Financial inclusion means integrating the unbanked population into the mainstream, and actively involving the financially weaker populace who have bare minimum access to any economic reform programs. 

A survey conducted by Financial Express on digital payment shows a steep rise in the acceptance and growth of Bharat QR, PAYTM, BHIM, PhonePe, etc., among Indian nationals. The increase in digital payment was a whopping 53% in 2018 and is expected to reach 1 trillion in 3-4 years. Although the credit for shaping a cash-dominant economy into a digital economy can be attributed to the availability of cheap phones, data packs, and user-friendly apps to pay utility bills online easily, the current Covid situation also plays a crucial role in this transition. But there’s a long way to go.

Digital Payments Laying The Foundation of Financial inclusion

In the year 2005, the RBI (Reserve Bank of India) introduced the concept of Financial inclusion to include the poorest and underprivileged under the banking system to ensure easy and affordable access to basic financial services. 

The World Bank initiated a financial inclusion framework (FISF) in 2013 as a key enabler to eliminating extreme poverty. Around 55 countries, including India, made commitments to significantly increasing native financial inclusion. Financial Inclusion Data 2014 shows that only 42.8% of people (age 15+) from lower/middle-income groups had bank accounts in 2014. 21.2% of people with debit cards had access to a financial institution; out of these, only 5.6% of people used their debit card to withdraw salaries, and 9.6% used it to make online payments. 

These numbers improved significantly in 2017. As per the 2017 Global Findex database, 80% of adult Indians were registered bank account holders. 77% of women also owned bank accounts, who in India are comparatively more involved in utility bill payments than men. Even the poorest households saw a 40 percent increase in getting banked. 

Although opening millions of new bank accounts was, on paper, a massive step in the direction of financial inclusion, RBI's annual report in August 2019 shows that only 15% of bank accounts were operative; that is, these accounts did only 1 or 2 transactions in a year. Most people prefer to keep their savings at home as they did not trust or are not very comfortable with the setup. Another reason remains the lack of accessibility due to the long distance from the nearest bank(s) to their residences. This issue can certainly be addressed through online bill payments, but it needs a large awareness program to spread the word to the uninitiated. Lack of financial literacy but all-round internet connectivity in rural areas opens the path to limitless opportunities for both public as well as private financial institutions to explore.

Covid-19, social distancing, and contactless transactions have led bill payment mobile applications to skyrocket in metros and even smaller towns and villages. According to the Economic times, one of the leading digital payment startups - PayTM - has established its presence in 3000 Indian villages. Some tier-3 cities like Chitradurga (in South India) had a 20% higher adoption than metro cities. Even the most remote areas in the country are now connected through mobile phones. Bharat bill payment system has given hope to the wage workers who do not have a bank account, but he can still receive payment through BharatPe on his phone and send it to his family in a faraway village. 

According to a survey (April 2018) - Statista's Indian Digital Payment share - digital payment saw an unprecedented increase during and after the nationwide lockdown. In the Financial Year 2019, digital payments accounted for a whopping 769%  as a share of India's GDP. Statista has also predicted by the year 2023, mobile phone internet users in India will go up from 448.2 million to 500.9 million.

Another survey on mobile usage by Economic times revealed that about 88% of Indians use mobile apps for purchasing and making payments.

Use of Digital Platforms and Mobile Apps in Non-Metro Cities

Looking at the figures given by Livemint:

• BharatPe transaction values have risen from 30-35% in tier-II geographies and beyond, 
• PayTM market share has gone up from 50% in 2018 to 67% in 2020 in tier II, III, and IV cities,
• On PhonePe, 70% of its transaction comes from Tier II and III cities
• Freecharge has also shown growth of 2% from pre-Covid
• Demand for online payment grew to 40% due to lockdown in tier II and III cities
  

Online Bill Payments is Indeed The Key Entry Point

Internet, mobile money, bank transfers, and online payments have started gaining traction. With utility bills making 60% of Indian average household expenses, connecting everyone, especially the economically lower section of the society, with the mainstream mobile bill payment will be a decisive step to greater financial inclusion in the world's largest democracy. Yes, there’s a long way to go but with the current momentum, we’re not that far away.