One cannot discuss the role of banks, FinTech and payment enablers in improving the digital financial landscape without first addressing the needs of their customers.
So, what do clients truly want from digital financial services in today’s complex and rapidly evolving environment, especially the underserved rural and female customers? The answer is rather straightforward: like their urban counterparts, these customers too want to participate in the digital economy through empowering solutions that are simple and affordable.
It’s particularly vital to cater to the underserved demographics, as rural India is home to over 65% of the country’s population of 1.4 billion people, with women comprising ~50% of the total. The goal of becoming a ‘Viksit Bharat’ by 2047 is unattainable without ensuring the digital financial inclusion of these segments. Therefore, it’s critical that all actors in the financial services sector (banks, NBFCs, FinTechs, and aggregators) do their part to bring them into the fold.
The objective of achieving digital financial inclusion can be fulfilled if we focus on the following three key elements:
- Accessibility
Historically, the leading cause of financial exclusion in the country’s remote corners was that access was limited to brick-and-mortar bank structures. Being a banker myself, I’m extremely well-versed in the challenges involved in setting up and running a branch – the primary one being the significant costs involved (infrastructure, manpower, and daily operations).
However, the advent of the internet, coupled with smartphones, has replaced the need for traditional, infrastructure-intensive bank branches with cost-effective digital channels, customer service points (CSPs), and other technologies. This, in turn, has led to an increase in the accessibility of basic financial services like banking, insurance, loans, and pensions at a minimal cost, especially in remote, rural areas.
Thanks to new technology, sending money anywhere, in addition to small-value cash withdrawals/deposits, has become much more accessible and affordable. Customers can now also use various digital channels either in DIY mode, assisted mode or through CSP vendors. AI and ML can also be leveraged to providing accessible and personalised support to customers.
Today, India’s Financial Inclusion Index (FI-Index) stand at 67, a surge from 53.9 in 2021, reflecting substantial progress in extending banking services across the nation. Bank account ownership has risen to 89%, largely driven by government initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY). The number of payment transactions and domestic money transfers has also increased significantly, with Unified Payment Systems (UPI) having over 35 crore active members. Additionally, India has an 87% FinTech adoption rate compared to 67% globally.
However, formal credit access continues to present a challenge. Fintechs can help bridge gaps on this front further through alternative data and embedded financial models. At Pahal, we’ve launched PahalPe, a mobile application that provides seamless access to personal loans with rapid approvals and a comprehensive range of services. It’s designed to empower individuals, particularly in rural and semi-urban regions, to manage their financial health efficiently and effortlessly.
When it comes to championing last-mile connectivity, payment enablers should continue to support merchants and consumers to transact without traditional banking dependencies.
- Speed
Since its launch in 2016, UPI has revolutionised retail payments in India, enabling instant peer-to-peer and merchant transactions. In FY 2024-25 alone, UPI achieved a landmark with 18,587 crore transactions amounting to 261 lakh crores.
Financial services actors should continue to focus on reducing transactional lag and increasing real-time efficiency. Innovations such as AI-driven chatbots and virtual assistants help improve the TAT of customer support services by providing personalised, real-time assistance.
FinTech platforms can leverage AI and cloud infrastructure to automate onboarding, credit scoring, and disbursements, reducing turnaround time from days to minutes. At Pahal, we’ve successfully brought down the number of days needed for loan disbursement from 15 to 2-3 by integrating new technology. We’ve also introduced Pahal Sangini, a dedicated customer mobile application designed to provide users with real-time access to their loan information and facilitate fast, seamless payment through UPI via the BBPS channel.
Additionally, payment enablers like mobile wallets and QR-based systems should continue to streamline microtransactions, especially in underserved geographies.
- Security
One of the most important pillars of the financial services industry is customer trust, which is often linked with transaction security. Financial institutions must remain custodians of said trust, investing in robust cybersecurity frameworks and regulatory compliance.
Today, with the increasing threat of cyber-attacks on data privacy and security, collaborative protocols such as tokenisation, biometric authentication, and two-factor verification are quickly becoming industry standards. Additionally, FinTechs can deploy advanced technologies like blockchain for tamper-proof records and AI for fraud detection and automation of compliance processes.
However, it’s equally important to establish ethics frameworks for AI deployment in financial systems to eliminate biases, especially in credit scoring and underwriting.
The digital financial landscape has evolved rapidly in the past decade due to innovative technology coupled with the widespread efforts of the government and private actors to drive financial inclusion. However, efforts still need to be made to overcome challenges like infrastructure barriers, low digital literacy and awareness, data security concerns, and regulatory and policy issues.
We must continue to work to achieve our goals and transform our country into a truly Viksit Bharat by 2047.
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