With the world readily embracing the digital age, the applications of technology have had far-reaching impacts in all realms of society. Technology has
helped tackle some of the world’s most crucial social problems, such as low literacy rates, food insecurity, and climate change. The use of technology in financial inclusion stands to be pertinent in today’s context as it paves the way towards inclusive growth through the upliftment of disadvantaged sections of society.
Financial inclusion refers to the availability to both individuals and companies of useful and cost-effective financial goods and services, including payments, transactions, savings, credit, and insurance, that are sustainably and ethically provided.
The importance of financial inclusion lies in the fact that it allows social mobility. These resources help empower individuals and foster communities, which can aid in promoting economic growth. Moreover, account holders are
more likely to utilise additional financial services such as credit and insurance to launch and grow enterprises, make investments in their children's or own health or education, manage risk, and recover from financial setbacks, all of which can enhance their overall quality of life.
Millions of formerly excluded clients are switching from only using cash for formal financial transactions to using digital banking services over mobile phones or other devices.
Financial inclusion has advanced significantly. Globally, from 51 percent in 2011, over
76 percent of adults now have a bank or mobile account. In addition, more than
80 nations have introduced digital financial services, some of which have attained a sizable market, including those utilising mobile devices. As a result, millions of formerly excluded clients are switching from only using cash for formal financial transactions to using digital banking services over mobile phones or other devices.
Impediments to financial inclusion
Though major strides have been taken toward financial inclusion to target low-income marginalised sections, the undertone of a divide still exists and needs to be proactively addressed. Nearly
80 percent of the Indian population has a bank account, and nearly
18 percent (81.38 million) of bank accounts are inoperative, having “zero balance”. Moreover,
up to 38 percent of accounts are inactive, which means that there have been no deposits or withdrawals in the past year, demonstrating that many Indians are still not fully integrated into the formal banking system.
Understanding the reason behind the digital divide that prevails is crucial to addressing the root cause of the issue. .
Additionally, India still needs a robust telecommunication infrastructure with a stable broadband internet connection. Despite progress in increasing technological features with increasing speeds, the inability of the entire country to adapt to these innovations has widened the gap.
India additionally faces the hurdle of getting its citizens online, with more than
310 million individuals needing a basic cell phone. This prevents account holders from receiving crucial information, such as details relating to account transactions. In addition, financial institutions also need to be more willing to deliver messages for transactions of small quantities. These factors have led to an
increasing dependency on local agents.
Rural clients need help accessing prospective financial services due to complicated banking procedures such as requiring identity credentials and maintaining a specific balance in an account.
There is an evident
divide between the urban-rural regions that dominate India. Only 4.4 rural families have computers, compared to 14.4 percent of urban households and 14.9 percent of rural homes have internet connectivity, compared to 42 percent of families in metropolitan regions. Meanwhile, only 13 percent of adults in rural regions have access to the internet, compared to 37 percent in metropolitan areas.
Specifically, such gaps are associated with various factors in finance, starting with small-time lenders charging high-interest rates common in rural regions. Access to credit still needs to be solved. Government programmes are yet to reach more remote areas to improve loan availability efficiently. Individuals find that online loans need more options from reliable financial institutions or digital lending. Additionally, rural clients need help accessing prospective financial services due to complicated banking procedures such as requiring identity credentials and maintaining a specific balance in an account.
The digital divide is also a
result of limited access to computer and communication technologies. In India, fewer people can afford the device needed to access digital information. India additionally faces the burden of providing diversified content across different regions, as individuals across India have different mother tongues. Moreover, the number of individuals who have access to computers or are knowledgeable enough to utilise the internet varies too widely between states. Thus, a blanket approach cannot be implemented nationwide.
Indian citizens lack the potential to maximise technological interventions. About
266 million adults are illiterate. The lack of financial literacy has also greatly impeded the growth of financial inclusion, with many financial cyber crimes peaking in proportion to the growing distrust among rural residents, leading to lower adoption rates and a
6-percent jump in cybercrimes in the same year.
India additionally faces the burden of providing diversified content across different regions, as individuals across India have different mother tongues.
As Personal Identifiable Information (PII) guidelines are not strictly enforced and adhered to, large quantities of data are readily accessible to numerous parties, raising serious concerns about data privacy. Mobile numbers and Know Your Customer (KYC) Data are widely used. There have been cases where a few business correspondents' agents secretly record biometric information in clay, where they would subsequently recreate it for fraudulent purposes.
Recommendations
While India works consistently towards various technological advancements through various e-governance schemes, there needs to be more attention given to the gap within society. It is pertinent that when working towards addressing such social inequalities, the existing gaps are kept in mind. It lies in the hands of the government to implement a financial inclusion policy and look at the reasons behind financial exclusion and effectively address them. Information and Communication Technology policies are primarily top-down and supply-focused. Thus it is necessary to develop financial goods and services focused on the needs of citizens and the disadvantaged. These policies should focus on digital inclusion strategies to ensure that rural areas can access proper internet connectivity.
A systemic strategy focused on digital skills, and financial literacy should be implemented in each region, keeping in mind the language barrier and access to technology.
Additionally, to ensure digital financial inclusion, the government should encourage the middle-aged bracket to educate themselves in reading and writing to use the various facilities they provide. Government websites have information primarily in Hindi and English, excluding large sections of the population. A systemic strategy focused on digital skills, and financial literacy should be implemented in each region, keeping in mind the language barrier and access to technology.
To combat financial fraud, implementing a one-to-one Management of Financial Services (MFS) agent mentorship programme that focuses on vulnerable populations and teaches them the fundamentals of mobile and online interaction is possible. Additionally, removing the barriers to financial service access for low-income persons by reducing transaction costs could facilitate increased participation, as
observed in Nepal, where free and easily accessible accounts were more prevalent among women.
The lack of access to technology can widen social exclusions already present and deprive people of necessary resources. The digital divide affects every area of life, including literacy, wellness, mobility, security, access to financial services, etc. Therefore, for a fast-growing nation such as India, the focus needs to shift from simple economic growth to equitable and inclusive growth.
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