Financial inclusion widens the foundation of our financial system as it inculcates and encourages the habit of savings largely among the rural part of India. It plays an important in keeping our economy healthy and breathing. Further, it brings low-income groups in the ambit of the formal banking sector and protects their financial wealth and other resources. Financial inclusions also alleviate the exploitation of the vulnerable section of society in the hands of the exorbitant money lenders by facilitating easy access to formal credit.
In January this year, The Reserve Bank of India announced an Infrastructure Development Fund (PIDF) of 345 crore to boost digitized payments in Tier III and IV cities and seven Northern states. The announcement was seen as a sign of encouragement to deploy Point of Sale (PoS) infrastructure in both physical and digital payments.
Though the Indian government is trying hard to incorporate digital payments as universally accepted models, the majority of the population in Rural India are not tech-savvy, the digital literacy is still rampant in most parts of the rural areas. Despite the government’s efforts, the acceptance of Digital Financial Services (DFS) is stained by digital literacy. The people are reluctant to accept digital products. The lack of trust in technology, the inability to understand the features of a smartphone and poor network in their area were restricting digital transactions. As a result, cash is still seen as a preferred mode of payment.
However, concrete efforts are now being laid through hyper-localisation and as some would say the retailer based assisted model are successfully addressing the pain points of a customer from switching cash transactions to digital payments. Multilingual options while making digital payments have also contributed to the financial inclusion. Most public and private players are now collaborating with local innovators and vendors as they are more clued in about regional demands to suit local needs.
One of the reasons why rural customers are slowly weaning away from the traditional banking system is due to lack of documents, long queues and waiting time. However, Aadhar Payment Enabled System (AePs) managed to address this issue but still a lot of work needs to be done by banks and Fintech. They must come up with new product lines, align their policies to cater to their financial needs.
It is a known fact that rural customers rely more on local retailers for their credit needs. And it is interesting to witness how these Kirana store owners have turned the tables. From giving credit to helping rural customers to open their bank accounts, withdrawals, bill payments, recharge and money transfers. And what are they getting in return? Banking commission for their convenient services.
Banks and Fintech companies must come up with simpler services to retain rural customers confidence and trust in them. Such as, remittances for migrant workers, low interest loan facilities should be made hassle free through simple processes and product innovation. Possible measures such as training or tutorial camps must be set-up to increase digital literacy in rural areas.
COVID 19 and periodic lockdown have accentuated the need of digital financial services in rural households. From daily wage earners to low-income farmers to small business are encouraged to adopt digital payments to make their life easier. As it opens a whole new world of benefits and opportunities through many governments’ financial inclusion schemes. After all, the success of digital services in India truly depends upon the transformation of the rural India- from cash driven to more digital payments.
The author, Praveen Dhabhai, is COO at Payworld. The views expressed are personal