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Future of Virtual Banking in Rural India


The banking sector in India has witnessed a significant transformation over the last decade, with the introduction of digital banking. The use of digital technologies in banking has enabled the sector to offer more efficient, convenient, and cost-effective services to customers. However, the benefits of digital banking have primarily been enjoyed by customers in urban areas. Rural areas, which account for a significant portion of the Indian population, have been left behind due to a lack of infrastructure and awareness. Virtual banking, which is the provision of banking services through digital channels, has the potential to bridge this gap and revolutionize banking in rural India.

Virtual Banking is too generic a terminology with several applications that are used by customers in all the demographic profiles in India. Two such applications stand out and we believe will drive the usage of virtual banking in Rural India. The central theme in these use cases finding its journey into the heart of our rural customers is to solve the last mile problem in a low internet and low smartphone environment. Fintechs have spent intense research time in evolving Mobile apps that use AI Models to work in offline modes and yet enable active banking. The two banking modules that have the potential to change the landscape are:

A.Doorstep banking using a Low Internet/Zero Internet customer Onboarding Module.

B. USSD Banking or SMS Pay platforms to handle payments in real time.

Digital channels bridge the great divide. The compelling pain point for all banks is to develop cost effective channels to make financial inclusion profitable and sustainable. Doorstep banking can be delivered in a bunch of methods. The agency banking model where a bank agent via a POS terminal or a Tablet onboards a customer instantly using a Aadhar authentication is one tangible way. Alternatively, banks can use mobile branch or a smart branch approach to have bank staff approach customers to be onboarded using offline methods. These assisted models extend the geographical impact of the traditional branches and effectively allow rural folks to carry out all transactions via these fixed or mobile terminals.

Solving the Payments Problem IVR, SMS or better still USSD has been successfully demonstrated in other countries as being very effective in Rural markets challenged with Low Internet or low critical mass of smart phones. The good old feature phone with just key sequences is enough to access digital banking and even let Micro ATMs dispense cash. USSD channels provide a wide spectrum of customer services like wallets, bill payments, fund transfers, statement checks which constitute the bulk of the often-used Banking transactions. In many developing markets, especially in underbanked markets, customer base on USSD is significantly more than the conventional mobile or Internet banking. It’s a low cost, lite model of digital banking which serves as a snug fit for the Rural Markets in India.


Despite India boasting economic growth rates higher than most developed countries in recent years, a majority of the country’s population still remains unbanked. Financial Inclusion is a relatively new socio-economic concept in India that aims to change this dynamic by providing financial services at affordable costs to the underprivileged, who might not otherwise be aware of or able to afford these services. Global trends have shown that in order to achieve inclusive development and growth, the expansion of financial services to all sections of society is of utmost importance.



(The author is Harshavardhan Pusala, Founder and Managing Director at Techurate Systems Private Limited, and the views expressed in this article are his own)

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