Trends witnessed in rural India digital payments amidst the lockdown

Cash is the de-facto mode of payment in India. The majority of transactions (around 95%) in the country are still cash-based. While the demonetization of Rs. 500 and Rs. 1000 notes in November 2016 removed 86% of the currency from the Indian market, the ratio of currency in circulation to GDP increased from 8.7% in 2016-17 to 11.2% in 2018-19. Digital modes of payment have also grown steadily over the past few years, but the adoption rate is slow, especially outside urban settings. Multiple factors such as lack of infrastructure, uneven broadband distribution and unavailability of PoS machines have acted as a barrier to digital payments adoption in rural India.

Notwithstanding the fact that digital payments have a lot of catching up do, the growing internet user base in India’s small towns and villages set the stage for increased use of e-payments. According to Kantar’s findings, rural India recorded a 45% spike in the monthly active internet users in 2019. The report also estimates that there will be around 304 million internet users in rural India by the end of this year. Now, the COVID-19 pandemic and the nationwide lockdown imposed to contain the outbreak is further propelling the growth of digital payments in India’s hinterlands. 

Acceleration of digital payments adoption post lockdown

The Government of India has been advocating digital modes of payment in an attempt to promote social distancing. Prime Minister Narendra Modi in a tweet requested Indian citizens to abide by social distancing guidelines by adopting digital payments. Banks have also echoed a similar sentiment as growing evidence suggests paper currency can be a potential carrier of the coronavirus. The concerted effort from the government bodies and private organizations has led to increased use of various online payment apps in India. As estimated by a survey of 42,000 respondents by the consultancy firm Local Circles, about 42% Indians have turned towards digital payments during the 1st phase of the lockdown – from 25th March 2020 to 14th April 2020.

This does not specifically show the adoption of digital payments in rural India, but the government is taking a slew of measures to take the benefits of mobile-based payment methods like USSD along with Aadhaar-based payments like AePS and mobile ATMs. The IT Ministry requested the Home Ministry in April to allow more number of digital kiosks to resume their operations in rural areas to facilitate disbursal of essential services such as AePS. 

While the government-led initiatives started the digital payments revolution in rural India, FinTechs have also been making relentless efforts to take this narrative further. They have partnered with traditional banks and established financial institutes to help them expand their reach and acquire a larger customer base from the rural areas. The operational experience of banks combined with the technological prowess of these new-age FinTech firms is bringing the benefits of digital payments to the rural masses, enabling them to make transactions in a faster, seamless manner. Some of the innovative, tech-led solutions to promote digital payments in rural areas are as follows: 

Mobile ATM vans

Mobile ATM vans have been deployed across many regions in the county to bring the key banking services to the doorstep of people. In addition to cash withdrawals, these mobile vans also facilitate cardless cash withdrawals and enable users to transfer funds to registered payees, change the ATM pin, recharge their pre-paid mobiles, and make fixed deposits. While the concept of mobile ATM vans is not novel, it has seen widespread adoption in rural India in the wake of the COVID-19 crisis.  

Self-service bill payment kiosks 

Self-service bill payment kiosks have been vital and gained huge momentum in small towns and villages during the lockdown period. Bill-payment kiosks not only allow users to seamlessly pay for their electricity, gas, water and other electricity bills, but also eliminate the requirement for human-to-human touch and physical interactions.   

mPOS (mobile-point-of-sale)

mPOS has become a saviour for rural merchants, who do not have the means to invest in a separate device. Compatible with smartphones, tablets or any other mobile terminals, mPOS solutions are designed to facilitated faster payments. Factors such as ease-of-use, low deployment cost and portability have contributed to the growing adoption of mPOS terminals in rural India.

(The views expressed in this article are by Mr.Rohit Kumar, Founder & CEO, Xpay Life. Onlineandyou.com doesn’t own any responsibility for it.)