How Mobile Banking is Driving India Toward a Cashless Society
Roughly 2 billion people in the world lack access to any sort of banking.
Here’s the good news: That number is 500 million people less than it was three years ago.
The reason for that drop: Smartphones.
In India, as an example, smartphones are prevalent, even though 20% of the country’s population lives in poverty. Smartphone owners' can download mobile banking apps as “e-wallets,” and that is making a huge difference in how business is won, as well as who is allowed to participate. Rural Indians, who are often miles from commercial areas, have made e-wallets even more popular than their counterparts in urban centers.
So what is it that these apps actually do? They help consumers get access to loans, send and receive payments, obtain direct deposits and government subsidies, and build up savings account balances. The uptake has been dramatic. In the 12 months ended June 2017, India saw a 122% jump in mobile banking transactions.
That surge came on the heels of savvy new government policies. Prime Minister Narendra Modi took bold steps in 2016 to make India a virtually “cash-less” society. That’s helped cut down on fraud, theft and payoffs to middlemen that have plagued the Indian economy, all of which took an especially hard toll on the nation’s poor.
To help spur adoption, mobile payments firms like Paytm are beefing up their apps and spreading their marketing campaigns nationwide. Paytm’s clients have come to rely on its app at small stores, food outlets, gas stations and pharmacies.
This rapid uptake in mobile banking carries a few important implications for India. It is enabling entrepreneurs to more easily launch new business while lowering the cost of conducting business. That’s providing a clear lift to national economic growth. McKinsey & Co. predicts a 10-12% cumulative boost to GDP from mobile banking.
Another benefit: The massive troves of data on how Indian consumers spend are fueling a boom in marketing analytics and advertising.
Online bank accounts in India, Africa and elsewhere are just the first step. Mobile apps are now ushering in new and easy ways to save, invest, buy insurance and manage wealth. Those services will target India’s fast-growing middle class. One clear sign of that segment’s growing economic clout: air travel in India surged 20% last year.
Here are a pair of firms to watch to capitalize on this exciting new economic trend. Qykly, created by AarVee Idealab, is a daily expense manager that helps organize finances and personal expenses. Also, keep an eye on Fisdom, which is racking up awards for its mutual fund apps. It’s a small jump from sending money to managing it, and smart investors are betting not just on mobile banking, but on mobile bank management.