Financial Inclusion for the New Internet Users in India
Impetus towards digital transformation & NIUs emerging as the largest untapped market for FinTech services
India has become truly digital with the internet and e-commerce emerging as one of the fastest-growing sectors in the country and is expected to witness exponential growth to $800B by 2030 (registering a ~10x growth from 2020) on the back of rising internet penetration and increasing income. A significant proponent of this digital transformation is the Indian FinTech industry which continues to outpace the world with rising adoption, emerging as the third largest fintech ecosystem in the world.
However, the last-mile financial connectivity and financial inclusion continue to pose a significant challenge to the overall ecosystem as a large section of the population deals with barriers related to adoption such as traditional mindsets and apprehension, inaccessible services, and most pertinent, limited financial literacy and confidence. One of the most critical and notable pieces of information from the data is the potential for FinTech adoption in low income states and with the Next Billion Users. Combining this with New Internet Users (NIUs) in Tier 2 and 3 cities who have unique behaviours, aspirations, needs and challenges when interacting with financial products. It would be imperative for financial companies to map and understand these in order to bridge the gap between the increasing digital usage and the low penetration of financial services.
Xeno Co-lab over the years has undertaken extensive research in this sector in collaboration with various organisations. This article tries to encapsulate those lessons and insights pertaining to unique NIU behaviours, needs and current gaps that could be the gateway for innovation, in turn successfully onboarding this vast, largely unexplored segment of the population.
1. Reliance versus co-dependence on family
In the Indian context, families play a central role in decision making in all aspects of life; naturally financial and payment decisions are not an exception. In the case of new or under-confident digital users, the role of the family becomes even more vital as they act as support systems. Spouses or children take on the role of teachers and guides that replace the tutorials provided by various platforms and apps. These users are introduced and made aware of various ‘trusted’ apps by their friends and family members. For example, many first time users were drawn to certain UPI apps because they are ‘trusted and used by everyone they trust’.
This symbiotic ecosystem could be seen as a window of opportunity for FinTech players, wherein establishing trust with one user could lead to multiple customers from their communities in return. In stark contrast to urban users that are much more likely to thoroughly vet platforms themselves, NIUs would trust word of mouth recommendations and stories. Leveraging this network to spotlight star influencers may be one promising way of expanding outreach.
The flip side to this interdependent ecosystem is two fold. Firstly, though this symbiotic relationship with the family is valuable, the downside is that when family members are unavailable to make transactions on the user’s behalf, it can paralyse them, and delay any financial activity they want to undertake. In order to overcome this, seamless onboarding and handholding would gradually but surely lead to increased conviction in their abilities to navigate the platforms, and subsequently reduced reliance on other people. Secondly, traditional family structures and dynamics, especially in the rural set up could adversely affect financial independence especially for women. For example, our work has revealed that when it comes to accessing micro-finance loans, availing services, or using a fin-tech product for themselves, rural women in most of the cases have to take permission from their husbands or other family members. This delays and often prevents or delays the adoption and uptake of services that have been designed to be inclusive and accessible. Thus the onus on financial institutions lies not just to educate and imbue a sense of confidence in women customers, but also aim to create a paradigm shift in how they might be viewed as decision makers.
2. Embracing financial platforms with cautious optimism
Novice users continue to be apprehensive of new financial services and are plagued with multiple fears such as the fear of frauds, security and privacy concerns, unreliable platforms and overwhelming interfaces. Lack of robust financial infrastructure and education in rural and semi urban set-up makes accessing trusted information challenging. Often formal lending services are replaced with unregulated, informal lenders with unclear terms and conditions. Having heard of multiple ‘scare stories’ within their neighbourhoods amplifies the anxiety of falling prey to fraudulent schemes. Additionally, a lack of confidence in their ability to comprehend and interact with digital platforms becomes even more concerning when dealing with financial platforms as cashless money once lost is perceived to be difficult to trace. Thus we see a higher degree of comfort when transferring lower denomination amounts but accessing loans, savings and credit schemes digitally still causes great unease.
However, on the bright side novice users tend to approach financial platforms with cautious optimism. Almost unanimously we have heard from such users during our multiple research projects that the digital movement is here to stay and that they do not want to be left behind. Thus they display a higher willingness to learn how to navigate these platforms with confidence, rather than dismiss them altogether. Once confidence has been built for them to comprehend the interface and services offered, they display a much greater degree of trust in a platform.
This need for educating and training users could be mindfully taken over by FinTech platforms. Providing periodic training sessions about their rights, various touch-points that they would interact with and onboarding them onto the platform seamlessly are some of the ways to create financial awareness and literacy. Additionally, constant motivation, reassurance and a sense of accomplishment in completing tasks successfully are some ways to boost confidence not only in their abilities but also facilitate trust. While this exercise may seem slow and requires supplementary investments, it would have lasting impacts in moulding new self-sufficient users. We see this activity as being a stepping stone for gaining the trust of new customers.
