Technology and financial inclusion are the popular coinage in banking parleys in the country. While technological upgradation and mobile banking are catching up so fast, financial inclusion is tardy.

Financial inclusion is a major agenda for the Reserve Bank of India (RBI). Without financial inclusion, banks cannot reach the un-banked. It is also a major step towards increasing savings and achieving balanced growth. Recently two conferences were held in Mumbai highlighting these issues; The Sixth Banking Tech Summit of Confederation of Indian Industry (CII) and another one organised by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Of the 6.9 billion people on the planet, just 30 per cent (2.1 billion) have bank accounts while 75 per cent — 5.2 billion people — have mobile phones. “In India, only 200 million people have access to a bank account while 811 million have a mobile phone. For a population of 1.2 billion people, this translates into 68 per cent having a mobile phone and only 17 per cent having a bank account. The numbers speak for themselves: when it comes to reaching the ‘un-banked' and extending financial inclusion for the larger population, mobile phone is the key,” said Wim Raymaekers, Head of Banking Market, SWIFT.

The reach the country is having with technological progress mobile banking has the potential to emerge as a game changer in terms of costs, convenience, and speed of reach. Business models of banks, telecom operators and other stakeholders need to converge.

However, the banking industry's penetration to un-banked areas is still found sluggish. “The role of the Indian banker is challenging. At one end of his spectrum lies the demand to achieve financial inclusion as nearly 50 per cent of the population is yet to be covered under the formal system of banking and at the other end lies the task to fulfil the needs of the existing customer,” said RBI Deputy Governor K. C. Chakrabarty while speaking on ‘Connecting the dots' at the CII conference.

“We need to remember that we should work towards bringing nearly 400 million citizens to the formal fold of the banking sector. It is not just about opening ‘no frill' accounts. As of today, 75 million ‘no frill' accounts have been opened but there are hardly any transactions in them. Banks need to work towards providing a full range of financial services and this would need a low cost, reliable, easy to use and secure technology backbone linking six lakh villages in the next four-five years”.

The first priority for banks is to adopt core banking solution (CBS), including all regional rural banks (RRBs). Next, a multi-channel approach using handheld devices, mobiles, cards, micro-ATMs, branches and kiosks can be used. However, it should be ensured that the transactions put through such front-end devices should be seamlessly integrated with the banks' CBS.

SWIFT appreciates National Payments Council of India's (NPCI) efforts to build a world-class payments system with global ambitions. The mission of the new NPCI is clear: “to build a state-of-the-art, world-class customer-friendly electronic retail payments system available and affordable to all round-the-clock”.

Today, banks are already offering services over mobile to communities that have been historically ‘unbanked'.

In rural areas, where accessibility is a problem, banks are using the microfinance network and business correspondents and facilitators to bring more people under the ambit of banking services, said a report of PwC prepared for the CII's banking summit. Capitalising on the huge untapped potential in smaller towns and cities and rendering financial services to this segment of people poses a big challenge. “Few banks have explored technology solutions to increase the scale of their microfinance portfolios, with the use of smart cards and core banking solutions”.

Often a multitude of operational issues are quoted as reasons for lagging behind in financial inclusion targets. Till such time complete technology integration takes place on all fronts, there are bound to be areas where intermediate brick-and-mortar structures need to be in place. Even with Business Correspondents (BCs) issues arise regarding their supervision and customer grievance redressal. Certain accounting issues in this regard are also being addressed. All these operational issues and many more can be resolved if banks begin to look at financial inclusion as a business opportunity rather than an obligation to fulfil their corporate social responsibility (CSR) objective.

Banks have to realise that for Business Correspondent (BC) model to succeed the BCs who are the first level of contact for customers have to be compensated adequately so that they too see this as a business opportunity. Similarly, as regards MSPs (mobile service providers) acting as BCs reports reaching the central bank still suggest that the true spirit of cooperation is yet to stabilise with each still trying to destabilise the other.

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