But high investment costs pose a challenge, says Associate Partner, FS Advisory
Highlighting the role and impact of digital financial services on rural communities, a study by USAID (United States Agency for International Development) has found that the use of digital tools in the last mile of agricultural value chains could allow agri businesses and farmers to optimise procurement and business performance.

“Almost 70 per cent of our population is based in rural areas, providing a unique opportunity for financial service providers to serve an untapped market,” said Himanshu Bansal, Associate Partner, FS Advisory, at advisory services firm Intellecap, which is part of the impact investment-focussed Aavishkaar-Intellecap Group.

While the opportunity is ripe, Bansal says many tend to find it challenging to serve rural clients, with the high investment costs associated with designing and delivering financial products and services.

Intellecap was selected by international development agency USAID to identify and digitise rural value chains, and to expand acceptance and use of digital payments in a rural setting.

Impediments
Commenting on numerous unsuccessful digitisation initiatives in rural India in the past, Bansal outlined some of the major impediments: the high availability and circulation of cash in the rural economy, less developed rural ecosystem for digital spending, and lack of knowledge about the benefits of utilising digital financial service channels.

However, Bansal added the government’s desire to boost financial inclusion and reduce the use of cash has been fuelling rapid growth in electronic payments in rural India.

Advancements in biometrics have also enabled financial institutions to develop interventions such as Micro ATMs and Kiosk Banking, said Bansal, which are designed specifically keeping the rural customer in mind to increase the adoption of digital financial services (DFS).

Bansal said a step-by-step approach on promoting digitisation was needed in rural India to ensure its sustained usage.