While these figures paint an optimistic picture of India’s digitalisation journey, the picture is currently incomplete. Why? Because most digital transactions in India are concentrated in urban centres. With only 28% of rural India boasting access to internet-enabled smartphones and a low level of digital literacy among rural residents, India’s rural heartland is not part of India’s fintech revolution. Despite making up 70% of India’s population, the people living in rural areas are the most underserved when it comes to accessing the fintech services.
However, the picture of India’s financial inclusion landscape is not completely gloomy. All it shows is that India is yet to tap into its full potential to accelerate its advance to become a cashless economy. The good news? Developments in this direction are already underway.
Bringing digital banking to rural India
Finance Minister Nirmala Sitharaman recently urged the Indian Banks Association to increase the presence of banking services in rural India, encouraging the banks to decide where they need to be physically present and where digital services can be extended. A lack of infrastructure is one of the key challenges that the government has aimed to address through initiatives such as the PM’s program and Bharat Net Project. In the same vein, the RBI has recently operationalized the Payment Investment Development Fund (PIDF) with an initial corpus of Rs 345 crores aimed at adding 30 lakh digital payments touch points in tier-3 to tier-6 regions and north-eastern states.
Beyond the problem of infrastructure is the people’s distrust towards new technology. Renowned sci-fi author Arthur C. Clarke once quipped that “a sufficiently advanced technology is indistinguishable from magic”. While the convenience, interoperability, and swiftness enabled by fintech solutions are nothing short of magic, demystifying fintech offerings is crucial to building the user trust required to achieve mass adoption. And this is where the Ministry of Electronics and Information Technology (MeitY) has taken the lead by announcing plans to set up Common Service Centers (CSCs) as digital financial hubs to spread awareness among consumers regarding governmental policies and digital finance options for rural citizens. To drive this project, the government has invested more than Rs 65 crore to promote digital financial services such as UPI, IMPS, Bank PoS machines, etc.
Private companies have picked up the slack further, entering territories where the government finds it difficult to gain traction. Amazon, for instance, has invested Rs 225 crore in its Indian digital payments arm to scale up its presence across the subcontinent with rural India forecasted to corner 63% of the market share by 2025. On their end, fintech companies are coming up with innovative technologies suited for the sensibilities and requirements of the rural population. These range from voice-based payments solutions that do not require an internet connection or a smartphone to merging fintech with agriculture, education, and healthcare in small towns.
Considering these developments, it is safe to say that India is well on its way to becoming a digital-first economy. The factor that will determine how soon India can achieve its financial inclusion goals is how fast it can help its rural residents score well on financial and digital literacy metrics, besides making the fintech infrastructure more accessible and affordable. A sweeping transformation is imminent and it will arrive on the back of a roaring rural economy. Modern fintechs would do well to prepare and devise tools to not just enable but also capitalize on its tremendous potential.
(The writer is Founder, FidyPay)
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