The year 2021 has started on a positive note for the digital financial sector in India. On January 5, the Reserve Bank of India announced the creation of a Rs 345-crore Payments Infrastructure Development Fund (PIDF) to boost digital payments in Tier III to VI centres and the seven North-eastern states. The move will encourage the deployment of Points of Sale (PoS) infrastructure in both physical and digital modes, improve digital payments, and give people in small towns and villages better access to financial services.
The Fund is a welcome step in promoting financial inclusion – now a key indicator of economic growth – and taking last-mile banking to the unbanked and underbanked communities across the country. In less than a decade, financial inclusion programmes such as Pradhan Mantri Jan Dhan Yojana (PMJDY), Direct Benefit Transfer (DBT), Atal Pension Yojana, and RuPay cards, among others, have accelerated the digital revolution and brought more citizens, especially in rural areas, within the ambit of digital financial services.
For a frame of reference, since the launch of PMJDY in 2014, banks have enrolled over 40 crore new accounts that have provided people in towns and villages with access to affordable banking services such as deposits and withdrawals, remittances, credit, and insurance, and pension schemes. The last few years, in particular, have seen public and private players adopt new-age technologies to empower the semi-urban and rural population with digitised services, including UPI and Immediate Payment Systems, and create an inclusive digital finance ecosystem. Despite this, there are barriers to the penetration of digital services among low-income groups. Some of the reasons for this are lack of financial and digital literacy, the complex nature of digitised financial products, and inadequate payments infrastructure.
Digital Literacy: A work in progress
Digital financial services (DFS) lies at the heart of financial inclusion in India. Despite the government’s efforts to make interconnected digital infrastructure, the adoption of DFS in rural places is marred by digital illiteracy, which has a direct bearing on the acceptance of digital goods. The lack of trust in technologies, inability to use smartphones and poor network connectivity restrict digital transactions and discourage individuals with low digital proficiency from employing e-banking services. As a outcome, money is nonetheless the preferred mode of payment in rural India.
Financial inclusion does not rely only on the digital capabilities of rural prospects, but also on the ease with which they can carry out transactions on the net or on their phones. The absence of monetary goods and services suited to the rural masses remains a challenge in digital monetary inclusion. Products have to be created in a way that they are each uncomplicated to realize and operate. Language is an additional aspect. Banks and fintechs will have to necessarily integrate nearby languages into their goods so that customers have small problems accessing them. So what can be accomplished to market digitised monetary goods in rural India?
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Introducing the Physital model
Switching to digital modes of the transaction can be a daunting activity, specifically for these relying heavily on physical modes. Here, banks and fintechs will have to attain out to such customers and guide them in the use of digital monetary services. One way to do this is by means of company or banking correspondents who can, by means of nearby neighborhood centres or kendras, clarify the several advantages of digital payments and other transactions. These agents are educated to carry out digital banking services such as opening accounts, money-in and money-out services, and peer-to-peer payments. They can also play an crucial function in producing awareness about new goods and options amongst the townsfolk and villagers.
E-commerce has gained traction amongst rural buyers in current years. Banks and private businesses are establishing a network of rural entrepreneurs to make a one-quit-shop for the monetary demands of rural prospects and assistance them shop on the net through digital platforms with constructed-in digital payment modes. Many NGOs and educational institutes have come forward to spread awareness about digital finance amongst India’s semi-urban and rural population, and hence additional the purpose of monetary inclusion.
Simplifying item offerings
In rural India, the mass adoption of digital payment platforms and mobile apps can be driven by hyper-localisation and addressing the discomfort points of switching from money-based transaction mode to digitised services. Multilingual selections will also assistance create a more inclusive model. Public and private entities can help nearby innovators who are more clued into regional demands and collaborate with them on goods that suit nearby demands. For instance, the lack of documents has been the most significant deterrent in weaning rural prospects away from regular banking services. However, AePS (Aadhaar-enabled Payment System) helped address this concern. Rural citizens are now carrying out standard activities such as deposits and withdrawals employing their biometric ID and Aadhaar at the AePS kendras.
At the very same time, banks and fintechs will have to create new item lines and align their policies with rural monetary demands, rather than merely sell complicated urban-centric goods to rural segments. Instead, straightforward banking services such as remittances for migrant workers, low-interest credit facilities, and modest-ticket loans can assistance bring the unbanked into the formal banking method. Finally, digital monetary inclusion depends as substantially on item innovation and simplicity as it does on retaining rural prospects and defending their livelihoods.
Need of the hour
Covid-19 and the ensuing lockdown have underscored the will need for digital monetary services in rural households – each day wage workers, low-revenue farmers, and modest organizations – and encouraging them to adopt digital payments in each day life. This will not only open a entire new globe for them, but it will also bring them a slew of advantages by means of the government’s several monetary inclusion programmes. After all, the accomplishment of digital monetary services will rely on the transformation of rural India from a money-driven economy to a significantly less-money and more digital payments economy.
Dilip Modi is the Founder of Spice Money. Views expressed are the author’s personal.