In recent years, a significant shift has been observed in the digital landscape where nearly every app seems to be venturing into microfinance. This move is not random but driven by compelling business incentives and the massive potential financial sector holds. Here, we’ll explore why so many apps want to become microfinance platforms and what this means for users and the digital economy.

Firstly, microfinance apps offer a lucrative business model. Unlike many other sectors, financial services provide higher margins and recurring revenue streams. When apps introduce lending, payments, or investment features, they can generate commissions, interest, or fees that create steady, often escalating income. This financial stickiness reinforces user engagement because once someone uses an app for financial transactions, they’re less likely to switch to competitors, building a strong ecosystem around the platform.

Financial sector integration also enables stronger user lock-in. If your app can manage your money, provide credit, or facilitate savings, users develop trust and habitual use. This is far more sustainable than one-off or infrequent interactions. Payment gateways, easy credit options, and financial products keep users coming back, increasing the lifetime value of each customer.

Another reason for this trend is the digital transformation of financial services itself, which opens up opportunities for innovation and accessibility. Microfinance traditionally targets individuals or small businesses underserved by traditional banks. Digital apps can leverage data analytics, AI, and mobile technology to underwrite and disburse loans with efficiency and scale that was previously impossible.

In countries like India, microfinance has taken a strong foothold driving financial inclusion for millions who previously lacked access to formal credit. Apps that integrate microfinance features can tap into a vast unbanked population, expanding their market significantly. This aligns with the social impact narrative, but it’s also a smart growth strategy.

The pandemic accelerated digital adoption and financial tech innovation, which gave even more impetus to apps to add microfinance services. With more people comfortable with digital payments and online banking, apps across domains such as e-commerce, social media, and utility services are adding financial layers to diversify and deepen their offerings.

However, it’s important to approach this trend with discernment. Providing microloans and financial products carries risks like defaults and regulatory oversight. Not all companies are well-prepared to handle these complexities. But for those that succeed, the rewards in terms of customer loyalty and revenue can be substantial.

In summary, every app trying to become a microfinance app is a reflection of the financial services sector’s attractive economics, user engagement advantages, and the digitization wave broadening financial inclusion. As this trend continues, users will likely benefit from more integrated financial ecosystems, but they should also be mindful of the responsibilities that come with digital finance services.