Financial inclusion is the need of the hour in India – according to World Bank data, only 35% of Indians have an account with a formal financial institution. Less than 8% have debit cards, and less than 2% have credit cards. As per the 2011 Census, only 58.7% of households utilise formal banking services.
The Indian government is on a mission of financial inclusion with the Jan DhanYojana, an ambitious scheme that envisions a bank account for every Indian. The target for the first phase of the scheme was 75 million accounts by August 15, 2015. As per the current status report, we have over shot this figure – we stand at 112.3 million accounts, and it’s heartening to note that 66.9 million accounts are in rural India.
What is disturbing is that 81.1 million (or 72%) of the accounts opened under the scheme have Zero Balance. In the past also, we have seen that no-frills accounts are opened and then stay inactive or dormant once the initial enthusiasm dies down. Why is this? The same banks who are keen to push their services aggressively to urban, affluent customers are missing out on capitalising on the vast user base of first time customers who have a great need for a range of banking products and services. As social entrepreneurship group Ashoka points out in this article on Forbes magazine “The basic obstacle is that mainstream banks will never be able to deliver tomorrow’s low-cost services (services the unbanked need most of all) using today’s high-cost business models.” Therefore banks engage only in a limited way with the marginalised customers. Banks should not see the Jan DhanYojana as something that is done only to ensure compliance, they should also see an opportunity that can impact their growth positively.
This is where technology, and digital inclusion can play a role, hand in hand with innovative thinking in the design of products and services. Did you know that SBI is the bank with the largest market share (51% or 1.15 Crore users) of mobile banking users in India?According to an SBI report, the vision is to “gradually move in a direction where every poor person is able to operate his bank account from his mobile, as mobile penetration is higher than financial services penetration.” The existence of a vibrant, lower income market that can be reached on mobile, has been demonstrated powerfully by the success of mobile payment services like M-Pesa. The World Bank’s 2014 Global Financial Development Report notes that low income customers benefit the most from technology-driven innovations like mobile banking, as they make financial services cheaper and easier to access. The constant presence of the cell phone with the customer also makes it a valuable tool for financial literacy, without which financial inclusion is meaningless.
India has 900 million plus phone subscribers as per the latest TRAI report, and already has the second highest number of cell phone sales, after China. Banks can experiment with mobile phone technology to pilot innovative and more flexible business models. And if they fail to do so, they will certainly face stiff competition from the new entities that will be set up in 2015 as per RBI’s new norms that allow retail chains, corporate and telcos to open payment banks.
Phani Bhushan is the founder of Anant Computing. Anant Computing helps companies to create native apps in every Indian language, that runs on any feature phone or smartphone. Team Anant firmly believes that true digital inclusion will happen if every citizen of our country has the power of internet and computing at their finger tips. Our vision when we designed Anant was a more digitally inclusive India, where everyone with a mobile phone can both create and access high quality apps ,sans language barriers.