Fintechs: Closing gaps in demand: How fintechs can penetrate more deeply in rural India
While these numbers paint an optimistic picture of India’s digitization path, the picture is currently incomplete. Why? Because most of the digital transactions in India are concentrated in urban centers. With only 28% of rural India having access to internet-enabled smartphones and a low level of digital literacy among rural residents, India’s rural heartland is not part of the Indian fintech revolution. Despite making up 70% of India’s population, people living in rural areas are the most underserved in access to fintech services.
However, the picture of India’s financial inclusion landscape is not entirely bleak. All it shows is that India does not have to reach its full potential just yet to accelerate its progress towards 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 Bankers Association to increase the presence of banking services in rural India and encouraged banks to decide where to have a physical presence and where digital services can be expanded. Infrastructure shortage is one of the major challenges the government has sought to address through initiatives such as the Prime Minister’s Program and the Bharat Net Project. In the same vein, RBI recently deployed the Payment Investment Development Fund (PIDF) with an initial corpus of Rs 345 crores aimed at providing 30 lakh digital payment contact points in Tier 3 to Tier 6 regions and northeastern states to add.
Beyond the infrastructure problem is people’s distrust of new technologies. Renowned science fiction writer Arthur C. Clarke once joked that “a sufficiently advanced technology is indistinguishable from magic”. While the convenience, interoperability, and speed of fintech solutions are nothing short of magic, demystifying fintech offerings is critical in building the user trust necessary for mass adoption. And this is where the Department of Electronics and Information Technology (MeitY) has taken the lead by announcing plans to set up Common Service Centers (CSCs) as digital financial centers to raise consumer awareness of government policies and digital finance options for rural citizens. To move this project forward, the government has invested more than 65 billion rupees to promote digital financial services like UPI, IMPS, bank PoS machines, etc.
Private companies have exacerbated the doldrums and have moved into areas where the government is struggling to gain a foothold. Amazon, for example, has invested Rs 225 billion in its Indian digital payments arm to expand its footprint in the subcontinent, with rural India projected to achieve 63% of the market share by 2025 with technologies that suit the sensitivities and needs of the rural population. These range from voice-based payment solutions that require neither an internet connection nor a smartphone to the amalgamation of fintech with agriculture, education and healthcare in small towns.
Given 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 quickly India can achieve its financial inclusion goals is how quickly it can help its rural dwellers perform well on financial and digital literacy metrics, and make fintech infrastructure more accessible and affordable. A major transformation is imminent, and it will take place on the back of a booming rural economy. Modern fintechs would do well to prepare and develop tools not only to enable their enormous potential, but also to use them.
(The author is founder, FidyPay)
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