India is undergoing a metamorphosis in terms of financial inclusion, embracing technologies and slowly out-growing the previous technological pastures. A slew of measures taken by the government has played a pivotal role in the country’s digital transformation journey.
As part of the ‘Digital India’ initiative, technological deployments such as UPI, BHIM app, DigiLocker, Pradhan Mantri Jan-Dhan Yojana (PMJDY), India Stack etc. have created a robust infrastructure to facilitate seamless interactions between consumers, service providers and the authorities.
Government-led Initiatives To Bring Large-Scale Changes
The government’s push towards digital enablement was reflected in this year’s Union Budget as well. Finance Minister Nirmala Sitharaman proposed to allocate INR 6,000 Cr the BharatNet programme in 2020-21 to further enhance broadband connectivity in rural India. Funded by the Universal Service Obligation Fund (USOF), BharatNet can digitally connect 250 thousand villages and bring them on board the digital bandwagon.
With this initiative, the government intends to provide affordable broadband connectivity to all households and public institutions like anganawadis, government schools, PDS outlets, police stations, post offices, hospitals that are at the gram panchayat level.
The fibre to the home (FTTH) connection through BharatNet is expected to link 100,000 gram panchayats in just one year. Such efforts are aimed at enabling consumers in remote areas to access internet-based services.
Rapid Digitalization Paving The Way For Financial Inclusion
Estimated at 190 Mn, India has the second-largest unbanked population, reveals the World Bank. What’s more, half of India’s bank accounts are dormant. With infrastructural barriers to overcome, financial inclusion still remains a far-fetched dream for the country.
The biggest challenge to achieving this, however, has been the lack of touchpoints. While major public and private sector banks are now expanding their presence into small towns, large segments of the Indian population are yet to become a part of the formal banking system.
However, the rapid digitalization in recent years is paving the way for financial inclusion in India. With the increased availability of bandwidth, cheaper data plans, and heightened awareness driven by government initiatives, users residing outside urban settings can also avail the benefits of core banking services like accounts and cards.
FinTech Firms Lend A Helping Hand
A new breed of FinTech firms in India is leveraging technology to reinvent traditional banking models and facilitate seamless delivery of financial products/services to the underbanked. These private players have come forward with their innovative offerings to further the government’s financial inclusion vision. One such solution is the mobile vans comprising mini ATMs and bill payment kiosks.
In addition to eliminating the need for high-internet connectivity, the mobile vans can be deployed at a low cost. But, how does this work? The bill payment kiosk facilitates recurring bill payment by accepting cash through cash acceptor and validator, and the integrated POS machine accepts payment through credit and debit cards.
Users can also use the mini ATMs to withdraw cash without having to visit the physical branch of their banks. Needless to say, large-scale implementation of these mobile vans can virtually bring the bank to India’s rural dwellers in a faster, cheaper and more convenient way.
According to a BCG-Google report, the digital payments ecosystem in India is estimated to be worth $500 Bn by 2020. This means greater adoption of digital payments in rural areas presents unbridled opportunities to the country’s financial services industry as well as the overall economy.
However, it is necessary that both the government and the private Fintech players come together and continue to take proactive efforts to establish a country-wide network. This will not only foster financial inclusion but also raise digital and financial awareness among the underserved segments of the population.