Financial Inclusion Through Digital Banking In India

In 2011 the World Bank—with funding from the Bill and Melinda Gates Foundation—launched the Global Findex database, the world's most comprehensive data set on how adults save, borrow, make payments, and manage risk. Drawing on survey data collected in collaboration with Gallup, Inc., the Global Findex database covers more than 140 economies around the world. The initial survey round was followed by a second one in 2014 and by a third in 2017. Compiled using nationally representative surveys of more than 150,000 adults age 15 and above in over 140 economies, The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution includes updated indicators on access to and use of formal and informal financial services. It has additional data on the use of financial technology (or fintech), including the use of mobile phones and the Internet to conduct financial transactions. The data reveal opportunities to expand access to financial services among people who do not have an account—the unbanked—as well as to promote greater use of digital financial services among those who do have an account. The Global Findex database has become a mainstay of global efforts to promote financial inclusion. In addition to being widely cited by scholars and development practitioners, Global Findex data are used to track progress toward the World Bank goal of Universal Financial Access by 2020 and the United Nations Sustainable Development Goals. The database, the full text of the report, and the underlying country-level data for all figures—along with the questionnaire, the survey methodology, and other relevant materials—are available at www.worldbank.org/globalfindex.

Dr.S.Rajaram, Associate Professor, Department of Commerce, St. Joseph University, Dimapur, Nagaland, India.

We examine how the development of the digital infrastructure known as the “India Stack”—including an interoperable payments system, a universal digital ID, and other features—is delivering on the government’s objective to expand the provision of financial services. While each individual component of the India Stack is important, we argue that its key overarching feature is a foundational approach of providing extensive public infrastructures and standards that generates important synergies across the layers of the Stack. Until recently, a large share of India’s population lacked access to formal banking services and was largely reliant on cash for financial transactions. The expansion of mobile-based financial services that enable simple and convenient ways to save and conduct financial transactions has provided a novel alternative for expanding the financial net. The Stack’s improved digital infrastructures have already allowed for a rapid increase in the use of digital payments and the entry of a range of competitors including fintech and bigtech firms.

This book addresses the gaps in the present institutional structure of inclusive finance framework in India. It provides a comprehensive review of the role of banks in financial inclusion policy and micro-finance landscape in India at present. It identifies the key issues within the banking system which prove to be obstacles in the way of achieving financial inclusion and sustainable growth. The book conceptualizes inclusive banking, delves into the theoretical foundations thereof and suggests an institutional framework to avoid overlapping of their functions in order to ensure profitability. It reviews the existing market structure and competition in the inclusive finance arena while considering the role of banks, micro-finance institutions and SHGs in financing the poor. The book proposes a distinct change to the existing business model, examines the bank business model for inclusion and how the banks can and should treat the micro lending clientele as their core client base to counter the issues of profitability and competition in today’s banking sector. It also discusses some of the latest initiatives in inclusive finance and the importance of entrepreneurship development experiments in India and their efficacy in comparison with the micro-lending model.

Digital financial inclusion can prove a master stroke in reaching the unserved and underserved population, especially to low income groups. With the aim of reaching such population banking and non banking sectors have started to render digital financial services to excluded people. The approach to digital channels and usage of financial services in formal way by the debarred and underserved populace is termed as "Digital Financial Inclusion". One of the decisive drivers that included majority of population in formal financial sector was Pradhan Mantri Jan Dhan Yojna initiated by the Indian Government. Under this scheme the bank accounts of majority of the Indian citizens have been opened to provide the benefits of direct benefit transfer. The accounts of adults with any of the financial institutions have been increased from 52.8% to 79.8 % between years 2014 to 2017 that shows more than three hundred million people entered in formal financial sector in three years. If the digital financial services could be provided in an effective manner by the service providers it may bridge the gap in the way of financial inclusion by providing convenience, ease of use, time saving and low cost transaction features etc. Various digital banking channels have been introduced by the financial institutions and Government such as Automatic teller machines (ATMs), Cash dispensing machines, Internet banking, Mobile banking, Point of sales (POS) terminals, Unified payment interface (UPI) and Business correspondents etc. which made the banking easily accessible. In spite of presence of enormous digital banking platforms, still there are quite a few lacunas ingrained in the system that act as roadblock in the way of digital financial inclusion. Hence we cannot ignore the adverse factors and the risk associated with digital transactions.

Financial inclusion has been one of the most propagated ideologies in countries, and as a result, significant efforts have been taken to nurture institutions and systems to include an array of socio-economic classes. Various financial institutions and societies have taken steps toward financial inclusion, but to be successful, they need to understand how to accurately target and market their potential customers as well as the new avenues for development. Marketing Techniques for Financial Inclusion and Development is a critical scholarly resource on the marketing techniques adopted by various financial institutions and societies for promoting financial inclusion initiatives for the development of the society at large. Featuring coverage on a broad range of topics such as consumer awareness, financial literacy, and micro-enterprises, this book is geared towards managers, investors, brokers, researchers, and all others within the banking industry.

Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.