By Shikhar Aggarwal, Chairman, BLS E-Services Ltd.
Roughly half of the people in India had a bank account in 2014. Well, that number stands at around 80%. The Pradhan Mantri Jan Dhan Yojana, Aadhaar, and the Unified Payments Interface have all supported millions of citizens in opening bank accounts. What started off as a drive to get people to open accounts turned into a push to make financial services available to people who were previously left out.
The Financial Inclusion Index went up from 60.1 to 64.2 in 2024, which is an encouraging sign that the government, regulators, and banks are all working together to make things better. But individuals who live in rural areas and families with low incomes still have trouble getting credit, do not understand much about monetary matters, and are skeptical of digital systems. Technology is helping to close some of these shortcomings, but there are still obstacles.
Wider Reach, Lower Costs
It has always been expensive to serve consumers who live far away or do not have much money. The cost goes up because of manual verification, documentation, and physical branches. That has altered because of digital procedures. Now that centralized databases can do automated checks, onboarding and compliance can be done in minutes instead of days.
The International Monetary Fund says that India’s internet infrastructure has cut the cost of getting new customers from approximately $12 to only six cents. When costs go down, banks can concentrate on improving the services they offer while still making them affordable.
Chat-based banking and virtual assistants have made it easier to do things like pay bills and send money. You need not go to the bank to see how much money you have, transfer money, or inquire about concerns. People who live far away from banks have seen a big change because they can now access them in their own language.
Products Built Around Real Lives
Financial products were once built for salaried, documented workers. Farmers, street vendors, and gig workers were left out because their income was irregular or unrecorded. Today, data is helping banks understand these customers better.
Mobile payments, transaction records, and spending patterns show how people manage money. Banks and fintechs use this information to design savings plans, small loans, and insurance options that fit real-world needs. Instead of relying only on formal records, they assess repayment ability through alternative data such as bill payments and business transactions.
This has enabled small business owners, women business owners, and individuals with independent businesses who previously had limited options, more choices. Lenders can manage risk and help borrowers who would otherwise go to informal lenders by tying loan terms to income patterns.
Voice-based banking and multilingual interfaces also help new users get used to digital services without feeling overwhelmed.
Small loans, big impact
One of the toughest hurdles to overcome in financial inclusion is access to credit. In the absence of formal income proof, many individuals were automatically disqualified by traditional lending models. Technology is beginning to fill in this lag.
Alternative data are now available. For instance, mobile payment histories, electricity bill records, or small business transactions are now being used to assess creditworthiness. At the borrower’s front, it implies access to small-ticket loans that fit their earning patterns. For the lender, it opens up fresh categories of customers that had been considered to be too risky or inefficient to serve.
As these new borrowers make regular payments, they build a credit history that lets them get bigger loans over time. This cycle not only helps individuals grow, but it also strengthens local economies by giving small business entrepreneurs and employees a safety net.
It Takes Time to Trust
People are more likely to use digital finance when they feel their money and personal information are safe. Systems that watch transactions and flag unusual activity help build that confidence.
Understanding money is just as important. Programs across the country teach how to manage savings, spot fraud, and use banking apps effectively. When people understand how the system functions, they are more comfortable moving from cash to formal banking.
As more individuals gain knowledge and confidence, they participate more in saving, borrowing responsibly, and planning for the future.
New Challenges
With digital finance picking up pace, parallel concerns about how data is handled and those who benefits from these systems also become evident. Privacy breaches, misuse of personal information, and biased algorithms can ignore the very people that financial inclusion aims to achieve.
Hence, responsible use of data has to be a shared commitment. Banks and fintech firms need to ensure that their systems are transparent, fair, and regularly reviewed by people who understand local realities. When data fails to reflect the diversity of users, automated outcomes can reinforce existing gaps instead of closing them.
Cybersecurity is another area of priority. With financial transactions increasingly happening online, a stronger protection framework is essential. Clear consent outlines, better encryption, and collaboration between financial institutions, regulators, and security experts can help facilitate trust in digital systems.
Inclusion is directly proportional to confidence. When people are confident that their information is safe and their needs are comprehended, they are more willing to participate in the formal financial system. That trust is what truly sustains progress.
India’s digital public infrastructure is the best in the world. The next stage is to make sure that everyone can use technology, not just those who are already familiar with it.
Three things need to be focused on. First, making it easier for people of all income levels to get online and learn about money. Second, making things that are useful for women, farmers, and people who labour in the informal economy. Third, making sure that the government, regulators, and service providers work together to find a balance between innovation and safety.
In India, financial inclusion has always been about size. It can now also be about relevancy thanks to technology. When things are based on trust and products are based on real life, inclusion becomes a part of everyday existence.
The number of accounts will not be a good measure of real success. Instead, it will be whether individuals can use financial instruments to make their futures safer and more independent.