FinTech innovations, mobile banking, and digital payment systems have transformed the financial landscape, making services more accessible, affordable, and user-friendly.
The Reserve Bank of India’s Financial Inclusion (FI) Index, measuring the extent of financial inclusion on a scale of 0 to 100, increased to 64.2 in March 2024 from 60.1 in March 2023, indicating growth across all parameters.
The country has made remarkable strides in financial inclusion, primarily through Government-led initiatives such as Pradhan Mantri Jan Dhan Yojana (PMJDY). Launched in 2014, this scheme aimed to provide every household with at least one bank account. By 2024, over 500 million Jan Dhan accounts had been opened, with a significant portion belonging to rural and semi-urban populations. However, challenges such as low financial literacy, limited access to banking infrastructure, and a gender gap in financial participation persist.
While traditional methods have played a vital role, the advent of digital technologies has been a game-changer. It has emerged as a powerful enabler, driving unprecedented progress in bridging the gap between financial institutions and marginalised communities.
FinTech innovations, mobile banking, and digital payment systems have transformed the financial landscape, making services more accessible, affordable, and user-friendly.
Digital Payment Systems
Digital payment systems have revolutionised how Indians transact. Platforms like Unified Payments Interface (UPI), developed by the National Payments Corporation of India (NPCI), have made peer-to-peer transactions seamless. In 2024, UPI processes over 12 billion transactions monthly, signifying its widespread adoption. The integration of UPI with QR codes, mobile wallets, and online banking has made digital payments ubiquitous, even in remote areas.
Government schemes such as Direct Benefit Transfers (DBT) have further leveraged digital payments to ensure subsidies and welfare benefits reach beneficiaries directly. This eliminates intermediaries, reduces leakages, and fosters transparency.
Mobile Banking and FinTech Innovations
With over 1.2 billion mobile phone users in India, mobile banking has emerged as a powerful tool for financial inclusion. Banking apps and USSD-based services allow users to perform transactions, check balances, and access credit without visiting a physical branch. FinTech startups like Paytm, PhonePe, and BharatPe have developed user-friendly interfaces, enabling even first-time users to navigate the digital financial ecosystem.
Innovative credit-scoring models, driven by artificial intelligence and big data, assess creditworthiness based on alternative data sources such as mobile usage patterns and e-commerce activity. This has facilitated access to microloans and credit for individuals previously excluded from formal financial systems.
Agent Banking and Micro-ATMs
Agent banking — where local business correspondents act as intermediaries for banks —has brought financial services to the doorstep of rural households. Equipped with micro-ATMs and biometric authentication devices, agents provide essential services such as cash deposits, withdrawals, and account opening. This model leverages technology to overcome geographical barriers and reduce operational costs.
Digital Identity and Aadhaar
The Aadhaar biometric identification system has been a cornerstone of India’s financial inclusion journey. With over 1.3 billion enrollments, Aadhaar enables seamless e-KYC (Know Your Customer) processes, reducing the cost and time required to onboard customers. Aadhaar-linked bank accounts have facilitated DBT, ensuring timely and accurate delivery of funds to beneficiaries.
Challenges in Technology-Driven Financial Inclusion
Despite the progress, several challenges hinder the full realisation of technology-driven financial inclusion. Digital literacy remains a significant barrier, especially among older populations and rural women. While smartphone penetration is high, many still lack access to affordable internet services, limiting their ability to use digital financial tools.
Cybersecurity and fraud are growing concerns. The rapid adoption of digital payments has made users vulnerable to phishing attacks and unauthorized transactions. Strengthening awareness and implementing robust security measures are essential to mitigate these risks.
Additionally, there is a need to address the language and cultural barriers that prevent certain groups from fully embracing digital platforms. User interfaces must be designed with inclusivity in mind, supporting multiple languages and intuitive navigation.
Policy Interventions and the Road Ahead
The Government and regulatory bodies have been proactive in creating a conducive environment for technology-driven financial inclusion. Initiatives such as the India Stack — a set of APIs enabling digital infrastructure — have laid the groundwork for scalable and interoperable financial solutions. Programmes like Digital Saksharta Abhiyan (DISHA) aim to enhance digital literacy, ensuring that citizens can safely and effectively use digital tools.
Collaboration between the public and private sectors is crucial. Banks, FinTech firms, and telecom providers must work together to innovate and deliver tailored solutions. Partnerships with grassroots organizations can also help build trust and awareness at the community level.
India’s experience serves as a blueprint for other developing nations, demonstrating the transformative potential of technology in promoting financial inclusion. By addressing existing gaps and leveraging emerging technologies, India can continue to empower its citizens, ensuring that no one is left behind in the digital age.
What is financial inclusion
Financial inclusion — the process of ensuring access to financial services for all individuals, particularly the underserved and unbanked — is a cornerstone of economic development. In a diverse and populous country like India, achieving financial inclusion is both a challenge and an opportunity.
Fun Facts
Between January and November 2024, digital payment transactions in India reached an unprecedented ₹223 lakh crore, with the BHIM-UPI platform recording over 15,547 crore transactions during the same period, underscoring its role as a key enabler of India’s digital economy.
In January 2024, UPI transactions reached a record ₹18.41 trillion, with nearly 8 out of 10 digital payments in India conducted through UPI, reflecting its widespread adoption.
Economic Survey 2024 highlights a strategic shift in India’s financial inclusion efforts, moving from targeting every household to focusing on every adult, aiming to deepen digital financial inclusion as the next goal.
These statistics demonstrate India’s commitment to enhancing financial inclusion through technological advancements and policy initiatives, contributing to economic growth and development.
