By 
The interdependence of reducing poverty and inclusive growth is a well-known factor and financial inclusion is the first step in this process. India embarked on this journey with Prime Minister Narendra Modi spearheading this effort. India’s mission of inclusion is probably the biggest the world has ever seen.
According to statistics published by the World Bank, only 80% of the Indian population have bank accounts with established financial institutions. With this statistic at the forefront, the country’s central bank, RBI has put many expansion programs in place. Over 41 applications for payments banks have been received and 72 for small banks to help new entrants with expertise in areas such as deposit accounts, ATMs and debit cards are being processed.
With an astounding number of 1.1Billion+ mobile phone subscribers, India is in a good place to harness technology to make financial inclusion a reality, across every section of the society. This is especially the case for the “unbanked” and “low-income groups”.
With the introduction of several new payment portals and methods, usage of these methods is going up and is expected to touch 20% of the total GDP in the next decade.
The hope is that digitalization will lead to tremendous economic growth. One major stumbling block to this scenario is the staggering number of India’s rural population. There are quite a few challenges facing the plan to bring digitalization to all. The key questions are:
Bank accounts: In the last couple of decades, India has made a lot of progress in making banking accessible to its citizens. Nationalized banks have opened branches in semi-rural and rural regions to provide banking access to the remotest corners of the country. After the demonetization drive, 4/5ths of adults now have bank accounts compared to 53% in 2014. In spite of the spike, people still like to visit their bank to carry out transactions instead of using their phones. Only 36% of account holders in India currently use the internet to send or receive digital payments.
Internet and mobile phone access: While 80% of the population have access to mobile phones, many do not have financial resources to purchase smartphones. Therefore, it is understood that internet access in the lack of adequate numbers of smartphones in the hands of the end users, is, no doubt, very limited or totally absent. Only 32% of the people use the internet and 38% use smartphones. This makes it difficult to access digital financial platforms. Infrastructural issues like poor or no internet connectivity, mediocre availability of electric lines, make the digital transition to enable last mile users to convert to digital payment platforms, even more difficult.
Awareness: Another barrier to complete this digitalization dream is low digital literacy among the mass population in India. This is even worse in older adults and women. This factor combined with a lack of trust and the reversal to building up a cash heavy economy are key issues creating hurdles in this transformation.
Acceptance of infrastructure: Especially in rural areas or small towns, customers with access to cards and alternative payment systems cannot use them. Even though there are 2.6 million EPoS terminals in India, these are not enough, based on the number of businesses and a country with over a billion in population. People must pay with cash which makes it difficult to go completely digital.
The use of digital financial services to change and boost the economy is a great idea. It is also a powerful channel to make modern and better services accessible to those under the poverty line or are living in remote regions of the country, more affordable or at low costs. The risks are also relatively low. The barriers that currently stand in the way of making it accessible for easy use, prevent it from being unleashed to show its true potential.
One solution on the supply side that the financial sector has implemented is to employ “agents” to help them bring banking services to far flung areas. These agents play a critical role in carrying out banking tasks such as opening accounts, etc. and helping with financial transactions. They assist customers to track their money, guide them in withdrawing money, and act as the human face of a bank. An agent’s role is to not just to build rapport with customers but also to be the point of contact who is easily reachable.
They act as a bridge for the illiterate by helping with online transactions, calculations and using devices like computers and smartphones to make transactions. Banks must invest a lot of funds, effort and time to ensure that their “agents” have the right education and training to execute their assigned duties and bring digitalization to the last mile users. Investment in devices and products is also necessary to make the transition faster and smoother.
The demand side requires that consumers be educated on the nuances and use of devices so that bridging the gap becomes easier. Consumers should be familiar with the benefits of using tools and on how digital financial services will benefit them. With the proliferation and easy availability of inexpensive smartphones, it is up to policy setters and service providers to make it simple to conduct transactions.
Since agents are the most important link and act as the representative between banks and the “last mile” customer, they should be given adequate resources and motivated to stay in the field. By maintaining regular contact with their agents, assistance with troubleshooting technical and other issues and offering better financial incentives, agents can be encouraged to perform their roles with dedication.
Banks can improve their reach by offering customized products for low income markets and work towards increasing customer awareness. A lot of work must be done before digitization reaches every citizen. Whether it is a big public sector bank or a micro-finance institution, gradual introduction and a shift to digital payment platforms can only happen one step at a time, and still has a long way to go.
Given all of the above facts and the move towards digitization of the financial and banking sector, the goal to include rural customers is now possible. An Indian company has designed and developed a payment system “YUVA PAY” a one of its kind payment gateway catering to the rural market.
What makes this product exciting and a really viable one is that the end user can send, pay and receive money, in their wallet/bank accounts without having access to any internet connection. Designed with financial inclusivity in mind, it has the potential to act as the bridge for all the disenfranchised citizens. Advantages of using the YUVA PAY payment system are:
Better COVERAGE with easier access to electronic payment methods. More CONVENIENT as it can be used by even by people who are unfamiliar with the internet etc.
Promotes CONFIDENCE in the product as the system is integrated and users can be assured of secure operations and are protected from fraud. Savings on COST as it is affordable for users and service providers
This out-of-the-box solution, devised by Indians for Indians, is the perfect solution for an issue which seemed like it could hamper economic growth.
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