A new Financial Inclusion Index (FI-Index) created by India’s central bank shows that progress has been made toward bringing banking services to the country’s 1 billion-plus consumers, but more work still needs to be done.
Preliminary results from the Reserve Bank of India (RBI) show that financial inclusion, as measured by access, usage and quality of financial services, rose 24 percent over the past four years leading up to the launch of its new barometer.
The growth in financial inclusion was attributed to previous government initiatives like the Universal Payment Interface (UPI) that have helped millions of residents enter the mainstream financial system in recent years.
See also: UPI Reports Over 3B Transactions In July As Digital Payments Increase
But for a country that has the second largest unbanked population in the world, it will take more effort to promote financial literacy, consumer protection, and address inequalities and deficiencies in services.
The comprehensive FI-Index, which is scheduled to be updated each July, will assess the progress in these areas, using 97 indicators that cover sectors from banking and investment to insurance and government-approved details from the pensions sector.
Record Number of Transactions
The study and inclusionary objectives come at a time when India’s FinTech segment is blooming and already working toward the same goals of promoting digital payments and amassing their user bases.
The launch of the Index comes at a time when Paytm, the largest and most well-known digital payments company in the country, is moving toward an initial public offering (IPO) this fall.
As PYMNTS previously reported, the company is looking to raise roughly $2.2 billion, making it the largest public offering in India with a $25 billion valuation.
Read more: Paytm’s Landmark IPO Could Launch By October
Earlier this year, the payments company launched Paytm Payments Bank, offering consumers accounts with a no minimum balance requirement, zero charges on online transactions, and instant loans.
In February, the FinTech firm, which processes digital payments in over 500,000 villages in India, clocked a record 1.2 billion monthly transactions amid an eCommerce boom in the country.
See more: Paytm’s Monthly Transactions Climb To 1.2 Billion
Lending and digital payments startup BharatPe, is another FinTech company that is helping bring a large proportion of cash-dependent residents into the financial services ecosystem.
The company has been dedicated to financial inclusion for Indian merchants and is the first firm in India to introduce several merchant-focused products, including a Unified Payments Interface (UPI)-backed system using a single QR code to enable payments across merchants, a zero–merchant discount rate (MDR) payment service eliminating fees on debit and credit card transactions, and a UPI payment-backed merchant cash advance service.
Read also: Indian Digital Payments Startup BharatPe Raises $350M
The company collaborates with 5 million merchants across 35 cities, providing them with a QR code backed by the country’s UPI payment’s structure.
The FI-Index will be tracking the financial inclusiveness of people in the banking and postal system as well as those who are not yet part of the banking system, like small depositors, micro investors and pensioners. This means the efforts of these FinTech firms that facilitate peer-to-peer (P2P) and retail payments through mobile wallets or UPI will be crucial to advancing the country’s financial inclusion agenda.
Demonetization as a Trigger for Digitalization
In an interview with PYMNTS this year, PhonePe CEO Sameer Nigam said the surprise 2016 Indian banknote demonetization triggered a digital shift in India, as it scrapped cash savings from citizens who were trying to avoid taxes and forced the cash economy into the digital world.
See more: PhonePe Addresses Massive Scale Of India’s Digitization
PhonePe, like other FinTechs, was quick to capitalize on the government move, registering 10 million installs within months of the announcement and eventually merging into India’s primary eCommerce platform, Flipkart, four months later. Today, the digital payments and financial services company boasts about 300 million active users across India.
“We believe that payments will reach a billion people,” Nigam told PYMNTS. “After mobile data and cheap smartphones, I think we will get there.”
He added that “everyone will have to migrate to digital payments” to enable the eCommerce markets to scale up in all categories.
A brand new Monetary Inclusion Index (FI-Index) created by India’s central financial institution exhibits that progress has been made towards bringing banking companies to the nation’s 1 billion-plus customers, however extra work nonetheless must be achieved.
