Over the past decade, technology (FinTech) has transformed the delivery of various financial services and products and quickened the pace of financial inclusion.
On this front, FinTechs are paving the road for digital financial inclusion, making lives better for families, communities, and businesses all around the world. To expand digital financial inclusion, banks and financial institutions must continue to innovate and simplify access to their services.
Besides, the government has also launched many initiatives for enabling digital infrastructure at grass-root levels, with its financial inclusion schemes such as Pradhan Mantri Jan Dhan Yojana (PMJDY), Atal Pension Yojana (APY), Pradhan Mantri Mudra Yojana (PMMY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Sukanya Samriddhi Yojana.
The path toward Digital Financial Inclusion:
While the progress has been remarkable, large-scale percolation across class and economic barriers is still required for people of all classes to apply their digital literacy skills to take advantage of digital financial features.
Financial institutions should reconsider their innovation initiatives. New technologies must be designed to provide smooth access to critical financial services to the general public. Financial institutions require products and services for digital financial inclusion, including smart financial advice and education for under banked people to improve their banking skills.
Lack of financial literacy and awareness of financial cybercrimes has caused general mistrust among the rural population as it consequently leads to reduced digital penetration.
Also, the cost of running a sustainable last-mile delivery model, predominantly in rural areas and last-mile level service delivery, is very high. Multiple efforts by government and business agencies trying to reach the same location for financial inclusion, social inclusion, or healthcare inclusion are driving higher costs.
Despite the challenges, digital financial inclusion is the need of the hour as it helps in developing a culture of savings among semi-urban and rural populations by bringing the low-income spectrum within the banking and insurance framework.
Furthermore, for banking services, digital transformation enables an expansion of access through the use of digital channels and customer information, as well as the redesign of products and process value chains to offer new products and serve customers more competently. In this context, the emerging market digital financial transformation presents opportunities.
- Low levels of formal financial services Innovations such as mobile money can create a strong foothold in emerging markets where there is an urgent need and no obligatory service to displace. Batting on the mobile money ecosystem, innovators in emerging markets have jumped over conventional financial infrastructures to offer a range of financial services planned to sustainably service dispersed or low-income populations.
- Operating a bank branch is costly, whether in the emerging or developed market and then switching over to digital channels helps tap a larger volume at lower costs across markets. Among low-income communities, particularly, digital channels are perceived as must-have features rather than add-on benefits, and they enable the working of financial services to lower-income consumers. So, the need for complete digital transformation from front-end customer channels, through the credit and payments engines, to servicing and processing is greater in emerging markets where financial access is a goal compared to wealthier markets.
- Flying under the radar of the global tech/venture capital community, local innovators get to create their forte and serve their markets while the giants are busy tapping the wealthier market. For banks, this can also create opportunities if they can take the lead in introducing unique local value propositions.
- Where general-purpose financial infrastructure is lacking, the networks and infrastructure of incumbent banks retain significant value. Banks can leverage their position of already having payments, identity, and trust assets in place as new infrastructure comes online. Banks can leverage their capital, customer bases, and brands to expand rapidly in partnership with FinTechs that can help fill lags in banks’ channels, product sets, and processing capabilities.
Summing up
Digital financial inclusion is still a pressing issue in the country. The country’s overall engagement in digital finance will pave the road for economic growth in line with global trends. As a young country, digital financial inclusion is critical to ensuring that the benefits of digitalization are distributed equally. It is the most efficient means of achieving inclusive development. Financial inclusion will eventually allow people to dream and live their lives on their terms. It will give millions of Indians across the country renewed optimism.