Digital Wallet has facilitated a new approach to microfinance by using the mobile phone, customer usage data and agents for loan applications, customer due diligence, and credit decision-making. The microfinance culture has begun to merge with the digital wallet culture to provide much more than microfinance services can offer alone. The ability to provide financial services via digital channels is opening up new opportunities to reach populations that previously were unserved.

Digital Wallet for Microfinance services

As financial institutions, Mobile Network Operators (MNOs) and regulators tackle the challenges thrown up by mobile banking, technology companies are busy churning out new innovations in that space. Consider the digital wallet, which does away with the need of carrying a bulky wallet stuffed with cash, checks, debit and credit cards and seems to be the solution for problems related to the physical handling of money. The digital wallet, which can be connected to bank accounts, credit cards and even prepaid money accounts, can be easily accessed by customers over mobile, using an M-Pin. In addition to facilitating peer-to-peer (P2P), merchant and utility bill remittances, this innovative medium would also be ideal for microfinance related receipts and payments. The support of other channels like the Internet, ATM, Kiosk and IVR, and possibly even TV in the future, will only add to the digital wallet’s convenience.

Fintech bring new hope for Microfinance

Using mobile money as a channel for financial institutions provides clear benefits to each party. Operators see increased transaction revenue due to greater activity rates from current customers or engagement with new customer segments, and financial institutions are able to reach customers more efficiently and conveniently at a lower cost.

The impact of FinTech on financial services, however, goes beyond retail and customer-facing applications and services to include all elements of the financial services production process.

New FinTech entrants can optimise a single link of the financial services value chain to provide a bank-beating solution that can connect to the rest of the financial ecosystem. That might mean delivering services directly to users’ mobile devices instead of using bank branches, dispensing with proprietary communication lines by using encrypted Internet transmissions, or avoiding the cost of data centers by utilising cloud computing.

Digital wallet features for Microfinance services

  • Financial Transactions

It enables customers to perform a variety of financial transactions from their mobile devices like mobile payments to merchants, bill payments, recharge of prepaid mobile accounts, payments for utility or other services , receive salaries, receive microfinance welfare payments, payments of microfinance loan instalments, payments of insurance premium etc.

  • Cash-in and Cash-out

Subscribers can conveniently deposit and withdraw cash using their mobile wallet accounts at neighbourhood retail agents.

  • Remittance & Money Transfer

The platform enables customers to transfer money instantly and securely to recipients in another city or across borders. The receiver of the money can collect cash at neighbourhood retail agent or at an ATM.

  • Accessibility

The services can be accessed anywhere and anytime, even while on the go.

  • Enhanced Security

Advanced level of security is implemented at both the application and transaction layers with 3DES data encryption security, transactional MPIN and access security rules.

Use case

New Delhi: Fintech company Mobikwik is expanding its services by offering instant micro loans to wallet users running short on balance as part of its efforts to boost digital payment usage in the country. The company, which competes with Alibaba-backed Paytm, started pilot on the project a few weeks back and has already given loans to about 25,000 users.