A digital approach to financial inclusion

However, the finance minister could have adopted the Olympic motto and set goals that were faster, higher and stronger. The whole idea of ​​using digital technologies to promote financial services, as well as most other services, is that materiality is not a barrier; In fact, it’s hardly relevant. There is no designated service area for digital financial services. The whole world is a serviceable area for them. Kotak Mahindra Bank chief Uday Kotak summed up the impact of the technological revolution: “Geography is history.”

When it comes to touchpoints, digital financial services, which bring products and services to users’ mobile phones, are like instant messaging. For potential, look no further than WhatsApp’s 2 billion active users worldwide, of which almost half a billion are in India. The country has 600 million smartphones – adding 25 million more every quarter – and has the highest monthly mobile data consumption rate in the world at 12 gigabytes per user per month.

So, when we think of taking digital financial services to every corner of India, we can easily think of taking it to 75 million or 75 crore people instead of 75 districts. In fact, we can stop thinking about absolute numbers and set a goal of providing 100% of the eligible population with access to formal financial channels. This is possible only when everyone in the ecosystem – policy makers, regulators and new age digital players – appreciate each other’s role and work towards a common goal.

start-up method, Financial inclusion is a priority on the agenda of governments around the world. If individuals and businesses have access to useful and affordable financial services and products, they fuel economic activity and growth. It improves the quality of everyday life by helping people plan for long-term well-being as well as short-term needs. This is why financial inclusion has been identified as a enabler for seven of the United Nations’ 17 Sustainable Development Goals, which provide a blueprint for a better and more sustainable future for all.

The first step towards increasing financial inclusion is to provide people with access to banking. This is the reason why the Government of India has taken forward the Pradhan Mantri Jan Dhan Yojana, which has so far put 445.8 million beneficiaries in the bank. The logical next step is to shift the focus from access to usage, where digital technologies become important.

India has been widely praised for the development and adoption of financial technologies, or fintech. This year’s budget seeks to take advantage of this further, as it lists promotion of digital economy and fintech as one of the goals of Amrut Kaal, which the finance minister termed as futuristic and inclusive. His job will be easier and faster if we start thinking like a digital start-up trying to provide access to useful financial services to as many people as possible.

branch out branchSeveral steps have been taken in this direction. More than six years ago, the RBI amended the service sector rules to give more leeway to banks. Government think tank NITI Aayog has presented a roadmap for the launch of full-stack digital banks.

However, physical branches remain the focus of the regulatory approach. It’s driven by solid logic: When it comes to trusting someone with their money, consumers prefer people who have physical installations and a wide network of people. But the benefits of innovative products and services enabled by digital technologies may soon be matched by the assurances of physical infrastructure. This has been proven around the world in the aftermath of the financial crisis, which led to the rise of technology-driven “challenger banks”.

Neo Bank, in particular, takes the financial services front-end to a very high level by increasing the speed of services and reducing friction. They improve returns and transparency for customers while reducing customer acquisition costs for their associate banks.

As the NITI Aayog paper notes, Neo Banks can serve the demographics who are “under-catered by main street banks”. This will include small businesses, paycheck-to-paycheck retail consumers, gig economy workers and Millennials. The migrant working population is another segment that will benefit from the new banks. As the recent past has shown, geography is already history for them.

Vibhor Goyal is the founder and CEO of OneBank, a neo bank