Given India is preparing for a digital future, the financial inclusion drive of the government needs to also focus on increasing the reach and adoption of digital banking. The surge in the opening of accounts under the Jan Dhan Yojana—the total number of accounts rose by 27% in FY15, while the proportion of basic savings bank deposit accounts rose from under a quarter of the total number of accounts to a third—and the current poor levels of adoption of digital banking mean branch transactions will increase, and their customer service quality will come under pressure.
Only 13% of the total banked population does digital banking at present. A BCG study has found that online banking lags online shopping by almost 2 years. In the first year of access to internet, 6% of users do online banking while nearly 8% do online shopping; however, the proportion of online shoppers reaches 15% in just under 2 years while that of users carrying out banking transactions online reaches a comparable figure after nearly 4 years. At this rate, BCG estimates, the penetration of digital banking among internet users would have moved up from the current 23% to only 25% over the next 5 years. More importantly, even within internet users, banks face stiff competition from non-bank mobile wallets—mobile wallet transactions had already surpassed mobile banking transactions in FY14, and were growing by a whopping 180% compared to mobile banking’s 80%. Banks, therefore, need to quickly identify the factors causing resistance to adoption of online banking and address these urgently. Fortunately for them, the opportunity to do so is presenting itself already. Internet penetration is growing fast, especially in rural areas—the number of rural internet users increased by 49% in 2014 over 2013 while in urban areas, it grew by 24%. Given the Jan Dhan customers are likely to be in greater numbers in rural areas, encouraging adoption of digital banking could ease the banks’ customer service pressures.