COVID-19 Impact: Digital Banking Thrives In India, Except Several Rural Areas

India finds itself at an inflection point as it is still tackling the socio-economic fallout of the ongoing Coronavirus crisis. In these critical times, digital banking, or online money transfer has helped every sector of the nation, from governments in navigating the financial dystopia, to the public, which is taking advantage of online payments systems.

The ongoing situation has shown that the trend towards digitalisation of financial services in India is here to stay. As the Coronavirus has limited the human activities people are utilising every possible way to adopt cashless and contactless process of money transfer. Having said that, there is a large population, which is living under an umbrella, and is far from the digital world. 

Satpal Sharma, whose entire village has zero internet and mobile network connectivity, said, “Forget about digital banking, we can’t even make a normal phone call. We have to go 3-4 kilometres away to make a phone call, so we are lagging behind as far as digital India is concerned.”

While there are several rural areas where they have witnessed positive signs, however a lot of remote villages are of that where these digital banking facilities are yet to shine.

Sanjeev Kumar, CEO, Spice Money said, "The COVID-19 pandemic has been a great learning platform for many industries and financial services is one of them. The fact that movement was practically restricted challenged every industry to find their new normal. This event definitely served as a catalyst to greater adoption of digitalisation in financial services. The adoption of technology in financial services is only going to increase especially in a country like India where there has been a major push by the current government for the financial inclusion of the underserved. The recent launch of e-RUPI is a great validation of the government’s focus on digitalising financial solutions." 

 Talking about the rural areas where these digital banking facilities are still a dream, Kumar said, "The challenge in rural areas is slightly different. It lacks basic banking infrastructure. There is still a long way to go before digital banking facilities are accessible to all marginalised segments. However Fintech companies can address the lack of basic banking infrastructure problems in rural India. One such area is ATM penetration in the country. India remains one of the few countries among emerging economies that has a narrow penetration of ATMs."

According to the World Bank, India had 20.95 ATMs per 100,000 adults as of 2019, very low when compared to other countries. While over 65 per cent of the Indian population resides in rural India, rural areas account for only 20 percent of all ATMs in India. Generally a bank ATM needs to have about 80-100 transactions in a day to be viable for the bank, otherwise the numbers are just too low for the bank to earn any profit. 

While explaining about how to deal with such issues to expand the digital India initiative, Kumar said, "Customisation is a key enabler in serving the needs of rural India. It is crucial to be in line with the requirements of rural customers as their economic and social needs, means of earning and average earning differs from the urban population. Offering solutions that cater to their specific needs will help in addressing the challenges and in bridging the financial divide for the underserved rural population. The rural segment requires a dedicated approach and consistency in terms of innovation to cater to their needs."

"Additionally, the government’s partnership with private firms to offer better connectivity and provide smartphones at affordable costs will help in increasing the digital infrastructure. The digital India initiative is simply the start of an extended journey which will be difficult, but rewarding, and will ultimately promote the easy availability of essential banking services in every nook and corner of the country," Kumar further added.