Preliminary outcomes from the Reserve Financial institution of India (RBI) present that monetary inclusion, as measured by entry, utilization and high quality of monetary companies, rose 24 % over the previous 4 years main as much as the launch of its new barometer.
The expansion in monetary inclusion was attributed to earlier authorities initiatives just like the Common Fee Interface (UPI) which have helped hundreds of thousands of residents enter the mainstream monetary system lately.
See additionally: UPI Stories Over 3B Transactions In July As Digital Funds Improve
However for a rustic that has the second largest unbanked inhabitants on the earth, it’s going to take extra effort to advertise monetary literacy, shopper safety, and deal with inequalities and deficiencies in companies.
The excellent FI-Index, which is scheduled to be up to date every July, will assess the progress in these areas, utilizing 97 indicators that cowl sectors from banking and funding to insurance coverage and government-approved particulars from the pensions sector.
Document Variety of Transactions
The research and inclusionary targets come at a time when India’s FinTech phase is blooming and already working towards the identical objectives of selling digital funds and amassing their person bases.
The launch of the Index comes at a time when Paytm, the biggest and most well-known digital funds firm within the nation, is shifting towards an preliminary public providing (IPO) this fall.
As PYMNTS beforehand reported, the corporate is trying to increase roughly $2.2 billion, making it the biggest public providing in India with a $25 billion valuation.
Learn extra: Paytm’s Landmark IPO Might Launch By October
Earlier this 12 months, the funds firm launched Paytm Funds Financial institution, providing customers accounts with a no minimal steadiness requirement, zero fees on on-line transactions, and immediate loans.
In February, the FinTech agency, which processes digital funds in over 500,000 villages in India, clocked a report 1.2 billion month-to-month transactions amid an eCommerce increase within the nation.
See extra: Paytm’s Month-to-month Transactions Climb To 1.2 Billion
Lending and digital funds startup BharatPe, is one other FinTech firm that’s serving to deliver a big proportion of cash-dependent residents into the monetary companies ecosystem.
The corporate has been devoted to monetary inclusion for Indian retailers and is the primary agency in India to introduce a number of merchant-focused merchandise, together with a Unified Funds Interface (UPI)-backed system utilizing a single QR code to allow funds throughout retailers, a zero–service provider low cost price (MDR) fee service eliminating charges on debit and bank card transactions, and a UPI payment-backed service provider money advance service.
Learn additionally: Indian Digital Funds Startup BharatPe Raises $350M
The corporate collaborates with 5 million retailers throughout 35 cities, offering them with a QR code backed by the nation’s UPI fee’s construction.
The FI-Index will probably be monitoring the monetary inclusiveness of individuals within the banking and postal system in addition to those that usually are not but a part of the banking system, like small depositors, micro traders and pensioners. This implies the efforts of those FinTech corporations that facilitate peer-to-peer (P2P) and retail funds by way of cellular wallets or UPI will probably be essential to advancing the nation’s monetary inclusion agenda.
Demonetization as a Set off for Digitalization
In an interview with PYMNTS this 12 months, PhonePe CEO Sameer Nigam stated the shock 2016 Indian banknote demonetization triggered a digital shift in India, because it scrapped money financial savings from residents who had been making an attempt to keep away from taxes and compelled the money financial system into the digital world.
See extra: PhonePe Addresses Huge Scale Of India’s Digitization
PhonePe, like different FinTechs, was fast to capitalize on the federal government transfer, registering 10 million installs inside months of the announcement and ultimately merging into India’s main eCommerce platform, Flipkart, 4 months later. In the present day, the digital funds and monetary companies firm boasts about 300 million lively customers throughout India.
“We consider that funds will attain a billion folks,” Nigam instructed PYMNTS. “After cellular information and low cost smartphones, I believe we’ll get there.”
He added that “everybody must migrate to digital funds” to allow the eCommerce markets to scale up in all classes.