What Were the Initial Challenges to Bring Digital Payments in Rural India?

India is not a small country, and almost 70% of entire nation falls under the rural part – this size is a big problem to get digital payments in rural India. Moving on to the population, 65% of the Indian population resides in the rural regions (Source: CNBC TV India).

Now, these people barely had access to the internet and smartphone like the urban people. As a result, creating awareness about digital payment was another significant challenge here. People had almost no knowledge of digital payments.

A report from Livemint shows that 19 crore Indian citizens have no bank account. However, the abovementioned schemes helped increase the number of bank accounts, but their cash dependency remained the same. As a result, 80% of the Indian population opened bank accounts, but 45% of these accounts remained inactive.

The rural people had a dominant trust issue in the banking services because of bad infrastructure, excessive service charges, and inaccessibility to the branches. In addition to that, their low income made them believe that a bank account is just a luxury.

The people with an existing bank account were not ready to embrace digital payments because smartphones and internet were not that accessible to them. And they believed the online solutions to be very complicated. All these made them least confident about the digital payment system.

But, this situation did not last longer – as soon as they got access to smartphones, they got digital literacy. Hence, the entire situation turned upside down.

The Entry of Smartphones and Internet in Rural India

As mentioned earlier, rural India was deprived of the technologies for quite a long time. It grabbed the attention of the companies, and these smartphone companies came forward to capture this market. Deloitte predicts that during 2022-2025, the demand for smartphones and internet connections in rural areas – in tier 2, 3, and 4 cities will be sky-high.

Around 1.7 billion smartphones will reach rural India by 2026, making  India's smartphone market worth $250 billion. The number of internet users in rural India grew by almost 13%, which consists of approximately 299 million population (Source: Tech Circle).

Forbes mentioned that rural India has a 20% higher internet presence compared to urban areas. Smartphones with internet connections provided these people with sufficient knowledge and minimized their reluctance for digital payments. As a result, the doors for digital payment opened in rural India.

The Emergence of Digital Payments in Rural India

A 2018 report from Livemint said that 44% of urban India used digital transactions, whereas rural India had only 16% participation. Complicated solutions and lack of tech accessibility were the key barriers to change this cash-driven mindset. A 2022 report says that in semi-urban and rural areas of India, online transactions surged by 650%.

So, the entry of smartphones and internet turned this situation upside down. Users have realized the ease of not carrying cash, and merchants have realized the ease of no need to return change to their customers.

How the Indian Fintech Sector Came Forward To Help Rural India?

Along with the Government of India and RBI, many fintech companies came forward to bring digital literacy in rural India. They directly addressed the pain points of the end users.

These companies begin by removing unnecessary complications from their solutions like UPI, payment gateway, etc., so people can use them without hesitation. Next, they removed the language barriers and made the solutions, guides, and everything else available in local languages. The solutions became easy to understand, and the rural population was eager to try them out.

These companies showed growth opportunities to the rural merchants, too. They demonstrated how, by using the fintech solutions, they can

• Quickly accept payments from anyone
• Stay out of the headache of returning changes
• Keep records of payments without a Khatabook
• Widen their sales by going online
• Enhance user experience

It encouraged many small businesses to use futuristic solutions like payment gateway. And they can easily resolve their doubts regarding the solutions with the help of easy tutorials in their local languages through their internet-enabled smartphones. In short, rural India finally accepted digital payments and understood the ease of payments it brings in. 

The Impacts of Digital Payments Brought In Rural India

The awareness campaigns and demonstrations from government, semi-government, and private organizations did not go futile. The merchants understood how easy it is to accept payments digitally, and end-users understood how easy it is to buy anything from anyone in any location and pay for it with UPI or card or net-banking.

As a collective result, demand for micro ATMs and mPOS devices increased by 25%. The value of ATM transactions grew by 25%, and volume increased by 28%. According to a Times of India report, it encouraged the government of India to invest almost INR 65 crore to promote digital payment services like IMPS, UPI, PoS machines, etc., in rural regions of India.

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Rural India is nonetheless an integral part of India, and it deserves the facilities of digital payments that the urban regions enjoy. Indeed, the rural people come with a conservative mindset, especially for these techy solutions. Still, rural India is an equally good market for these solutions. Awareness campaigns with convincing and friendly tutorials are needed to grab this market. To establish a cashless economy in rural India, government, semi-government, and private organizations took this approach, and it worked. No wonder more such approaches will take digital payments to the optimum level in rural India.