Digital financial inclusion: 4th revolution in India
The access to financial services has the potential to accelerate the growth of an economy, it is equally beneficial for enterprises, people living below poverty line and women. Unfortunately, only 53% adults in India have access to formal financial systems and globally, the proportion is 62%. The need of the hour is to promote digital financial inclusion and policymakers all over the world have realized it. Digital financial inclusion (DFI) has innumerable benefits, from being cost effective to simplifying things for farmers by making services available at a click. Despite the realization of the potential of digital financial inclusion, there are many barriers and challenges to it.
DFI ensures access to an affordable formal financial system by people living at the bottom of the pyramid. The components of DFI include transaction platform, customer service providers, delivery channels and internet connectivity. The platform in integrated with bank systems and allows people to convert physical money to digital cash. DFI is provided in both self and assisted ways to individuals, depending upon their understanding and need of technology. The four components along with a virtual account and application programme interface need to be in place for the functioning of DFI.
DFI makes transactions easy for individuals and helps small households and businesses in managing cash flows and savings. It also helps in increasing the sales and smoothening of operations in a business by supporting the firm in investing. The most prominent barrier to DFI is lack of infrastructure and supply of electricity. The delivery channels in rural areas are another barrier since it is difficult to provide internet facilities and connectivity in remote areas. There are low levels of financial literacy in most poor families and remote areas and lack of trust in financial institutions. Sometimes individuals refrain from using banking services for various cultural or religious reasons, which also leads to exclusion.
DFI has the potential to increase the availability of formal financial services to all poor people through affordable and sustainable ways. New technologies and methods have to be devised to overcome the barriers in order to realize the full potential of DFI. People should be educated on the use of DFI and more awareness should be raised. The financial literacy all over the world should be raised and taken into consideration. Also, national level programmes can help improving the situation for poor people in understanding the concept of DFI and more population can be covered under the formal financial sector. If all countries take an initiative into improving the facilities provided by DFI and there is proper coordination, the situation can be improved for poor people all over the world.
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