How fintech startups are using AI to empower MSMEs?

The MSME sector, better known as the ‘engine of growth’ has contributed immensely to the economic progress of the country. Providing employment opportunities to over 100 million people, many Fintech startups have also rolled up their sleeves to push MSMEs empowerment with the help of AI technology. Numerous cases reflect the emergence of newer fintech companies in offering optimized financial products and services to MSMEs in an economically viable manner.

The Indian MSME sector, known as the backbone of the country, carries a significant weight of India’s economy, contributing to 29% of the country’s total GDP. It plays an important role in eradicating unemployment in a way that provides many job opportunities across the country. However, the outbreak of the pandemic brought unforeseen economic disruptions that affected the financial inclusion of the MSME sector. In these tough times, fintech became a catalyst to scale MSMEs by offering tailored and innovative solutions at lower costs, leading to a revolution in the ecosystem.

Bringing efficiency in accounting and transaction records

Accounting is an important, yet daunting and expensive task. Even a neighborhood shopkeeper, be it a kirana shop or a local pharmacy, hires an accountant or finds it difficult to manage his financial records all by himself. However, the integration of AI has evolved the tasks of preparing and analyzing financial records through digitized methods that can increase their income. AI is one of the best technological innovations from fintech companies that help MSMEs expand beyond their core competencies and double their financial efficiency. The accounting tasks that once took hours and days to complete can now be performed in just a few clicks with improved accuracy.

Keep information about submitting tax returns

Keeping track of your taxes is another tedious task that can culminate in dire consequences if neglected. Any tax or accounting problem can drain the business in a split second. With the use of AI in accounting, MSMEs can raise the game of tax forecasting and identify instances that indicate potential fraud. To help MSMEs overcome such issues, many AI-based fintech startups are concentrating on platforms embedded with predictive modeling and advanced algorithms that are exemplary and designed to reduce the pain points of budding businesses.

Optimization of GST filing and accounting

New-age fintech startups include solutions that can help MSMEs save money on the operational front, optimize costs and prevent losses. For example, preparation, validation and filing of GST returns and all other accounting tasks can be done with advanced AI-based accounting platforms. Additionally, these technology-led accounting platforms are equipped with sophisticated GST reconciliation tools that enable users to detect the filing status of the return and suspect areas where there may be ambiguity.

Strengthen fundraising efforts

In today’s market landscape, the level of debt is increasing steadily – whether it is for individuals or MSMEs. Unfortunately, not all lenders are able to get the money back from borrowers. The main objective of these MSMEs is to increase the success rate of collection as any breakdown in collection can suppress the financial activities of the MSME. Considering this scenario, AI-based platforms are modernizing the debt collection process by analyzing the vast amount of data from different sources and using predictive analytics to identify risky credits. Early adopters of such platforms can witness meaningful payouts, which help improve the company’s financial performance.

Analytics to make better decisions

The integration of AI into fintech is exploring ever more economic opportunities. For example, apart from creating a balance sheet, calculating net income and providing other financial data sets for analysis, AI identifies sales opportunities, solves sales challenges and increases overall sales performance. As a result, MSMEs are able to understand their customers better and create thoughtful strategies by understanding opportunities to improve their sales process using data and analytics.

Management of financial estimates and risk evaluation

As technology-based financial operations expand, the likelihood of criminal activities such as undervaluation of creditworthiness, non-compliance with market risk regulations, fraud and cyber-attacks is higher. In particular, advances in artificial intelligence enable risk management processes that are shared by regulatory and technical expertise. Big data analytics, AI, and blockchain technology advances are addressing regulatory concerns about applying rules in a way that protects consumers and investors in large businesses.

The bottom line

There is no denying the fact that MSME plays an indispensable role in India’s economy, it can be further observed that more empowerment is required in the following spectrum. This can be made possible by utilizing and expanding the possibilities of AI and ML in finance and accounting. The urgent requirement is to continue reinforcing the industry with the latest advancements and adoption of fintech solutions to build a stimulating environment for entrepreneurial businesses.

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