Financial Inclusion the Digital Banking Age

This blog is based on an article in the Journal of Social Policy by Ram Cnaan, Marquisha Lawrence Scott, Daniel Heist and MS Moodithaya. Click here to access the article.

The idea that we have resolved the days of technological disparity and inequality should be reexamined. Having a cellphone or engaging in social media does not make technological equality. In fact, the way that technology is used as a marker for inclusion and advancement is a discussion that must consider the inequities and intersectionality of a myriad of social and economic factors that create chasms between the haves and have-nots.

For instance, having a mobile phone that makes local calls is a standard that many people meet, but having continuous, on demand access to the internet or mobile apps is not available with the same consistency. Similarly, access to the internet within a local library, at work or at school is not the same form of inclusion as having unfettered access within one’s home where electricity, connection and access to technology support is available. These inequalities are amongst the discussions that communities across the globe are contending with. The dilemma is not with the technology alone, but how technology connects individuals and communities to other systems and resources. In our paper, we closely examine how technology shapes the ability to engage in financial activities, or financial inclusion.

Assessing level of access to banking services needs to include consideration of 1) individuals’ opportunities to use the resources provided by online banks; 2) access to other key technological tools such as a device (e.g., smartphone, tablet or computer); 3) internet service and 4) electricity for basic use of the device or charging. In many cases, before individuals can take advantage of any services offered, several barriers must be cleared.

Take one of the most populous countries in the world—India—where many people have access to mobile phones, personal computers, and are seen as participants in the global economy. However, while this high-level of access is apparent in larger cities, we wanted to know whether this technological inclusion, and the financial inclusion that comes with it, is occurring in the rural villages of India.

Cashless societies were set as a goal by the Indian government to reduce bribes, other cash-related crimes and to increase the global economic engagement of its citizens. Therefore, many villages were required to shift from cash to an alternative form of financial management, namely a digital banking model. With several villages across India deeming themselves as completely cashless, several questions interested us. How does this work? Is everyone included? Who is excluded? How are neighbouring villages faring in this cashless society? How large are these cities? And where are they located?

To answer these questions, we partnered with Nitte University in Mangalore who had access to the information we needed.

With the guidance and support of India-based college students and partners from Nitte University, we wanted to ask people in rural Indian villages about their use of, and inclusion in, digital banking. We focused our inquiry on the growing initiatives of digital banking, where people use less cash and manage their money and businesses online. We created a survey to be administered to community members in these cashless villages as well as neighboring villages. In this extensive research project, we conducted the survey in 3,159 households in 14 villages—two villages in seven Indian states (Gujarat, Karnataka, Kerala, Maharashtra, Sikkim, Utter Pradesh and West Bengal). In each of the seven states, we studied an officially declared cashless village and a neighbouring control village.

The data was clear: on a local, day-to-day basis, lack of access to digital banking leaves community members unable to manage their money using digital technologies. This is a logistical concern, but also raises larger concerns about access and opportunity. A key finding is that the main predictors of digital banking to accommodate the cashless society were financial literacy and online access. Without an understanding of financial skills and access to the internet, there was little capacity for engaging in any meaningful way with digital banking. As a result, it can likely be deduced that without financial literacy and online access, there is a limited engagement with the global socioeconomic world.

Digital banking is quickly becoming a central avenue for individuals and communities alike to participate in the global economy that largely exists online. Without access to this increasingly mainstream format of banking and economic engagement, entire communities could be left out of larger conversations.

In future research, our team is using the collected data to examine philanthropy of the poor and emerging global identities in rural India. We aim to publish two additional articles reporting our findings on these topics.


About the author

Marquisha Lawrence Scott is Assistant Professor at Denver University.

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