India has a high population in which most people still live in the rural areas. Many surveys have shown that India has a high number of the world’s unbanked people numbers. These people are cut off from our financial sector and are unable to claim benefits of it. Moreover, they are also not a part of the country’s growing economy. Thus, to have a higher rate of financial inclusion in India, institutions like banks and digital lending platforms have to implement new solutions to attract these unbanked people with their services. One such crucial solution is video KYC.
Reasons why people still lack bank accounts
Many people living in poor and remote areas lack access to financial services. Although, institutions are implementing various solutions to achieve high financial inclusion in India, some reasons have stopped people from using banks or other financial services.
● Low income: This condition is the truth for many migrant workers and daily-income laborers. Their income is small and the cash they receive is completely spent on affording their living conditions. They are not able to save up any money, and find it wasteful to open a bank account.
● Illiteracy: A part of the population, especially in rural and remote area is still illiterate. They lack the proper knowledge of the services provided by the banks and other financial institutions as most of it is done in modern languages. The fear of being at a disadvantage, having to pay for extra charges, or somehow getting scammed prevents illiterate people from availing financial services.
● The lack of a widespread bank infrastructure in their area: Until a few years back, banks and financial institutions were not able to cover the entire length of India. Although more efforts are being done to reduce this, the changes are happening slowly. Lack of banking facilities in their vicinity prevented people from opening accounts and availing their services.
These issues can be solved if banks and local governments try to raise awareness to increase the financial inclusion in India. The introduction of new financial tools and services like digital lending in India or video KYC for banking is increasing the reach of financial institutions.
How can institutions increase financial inclusion?
We can see that a part of the Indian population still lacks access to banking services. Although, digital lending in India and video KYC is becoming more widespread in use, the some steps can also help with this. Reaching out to the unbanked can be an easy task if it is done correctly. Here are a few ideas:
● Introduction of digital solutions: Banks can reach out to remote areas if they make use of digital solutions like video KYC, etc. Through this, unbanked people do not need to travel anywhere and can complete their identity verification remotely.
● Introduce new schemes: The governments and financial institutions can collaborate to introduce new schemes that can attract the unbanked people. For example, providing small business loans, loans to encourage women empowerment, farmer loans, etc. These types of loans can have a more lenient credit underwriting process and use video KYC for faster authentication, so that people can easily get the money. Providing these loans at low interest rates will also attract people.
● Spread awareness of the benefits of banks: Banks can collaborate with local governments and spread awareness regarding financial services. Spreading correct information and solving doubts will attract many unbanked people.
Thus with the help of video KYC and other such digital solutions, financial institutions can try to attract more unbanked people and help avail themselves financial services. It will increase the financial inclusion in India.
