Loop I recently travelled by road from Mumbai to Ahmedabad on work, and decided that I would not carry much cash with me. I had a couple of UPI-based payment apps installed on my smartphone, and my objective was simply to test how cashless our economy has become, and to get a sense of how easy it was to get by using only payment apps. Of course, I also had my credit/debit cards (just in case of emergencies). I am delighted to share that I successfully completed the tripwithout once needing to use anything other than QR-based payment apps from my phone- including periodic stops at small roadside dhabas, larger restaurants and hotels.
Whether we use Google Pay, Paytm, PhonePe, Amazon, BHIM, your bank’s app or indeed, any of the other apps now available to make payments and/or receive money, we are benefiting from the robust digital payment ecosystem that has evolved in India especially since 2010. These new-age apps enable peer-to-peer payments using India’s revolutionary UPI backbone.
The transformative power of these apps must be understood in the larger context of how they have enabled democratization of financial inclusion and access. Urban India always had much better penetration of banking, insurance, mutual funds etc. Financial planners, wealth advisors, relationship managers and many other such professionals are available to assist segments of our country’s urban population to make better-informed decisions.
On the other hand, rural India presents a starkly different picture. Even the affluent farmers and others living in villages and smaller towns did not have easy access to professional advice and access to invest in various asset classes. And as far as the economically under-privileged sections of society go, many of our fellow citizens still don’t have easy access to basic banking services and products.
But a powerful combination of forces is reshaping this scenario.
Digitalization of various services, the growing penetration of smartphones and mobile internet access, a sharp rise in the number of basic bank accounts opened in the last decade (the proportion of adult Indians with bank accounts doubled from 40% to 80% between 2011 and 2018, according to Global Findex and the emergence of Aadhaar as a unique validation tool, have all contributed to creating a more level playing field. I would actually go so far as to say that new-age technologies are at the forefront of democratizing digital enablement and through that, financial inclusion. Increasingly, users in rural India too have access to the same apps their urban cousins do.
But it is important to keep in mind that digital enablement means a lot more than just making payments via a smartphone. It also means digitally enabling and supporting back-end processes associated with financial inclusion. For example, submitting documents for authenticating KYC is an integral part of regulatory compliance for opening accounts, making investments etc.
Technology-enabled integrated solutions are now available to complete video-KYC for customers at remote locations or those who are physically incapacitated and cannot travel to the branch. Digital technology is playing an important role in assessing creditworthiness of customers. Analytics using reliable indicators of creditworthiness are being used to arrive at proxy credits scores.
In fact, digitally native neo-banks are now able to open accounts or approve loans in a matter of minutes, instead of the process taking several days in earlier days.
True financial inclusion also means addressing the gender gap. This too can more easily and effectively achieved using digital technologies. Women’s self-help groups and other financial inclusion partners can play important roles in promoting awareness, training and enabling usage. Such options grant greater access, safety, privacy and financial independence to women in making financial decisions.
But many processes still need some element of human intervention. By combining technology with trained human resources, a robust, flexible, cost-effective “assisted” model can be created to accelerate financial inclusion. Just as the ride quality of a car is determined by several factors such as its design, engine, fuel quality, interiors, road conditions and driver skill, the challenge of accelerating financial inclusion in India too needs multiple drivers. These include fine-tuned government policies, innovative banks and fintechs, higher levels of mobile telephony and high-speed internet penetration, regulatory frameworks to protect consumers and other stakeholders, and intermediaries with expertise and experience in working with users and customers who have low levels of digital/financial literacy. The necessary digital ecosystem is coming together quite nicely, and as a nation, we can expect to get closer to the holy grail of 100% financial inclusion.
PS: I am confident that by 2025, you, I (and indeed, anyone with the necessary digital payment apps) can experience smooth travel between any two cities in India by road without carrying any cash/cards. (The road tolls are anyway already payable digitally via Fastag).
Views expressed in this article are the personal opinion of Rajesh Shet, Chief Business Officer, Manipal Business Solutions.