3. Forging trust through personal interaction & strong reputation
What has been clear to us through our various interactions with NIUs is that having a human touchpoint is the swiftest medium of helping them trust an app or platform. Human interaction is viewed to be extremely valuable because customers, particularly NIUs, think it is important to hear directly from the company about the app or any new features through in-person sessions. They tend to trust these face to face interactions more than digital channels as it puts a comforting face to the faceless app for learning new things and also for problem resolution. The users believed that if there exists a strong interpersonal relationship between them and the company representatives making them accessible at all times and could be held accountable for their personalised problems. All of this would eventually translate into a deeper trust in the system that the users really cherish and rely on. We have also seen in most of the cases, if the representative is local; it builds even stronger relationships and trust in the services as the NIUs feel the representative can relate to their context better.
A universal rule is that trust is built by the reputation of the organisation in the market, based on intrinsic and extrinsic models of assessment. These could be through personal recommendations, reports and ratings done at the state and national level etc. These reputations are built over time and are constantly under scrutiny. An addition to these factors that is important for NIUs in the ‘visibility’ of a particular brand which could be through newspaper, tv advertisements. Users we have spoken to so far highlighted that apart from relying on word of mouth recommendations, they also view platforms by organisations to be safe based on how accessible they are, for example, having physical touchpoints such as a bank near their homes. If there is visibility, then users can reach out to the organisation anytime to reassure themselves that the digital process is safe and secure.
Thus accessibility and visibility are viewed as key principles in assuring the users that a platform is accountable and secure. In our projects with successful micro finance, fintech or digital services with NIUs we have repeatedly heard that —
“We have heard the company’s name in ads or TV and therefore trust that they are a big company and their products would be safe or they won’t do anything wrong”.
We find that facilitating these accessibility and visibility mindfully and responsibly would ultimately become a gateway for sustained loyalty.
4. Seeking hyperlocal solutions that are “designed for me”
Our research across segments of the Indian market with the focus on the user diversity highlights one key need- that of contextual and customised solutions. Audiences look for hyperlocal solutions at the click of the button and are willing to quickly switch to another platform if their needs are not met. In a country as diverse as India with each segment of stratified society having their own distinctive needs, digital literacy & confidence, ways of communicating and consuming content. It is vital for the success of a product that the users find it to be “designed for me” and “keeping my core requirements” in mind. It becomes important to design the products and services that make the users, especially NIUs feel that it is made for them and is usable with their level of digital awareness.
One key tool of achieving this is optimising the potential of vernacular languages. Often we find that this aspect is sidelined by bigger players in the market and platforms are offered in a few primary languages such as English. Although presently users navigate many digital apps in English, many are forced to do so by memorising actions or icons, colours of buttons without a thorough understanding or due to lack of better alternatives. This may be seen as a fallacy since many micro-finance players working in the rural setup have seen vastly successful adoptions, largely owing to the platforms being designed in local languages. Not only are local languages easier to understand and relate to, users also get a sense that a platform was curated keeping them in mind.
We also found that they have preferences within vernacular script as well, such as the inclination towards colloquial script and tonality over formal textbook language. Many users also mentioned that they would prefer a mixed, spoken language to be incorporated such as ‘Hinglish’. Apart from reading, they also displayed a preference for transliteration when typing. Lastly, another crucial step would be utilising audio-visual features and localised design icons to make products accessible and inclusive.
Meeting the NIUs where they are
These learnings of our team all point towards one core recommendation which is that organisations need to expand their understanding of what inclusivity truly means for that region/community while building financial products and services. Currently a vast majority of the population remains underserved and it is only when they are catered to and thought of as potential users that are equally valuable, can true inclusion be achieved. Financial inclusion and bringing them within the ecosystem of formal banking would play a central role in economic development of Indian society. This would also mitigate the exploitation of vulnerable sections by the usurious money lenders or other fraudulent schemes. There are already many positive trends and initiatives in the right direction which are innovating solutions specifically for this user segment, such as cooperatives and regional rural banks, self help groups, zero balance BSDS etc.
However, there is still a wide room for meaningful interventions wherein financial institutions meet the users where they are and ‘design for them’. Thus, organisations need to function keeping the users in mind and their education and awareness emerge as unique but critical needs that have to be addressed with this segment. Financial literacy continues to be a barrier of the marginalised communities and once this responsibility is undertaken by financial institutions, not only would it have immense long term benefits for the organisation in terms of new customers but also for the community. As this segment is highly dependent on friends and family to navigate digital places, this process of education would require significant hand holding. Therefore, organisations would need to initiate a slow and intentional digital transformation journey due to the users’ high dependency and trust on interpersonal relationships.
All in all, the combined willingness of novice internet users to become active users of financial services and the surge of initiatives to ensure that they are included in the gambit of formal banking leaves us with a sense of enthusiasm and optimism.
— Megha Mukherji (Research Consultant, Xeno Co-lab)
