Rural banks must cash in on digitisation options
The spread of cheap data networks has enabled the mobile to become a virtual bank for the masses
In the last decade, the face of the rural economy has undergone a metamorphosis both from an economic and social perspective. The rural clientele is no longer limited to farmers and the uneducated, but has come to include a generation which can use and adapt technology effectively. This evolution of the rural economy has dictated a change in the nature of the supply of banking services, adopting a more inclusive approach combined with innovative digital solutions.
Over a span of six years, the number of banking outlets in villages has increased eight-fold, basic savings bank deposit accounts six- fold and agriculture credit offtake has doubled. The focus on the Jan Dhan – Aadhaar – Mobile (JAM) trinity and more recently demonetisation, have induced a behavioural change in hitherto unbanked masses towards banking services.
India is now at the cusp of the great collision of the 3Ds of disruptive forces – demographics, (de)regulation and digitisation, and banks need to be ready to fully seize this “once in a centennial opportunity”. There has been early identification of the propellers of rural digital banking and the government has moved fast to lay the foundations for cash alternatives such as debit/credit cards, mobile/internet banking, e-wallets and Aadhaar merchant pay.
Cheaper mobile handsets and the spread of cheap data networks have enabled the mobile phone to become a virtual bank in the hands of rural masses. This trend will strengthen as BHIM USSD 2.0 kicks in, to empower 350 mn feature phone users to take advantage of the united payment interface (UPI).
From the bank’s perspective, digitalisation offers low hanging fruit; however to reap the full benefits ,banks must adopt a 4P approach - product strategy, processes, people, protection. Achieving 100% financialisation of the rural economy will require further strengthening of institutions, including digitisation of land records, setting up financial literacy centres, and a shift in policy priorities towards encouraging savings, provision of insurance products among others in the rural economy.
The fact that the rural economy largely withstood the impact of demonetisation is a reflection of the evolved face of the rural economy. Ensuring access and equity in the availability of financial services is a necessary building block for the sustainable growth of the country. Digitisation has allowed this transformation to become quicker and easier. I believe the rural economy is ready to embrace this change and it is imperative that banks must adopt the role of ‘change agents’ to become the spark plugs in this endeavour.