FinTech in India: An analysis on impact of telecommunication on financial inclusion

• Author: Kashif I. Siddiqui,Taufeeque A. Siddiqui
• DOI: http://doi.org/10.1002/jsc.2331
• Published date: 01 May 2020
• Date: 01 May 2020

RESEARCH ARTICLE

FinTech in India: An analysis on impact of telecommunication

on financial inclusion

Taufeeque A. Siddiqui | Kashif I. Siddiqui

Centre for Management Studies, Jamia Millia

Islamia, New Delhi, India

Correspondence

Kashif I. Siddiqui, Research Scholar, Centre for

Management Studies, Jamia Millia Islamia,

New Delhi, India.

Email: kshfsiddiqui@gmail.com

Abstract

There is an evident impact of telecommunication on financial inclusion in the case of

several constructs irrespective of regional differences in India. Poor households suf-

fer from inadequate access to financial services. Telecom plays an essential role in

expanding financial services to rural areas and in helping people to improve their

lives. Inclusive and holistic policies need to be promoted, which will simultaneously

enhance telecommunication infrastructure and financial inclusion in India.

KEYWORDS

financial Inclusion, FinTech, India, smart PLS, structural equation modelling,

telecommunication

1|INTRODUCTION

Financialinclusion is definedas “the process of ensuring access tofinan-

cial servicesand timely and adequatecredit where needed byvulnerable

groups suchas weaker sections andlow-income groups atan affordable

cost”(Rangarajan, 2008).It regards savings, credit, remittance,insurance,

and financialliteracy apart fromhaving a bank account.

1.7 Billion adults are still unbanked Demirguc-Kunt, Klapper, Singer,

Ansar, and Hess (2018). Poor people know their own money is their most

reliable form of social security to manage their financial uncertainty.

Households in poverty suffer from inadequate access to financial services.

Finance is a system comparable to public utilities under circumstances of

low competition with relatively few suppliers (Milana & Ashta, 2012).

In the current scenario, financial inclusion is emerging as a key

driver for promoting equality. Financial inclusion helps to reduce pov-

erty and decreasing disparity among society's underprivileged sec-

tions. Reserve Bank of India (RBI) has taken several initiatives to step

up financial inclusion in India. A well-developed financial system

brings poor people into the mainstream economy and allows them to

contribute to development and growth.

Telecom plays an essential role in expanding financial services to

rural areas and in helping people to improve their lives (Siddiqui &

Siddiqui, 2017a). Telecommunication is emerging as a vital force for eco-

nomic and social development in the knowledge-based presentscenario.

Department of Telecommunications (DoT) formulated the National Tele-

com Policy to overcome the developmental challenges of education,

health,employment, andfinancial inclusion to transform India.

Apart from being poor, most of the consumers are either illiterate

or less educated. This seems to be the biggest hurdle to the operation

of the Financial Institutes in rural Indiabecause of high transactional and

operational costs. Telecommunication infrastructure may reduce opera-

tional and transactional costs in rural areas. Education plays a moderat-

ing role between telecom services and financial inclusion (Siddiqui &

Siddiqui, 2017b). Using mobile telephone technology has broadened

Internetscope to the excluded, generating businessopportunities where

banks have not been traditionally present and are potentially disruptive

(Ashta & Biot-Paquerot, 2018). Hence, Telecom may help to reach an

unbankedarea across India (Siddiqui& Siddiqui, 2018).

In this study, two entirely different states of India selected for the

survey. The purpose is to assess the impact of telecom on financial

inclusion. The results may be useful for both the industries, particu-

larly financial service providers, to formulate innovative strategies.

2|REVIEW OF THE LITERATURE

Several studies link telecommunication and economic growth, such as

the following.

Roller and Waverman (2001) confirm the positive causal linkage

between telecommunication infrastructure and economic

JEL Classification codes: G20, L96.

DOI: 10.1002/jsc.2331

Strategic Change. 2020;29:321–330. wileyonlinelibrary.com/journal/jsc © 2020 John Wiley & Sons, Ltd. 321