Leveraging Financial Inclusion Through Technology-Enabled Services Innovation: A Case of Economic Development in India

Leveraging Financial Inclusion Through Technology-Enabled Services Innovation: A Case of Economic Development in India

Rajeev Dwivedi (Eastern Washington University, Spokane, USA), Melfi Alrasheedi (King Faisal University, Saudi Arabia), Pradeep Dwivedi (Independent Researcher, India), and Berislava Starešinić (Privredna banka d.d., Croatia)
Copyright: © 2022 |Pages: 13
DOI: 10.4018/IJESMA.289633
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The majority of the Indian population is not getting the advantages of inclusive growth and development in India, referred to as financial inclusion and has become a challenge for the Indian economy. The paper aims to investigate the use of available technology-enabled financial services and their role for financial inclusion in the current COVID 19 situation and the reaching rural and semi-urban India. The research is based on the in-depth analysis of the government policies and Fintech in the light of India's situation during COVID 19. The study reveals that the government showed the intent by opening a vast amount of banking accounts (411 million accounts) for financial inclusion in around six years. With radical changes in mobile subscribers and 4G, Internet, and Smartphone growth, India is close to achieving financial inclusion with full potential. However, significant change and development can be attained only if the government provides and motivates citizens to adopt the innovation services for financial inclusion.
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Indian economy is progressing at the pace of approximately 7% annual growth, except during the COVID 19 pandemics, intending to achieve sustainable development by including a maximum number of citizens from all levels/sections and rural areas of the society. The government of India and banks initiated various measures favouring financial inclusion from 2000 onwards, but the impact was not satisfactory initially. The impact was seen visible only after 2016 and post demonetization in India. However, the lack of awareness, financial literacy, and infrastructure is still causing a severe impact on the growth of financial inclusion. Based on this, we define three fundamental challenges: reaching the masses and providing banking to unbanked citizens, reaching the masses to secure unsecured citizens, and funding unfunded citizens as the Indian economy majority is driven by cash-based.

The banking industry of India is worth approximately US$2.5 trillion in 2020, which serves 1.4 billion citizens of the country and millions of small, medium and big businesses of the country. As per the KPMG-CII report (2020), India is the fifth-largest banking industry globally by 2020, but due to COVID 19, the growth is substantially slowed down. To permanently provide banking to unbanked citizens, the banking services and banking sector must be aligned with information technology to bring innovative financial services to citizens using technology, such as debit cards and credit cards—ATMs (automated teller machines), internet banking (Vuković et al., 2019), mobile banking (Pejic Bach et al., 2019), payment wallets, etc. To address the problem of this cash crunch, many banks, institutions, businesses, information technologies (IT) infrastructure, and telecom companies have launched various services to cater to the need of ordinary citizens and make the country a cashless digital-enabled economy, which brings transparent financial practices in place and thus helpful for economic development and sustainability.

This paper is focused on the various e-service innovations for financial inclusion based on existing resources, such as banking technologies, mobile phones, mobile applications and the Internet, and postal services available in India through the post office. The paper discusses how such technology-enabled e-services and mobile applications help India deliver underserved or unserved citizens, thus overcoming the digital divide.


Financial inclusion had been one of the biggest challenges for India since its independence since the Indian economy is primarily cash-based. It could be due to a lack of infrastructure and lack of commitments from all stakeholders. Still, Indians are persistent about using digital technologies to do financial transactions. Two events forced Indian citizens to accept and use financial services using the digital medium—demonetization in 2016 and COVID 19 pandemics in 2020. Citizens feared that cash might have contamination of COVID 19 virus. Many countries witness the demonetization in the past; USSR in 1991, Ghana in 1982, UK in 1971, Congo, Myanmar in 1987, Nigeria in 1984, North Korea in 2010, Pakistan in 2016, Australia, and Zimbabwe. So, demonetization in 2016 in India is not among the first ones at the global level. However, this act is new in the digital revolution and digital service revolution, especially for financial inclusion in India. E-service innovation is described as the art and science of creating innovative e-services that customers or citizens are willing to pay for and use in the digital world exemplifies many fundamental challenges (Chew, 2014).

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