Financial Inclusion: Past, Present and Future A Technology View

The biggest challenge to financial inclusion situation is that most of the people attempting a solution don’t even have a clear view of the problem. When you solve the problem with clarity of vision, you end up creating an institution like Bandhan Bank and in other cases you end up installing ATM machines in villages, only to realize very soon that cost of operating an ATM in a rural location can never be justified by the value it offers even at 100 percent capacity utilization. During my stint at HDFC Bank, I was leading the solutions for retail payments space, I was also responsible for financial inclusion initiatives. We did many things like Bank on Wheels, installing an entire bank branch including an ATM with biometric (finger print) capability in a bus specially modified for this purpose. Another version of Bank of Wheels was Ultra Small Branch, where we created solution for single man branches operated entirely through a handheld device. The manager would basically carry the entire branch on a bike and travel to dedicated service locations.

Once Wincor-Nixdorf senior management representatives were visiting India to showcase their new hardware to Indian prospects and during the evening meet and greet one of the Germans got into a conversation with me. During the conversation he mentioned that he is really interested in building something for financial inclusion specially for rural India. My answer to him, “Stop selling them ATMs.” The income and spending patterns are very different for rural and urban markets. ATMs are required for a customer base that receives bulk of its income in its bank account and then withdraws what it needs to spend, while when someone earns primarily in cash, they spend in case and then deposit whatever is left of it as savings in their accounts. By the way, this conversation was back in 2011 and a lot would have changed in last 8 years (QR code and UPI were non-existent then for example) still fundamental principal remains the same.

One more point I used to hear often about rural customers that biometric authentication (finger print) is a must have for building any solution for rural customers. Although most of the time their point of view prevailed and we ended up building solutions with biometric authentication however my counter argument to this always has been that a numeric PIN will work as fine. Even if the customer is illiterate he can identify his PIN as combination of symbols, besides if a customer can count money, he can manage his PIN. Who remembers her/his PIN as Five Thousand Three Hundred Ninety One? You always remember it as Five, Three, Nine, One. Introduction of biometric pre-aadhaar meant any solution built for rural was costlier and not viable. Has anyone in any bank ever verified their hypothesis, I doubt. Nobody ever shared any field research in this regard with me.

A lot has changed in last decade. APBS (Aadhaar Payments Bridge) is extensively being used to transfer subsidy directly into beneficiary’s account using Aadhaar mapper. Only credit in my father’s account is cooking gas subsidy. NREGA payments are being credited directly to the account. AePS (Aadhaar enabled Payments System) makes it easy to authenticate customer using Aadhaar. Jio has given mobile data connectivity to anyone who they can get their hands on. Internet in India is cheapest in the world and the connectivity has reach even small villages. PayTM has spend billions to teach people how to transact using mobile phones. G-Pay and PhonePe have used the UPI to create user friendly payment experience for anyone with a bank account (PMJDY gave everyone a bank account, even the ones who were never interested in having one). BharatPe and PayTM are reaching out to smallest of the merchants and on-boarding them on digital payments using QR codes. The people who were not even expected to handle a 4 digit PIN are now scanning QR codes through their mobile phones.

Next big game changer in financial inclusion space according to me will be from mass adoption of speech recognition and voice biometric. Together they have the power to make payments completely invisible thus removing any friction in the process. Imagine an illiterate person in some remote village calls up a designated number of her/his bank and speaks the instructions in her/his native language e.g. “humara phone recharge kar do do sau rupai ka (please recharge my mobile number for 200 rs).” and the bank “identifies” the customer through her/his “mobile number”, “authenticates” the customer through the combination of two factors “what he has?” i.e. his “mobile device” and “who he is?” i.e. his “voice biometric” and reads the instructions from his speech. This simple a transaction experience can really transform the way payment is happening today. Behavioral biometric is another area that can use customer’s way of interaction with the device as password and make authentication experience completely seamless and yet sticking to the two factor authentication process. There are companies working towards making this a reality and this experience is very much possible with the technology available today. There are start-ups like Uniphore and Gnani working on speech and voice biometric and start-up like NeoEyed on the area of behavioral biometric. (In my opinion OTP delivered on my mobile device for a transaction I am performing on the same device is not two factor authentication in true sense, it is “what I have?” i.e. my “mobile device” performed twice.)

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