Between 2011 and 2014, nearly 175 new bank accounts were registered in India. Aided by the Government’s push for financial inclusion, the banking penetration jumped from 35 per cent to 53 per cent within a short span of three years. The year 2015 saw even more citizens signing up for bank accounts to avail various financial benefits such as gas subsidy. Encouraging trend for the Indian economy, this, for everyone knows that numbers don’t lie.
As anyone associated with the Banking and Finance sector can tell you, numbers are of paramount importance. Here, then, are a few numbers for you. The total number of households in India with at least one bank account now stands at 210.5 million. This means that with exception to around 23000 households,nearly all Indian households now have access to at least one bank account. Only that they do, or at least manage to hide the truth very well unless you change your perspective. Despite the massive drive to promote banking behaviour in the Indian population, the country lags far behind the global standards when it comes to actual adoption. Nearly 72 per cent of the bank accounts opened under financial inclusions are either dormant or have no balance. Additionally, India has one of the lowest percentages of card users across the globe – only 39 per cent of all account holders in India own a debit or ATM card. The difference between the real and perceived bank usages becomes even starker when one considers the urban-rural divide. While urban areas enjoy a comparatively healthier banking inclusion rate, the number of citizens not availing banking privileges was nearly 60 per cent on last count. Considering nearly 64 per cent of India’s population lives in the semi-urban and rural population, this statistic becomes very worrisome indeed.
This is where electronics and digital payments companies come into the picture. Digital and electronics payments companies have been, either individually or through associations with banking partners, very successful in closing the urban-rural divide by contributing heavily to bring the benefits of financial inclusion to the rural population. What has driven the success of electronic payments in rural India is the recent technological revolution which has taken the country by storm.
Increased smartphone penetration and improved wireless network capability have extended the benefits of the internet to even the most far-flung, remote regions of the country. Electronic payments companies have taken advantage of this trend. By providing consumers financial services on their mobile phones without the need to link an existing bank account, they do away with the hassle of the lengthy paper trail that often precedes an account opening. Moreover, most electronic payments solutions are ubiquitous and offer rural users the convenience of transacting without the need to physically visit a banking outlet. Also digital-payments solution providers have the additional benefit of circumventing the biggest challenge faced by banking institutions – infrastructure.
Since the consumers themselves essentially take care of the infrastructural costs by paying for their smartphones and internet usage, electronic payments companies do away with the need to install a physical brick-and-mortar outlet unlike traditional financial institutions. This allows them to invest more in the service provision and delivery enhancement as opposed to upkeep. The significant impact made by digital payments is perhaps most aptly demonstrated in TranServ’s involvement in two key initiatives catering to the rural population – NSDC Government Grants Disbursal Scheme and Amul Dairy Solutions.
Under the NSDC Government Grants Disbursal Scheme, TranServ was empanelled to enable secure and transparent grants disbursement. Considering the fact that most of individuals who stood to benefit under the move were unbanked,
TranServ came up with an innovative solution – a Skilling Card. Backed by an account with the Bank of India, the card made it possible for rural users to receive funds which could then be used at ATMs and merchants. TranServ’s approach therefore enabled the creation of a bank-led solution for making payments in a secure and transparent manner.
Similarly, under the Amul Dairy Solution, TranServ helped streamline the payment procedure for dairy farmers by issuing prepaid cards. These cards enabled electronic fund loading and ensured timely disbursement of funds to the farmers by eliminating the need to physically collect the dues. The card also allowed transactional capabilities at ATMs or Business Correspondent outlets for cash withdrawal. Moreover, as SMS alerts were used to notify card users about all their transactions, it allowed farmers to get a complete visibility on their capital income and expenses.
Banking institutions as well as the Central and State Governments now recognize the impact made by digital payments solutions, and have partnered with several digital payments companies as a result to increase the penetration of financial services in the rural ecosystem. Moreover, payments companies are now rolling out several solutions catering specifically to the needs of the rural population. The results have been encouraging. India today has a higher number of mobile wallet users than it has credit or debit card users, signaling that digital payments solutions look set to play a pivotal role in the economy in the time to come. The numbers are once again up for scrutiny, and so far, they are holding true.
About the author: Anish Williams is CEO and Founder of TranServ