic values has changed unbelievably. Yes, most of us would not have imagined such a huge transformation in our economic lifestyle. From a single individual to public sector enterprises, the result reflects everywhere.

In this article, we’ll discuss the most important topic: the future of digital payment in microfinance, covering benefits and recommendations.

Digital payments exceed our expectations

Businesses have the most convenient way to interact with banks economically, staff members, suppliers, and new markets. By saving money and time on travel, these technologies help hasten registering businesses and making payments for company licenses and permits.

One easily gets access to savings and loan accounts. Employees get wages electronically, which can speed up payroll processing and lower costs. The lack of bank accounts, digital gadgets, and dependable technology infrastructure presents difficulties for many business owners and employees.

Digital payments strengthen economic standards. Here’s how.

• By simplifying, securing, and lowering the cost of financial transactions with clients, suppliers, and the government, digital payments can boost an entrepreneur’s profitability.
• Employees gain from digital wage payments, and companies find them to be safer and more economical.
• Digital payments immediately provide users with a credit history, which can make it easier for business owners to get credit.
• Digital payments allow female business owners more control over their income, perhaps helping their entire family, especially the kids.
• Digital payments help individuals to fulfill their small financial needs by quickly borrowing money from their lending partners.
• Paying outstanding amounts, EMIs, and getting timely updates on due dates is very simple now through smart digital payment apps.

What would the perfect digital payment system of the future look like?

In order to complete the cycle and create a collaborative network, it is important to engage with merchants and other service providers apart from microfinance companies. A crucial aspect that has caused debate in many financial markets is verifying identity. It has been tried out in a variety of ways but hasn’t yet found the most efficient mechanism. Digital payment systems have been helpful for microfinance businesses owing to their following benefits:

• Added-value services
• Progress in technology
• Acceptance of contactless payments increases
• Cross-border payments are being transformed by banks and microfinance companies.
• The Data Privacy Act is in effect
• The functioning of payment gateways and their integration with other payment intermediaries

How will microfinance companies benefit from the cycle of value?

We regard financial services with a digital foundation as the industry’s new nerve center. Digital payments through mobile wallets will become the new norm where mobile phones will make electronic transactions more practical given the widespread use of mobile devices and the rise in the number of websites throughout the world. A few future predictions describe the future scope of digital payments in the microfinance industry.

• By 2023, around 1.31 billion consumers will use mobile payment systems for their cashless transactions, according to the source Emarketer.
• The industry expects the global market for mobile payments to reach $3 trillion by 2024.
• The adoption of mobile payments will increase at an unabated rate of 26.93% CAGR between 2020 and 2025.

Here, a fully developed, mature digital payment platform stops being the ideal digital method of the future, not just for startups but also for laboratories, pharmacies, medical insurance firms, and other e-commerce platforms. Using a digital payment system platform to make payments will allow all participants in the industry, along with microfinance companies. We thus hope that these statistics on digital payments have given you a better understanding of the potential for financial gain in the sector.

At the end

The future scope of digital payments in microfinance is no doubt dazzling. The major take care which these micro-lending companies need is to promote more and more digital payments among digital lending customers. Digital payments have a great scope to put technologies in a single place. They make it possible to connect the typical daily payment destinations into one closed loop and increase awareness to impact adoption levels at both the consumer and merchant levels.

Although certain microfinance companies across the country have made noteworthy steps towards smoothly digitizing their payment environments, the majority are still far behind.

Chaitanya India, a leading NBFC, takes the best out of digital payments. Driven by the ethics of trust and responsibility, the fastest-growing microfinance company strongly believes in the utilization of digital technology for public welfare. Since their beginning, Chaitanya’s loan products have been created with a wider scope in mind to serve most of the rural people. The ecosystem here creates an aura where every individual from top-brass to executive-level employees makes the best usage of digital technology for the betterment of micro-financing.