The coronavirus pandemic has thrown millions of people into chaos, affecting their financial well-being due to soaring unemployment rates and insecurities around regular salary payments. There seems to be a heightened awareness among citizens to save for crisis, like the current COVID-19 situation and ensure financial security.
PayNearby, a hyperlocal fintech startup, in its first ‘India Savings Behaviour’ report has revealed that while over 80 percent of India today has a bank account, yet a huge chunk accounting for more than 70 percent of the people falling under the low-income group, still avail informal arrangements such as chit funds and cash under the mattress to park their savings.
Among the key reasons cited for these trends are the strong social contract that chit funds nurture in this cohort and a combined effect of lack of awareness, tech intimidation and accessibility challenges of formal financial systems.
The nationwide survey of nearly 10,000 low-income group people was conducted by PayNearby through on field detailed interactions and a digital survey that highlighted several insights into the factors that influence the cohort’s saving habits.
47 percent of people who responded said that flexibility in tenure and no restrictions on the amount to be saved played a decisive role while making a choice about the financial offering.
The need for flexibility was further highlighted when more than 65 percent of respondents said that they shied away from saving through formal mechanisms as they were unable to maintain regular cash flows.
More than 35 percent of the respondents said that their primary objective while saving was to stop themselves and the household from making unnecessary expenses. 49 percent of the respondents also spoke about building a safety net that would help them deal with emergencies.
The study also revealed that the low-income group cohort prioritized flexibility, security, trust and ease of use over return on investment while choosing their savings product. More than 40 percent of the respondents cited fear of documentation and processes being a primary reason for not choosing a formal savings product.
Over 43 percent of consumers said that the ease of operational process is a critical factor that determines whether and how often they will put money into a savings fund.
Commenting on the same, Anand Kumar Bajaj, MD & CEO, PayNearby, said, "Our greatest learning from the pandemic has been the need to invest in our health and economic infrastructure, so that we are better prepared to meet challenging situations like the current one. While we rely on government, civic and regulatory bodies to do their bit, it is important that individually we play our part in ensuring the security of people around us. One of the most important steps to ensuring economic security is to build the discipline of savings amongst the masses.
We know a large part of Bharat today are struggling to make both ends meet, and through our open banking platform, we want to ensure that DBT funds reach the intended. Our Digital Pradhans, spread across 17,000 PIN codes have done a tremendous job of enabling DBT fund access of more than Rs. 6,000 crores in the last two months. This was possible because of NPCI's support, guidance from RBI, policy directions from DFS and Finance Ministry and most important, the Banks who host these millions of accounts and our sponsor banks. It is now important to take the next step in our journey to make deeper impact on people’s lives and ensure that we not only help our fellow citizens create the safety net for unforeseen circumstances but also help them save and fulfill their life goals."
Further, Anand added that PayNearby will soon launch a neo-banking initiative, BankNearby, in collaboration with leading banks in India. "We will slowly introduce multiple banking products, and bring high-end technology, in a simple and easy to consume version, for the masses."
PayNearby empowers retailers at the first mile to offer digital services to local communities, thereby boosting financial inclusion in India. Retailer services are focused on Aadhaar based banking services, Domestic Remittances, Bill Payments, Card Payments, and insurance services among others.A DIPP-certified FinTech startup, PayNearby has partnered with various financial institutions including YES Bank, RBL Bank, ICICI Bank, State Bank of India, Axis Bank, CC Avenue, Bill Desk, NPCI, FASTag, NBFC and FMCG companies. It is the sole technology provider using Aadhaar Enabled Payment Services and IMPS to YES Bank, making them one of the only two fintech companies hosted by the National Payments Corporation of India.