The digital transformation
With companies increasingly taking the digital route to expand into small towns in India, it has become even more critical to bring the unbanked into the fold. In this context a recent survey by Nielsen India finds that there is a long distance to travel for companies that want to convert rural India into a cashless consumer economy. But payments banks are transforming the landscape by changing the way migrant workers remit money and could hold the key to the future
■ In India, just 63% of adults have access to the formal financial system. Financial inclusion in rural India, which houses 70% of the country’s population, is even less
■ Rural India’s need for financial inclusion is urgent, as those who migrate to larger cities need to remit money back to their families
■ Payments banks, which offer electronic remittances, financial advisory, online banking and more, offer immediate value to unbanked consumers
■ Payments banks have particularly been useful for the remittances economy. There are 120 million migrant workers in India, and more than 80 per cent live in the inadequately connected rural areas
■ Additionally, migrants make 80 per cent of the country’s domestic remittances. According to the National Remote Payments Survey by National Council of Applied Economic Research, and additional insights using Nielsen’s forecasting technique, domestic remittance in India is valued at more than Rs 900 billion per year, including non-traditional modes of transfer. Rural India’s contribution is over Rs 700 billion per year
■ Currently, the penetration of mobile phones in SEC D and SEC E in India is a meagre 18 per cent. So, only a fraction of remitters use online modes of money transfer as of now, thereby presenting a big opportunity
■ Typically, family members of households involved in remittances are less educated, with approximately 70 per cent of their chief wage earners being illiterate or educated only up to the primary level. Another characteristic of these households is that one or more of the younger family members typically migrate from rural areas to urban labour markets, industries and farms in search of better work prospects
■ Nearly 50 per cent of such families transfer money through risky non-traditional channels like friends, family, unknown persons and agents. The risks involve high chances of thefts, cheating and significantly higher transaction rates