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Interoperability in the finance context refers to participation in different systems to pursue a settled and clear payment efficiently. Moreover, interoperability allows the users of various payment systems to complete a financial transaction effectively. Find it difficult to understand the entire concept of interoperability? Let us provide an example to make the concept crystal clear for you. For instance, you are using a mobile financial service provider to pursue a mobile transaction. You should establish a transaction with another user using a different financial service provider.
In that scenario, the interoperability can allow you to complete the transaction directly without participating in various transaction systems. Similarly, interoperability has gained immense popularity in microfinance, it helps policymakers to achieve financial inclusion goals proficiently. The microfinance organization can nowadays easily connect with large banks with the assistance of interoperability, and consumers can swiftly complete payments to different providers. But, confusion remains regarding the appropriate time to incorporate interoperability in microfinance. Therefore, we have presented this blog to inform you about the perfect time for implementing interoperability in microfinance.
In most microfinance banks, the financial institutions connect through the payment aggregator to large wallet providers for disbursing and repaying the loans. However, interoperability can help them by facilitating the entire payment system and decreasing the time consumed for payment completion.
Therefore, if the financial institution has adequate technical support and follows a robust business strategy, it is the perfect time to implement interoperability in microfinance. Moreover, if the microfinance institution features a sound technical team skillful for controlling APIs, the bank is ready to get connected with interoperability.
A vast segment of microfinance institutions falls within this specific category. Generally, these institutions prioritize digital payment, and banks are aware that digital banking is the future. However, for such financial institutions digital payment is still not a reality. Most such microfinance institutions pursue transactions through SMS banking technology, and the banks do not offer the convenience of digital payments.
However, if the technical team within these organizations is ready for change management and follows an appropriate strategy to bring change in the payment system, the bank is ready to implement interoperability within the system. Although such microfinance banks can incorporate interoperability, they require additional support from the external environment.
In other words, these microfinance banks feature an ongoing effort to implement real-time systems or digitalize the payment environment. But the organizations have not achieved them yet. However, if microfinance institutions achieve robust technical connections, the organization is ready to incorporate interoperability. Such microfinance institutions often feature technical capacity supported by a network to establish a connection with the service provider.
Thus, the bank needs to look into the matter to align the organization with the appropriate payment system operator. If the degree and nature of the payment system operator do not match the support offered, the connection can be a strategic failure. Moreover, various microfinance institutions even follow a decentralized system with the scarcity of a robust digital payment environment. In that scenario, those financial institutions are not ready to implement interoperability.