Digital adoption, and sustainability of DFS The

financial services (DFS) aim to expand the delivery of basic financial services
to the marginalized and low income economy through innovative technologies like
mobile-phone-enabled solutions, electronic money models and digital payment platforms. These digital means aim at
delivering financial services to the unbanked in both rural and urban areas at
literally low or no cost at all and hence increasingly gaining importance as
a  tool that can be used to further the
goal of financial inclusion.


India, Bangladesh and Nepal, currently are at
different stages of adoption of Digital Financial Services aligning to their
efforts in achieving financial inclusion. Their needs are aligned in the manner
in which  the economy is growing,  with the government of all three countries
launching several initiatives and efforts towards initiation, adoption, and
sustainability of DFS

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The biggest
driver of digital money in Nepal is the need for financial inclusion which is continually being emphasized by the
country’s policy framework. Of the population of 28.9 million, only
around 33.5% are banked, the unique geography of the country with mountainous
and hilly terrain and subsequent low population density, poor connectivity and
infrastructure challenges, making it difficult for the banks and other
financial institutions to reach to people in all parts of the country.

2015 earthquakes in Nepal brought to fore this imminent need for a greater
financial inclusion by highlighting the challenges faced while providing for
humanitarian assistance. Most organizations found it difficult to push money
from one place to another in the hands of the people given the poor
infrastructure of financial service points.

With the
mobile penetration at 84% (GSMA,2014) and internet penetration at 28.9%, DFS can
play a key role in changing the current landscape of the financial sector in
the country leading to greater financial inclusion. Nepal Rastra Bank (NRB) has emphasized on the expansion of branchless banking and
mobile banking services in regions with low financial access. The government
also seeks to channelize government benefits like pension and other allowances
through digital channels. DFS also has the potential to act as a platform to
increase financial literacy of the people of Nepal, the lack of which has also
been seen as a major reason for the poor financial inclusion status of the
country. A supporting policy framework and the challenge to create economically
viable, alternate and appropriate services presents an opportunity for the
growth of DFS furthering the financial inclusion objective of the country.


neighbour, India is a country of more than 1.2 billion people where about 40%
of them are outside the ambit of the formal banking sector (PIB, 2016). Out of
the households who are unbanked 46% belong to rural areas as compared to 32% in
urban. With the estimation that by 2020, 315 million individuals in rural India
will have access to mobile internet, the country presents a huge opportunity to
strengthen the financial inclusion objective through the adoption of innovative
digital financial services. The huge
policy impetus has initiated work towards setting up the technological
infrastructure to enhance digital payments. The Reserve Bank of India (RBI)
along with Indian Banks’ Association (IBA) incorporated the National Payments
Corporation of India (NPCI), in 2008, as an umbrella organization for all
retail payments system in India. Under the NPCI, various interfaces/ services
have been set up. Another
initiative is India Stack, which is a set of APIs that allows governments,
businesses, start-ups and developers to utilise a unique digital infrastructure
(leveraging the Aadhar number primarily) towards presence-less, paperless, and
cashless service delivery. However,
despite all the efforts towards digitization, such as Pradhan Mantri Jan Dhan
Yojana (PMJDY), where account holders can transact digitally, giving payment bank licenses to mobile phone
companies, introduction of mobile wallets; there are several barriers
towards adoption of these digital platforms as the awareness of digital
products continues to be low. A study conducted by Financial Inclusion Insights
(2016) revealed that only 10 per cent people were aware about mobile money and
the use was 0.5%. An IFMR LEAD survey of low income households, found that 7
out of 10 people were unaware of mobile wallets and 8 out of 10 people were
unaware of low cost mobile solutions like National Unified USSD platform. Moreover,
with a number of developing use cases for digital services, there is still
little understanding of which services are being used or seen as useful for
different target population.  In addition
to these consumer side barriers, there is also a low acceptance infrastructure.

Many merchants and businesses do not have the necessary infrastructure to
accept digital payments like debit and credit cards. Security is also an issue
with regard to digital transactions. Recognizing these barriers and coming with
effective solutions to overcome these can enhance the economic benefits from
digital platforms possible.


Bangladesh, with a more mature
microfinance market, has exhibited relatively little growth in microfinance as
nearly every rural household has access to a microfinance service. In 2011,
Bangladesh Bank which is the country’s central bank issued Mobile Financial
Services (MFS) guidelines and by early 2012, bKash and
Dutch-Bangla Bank Mobile
emerged as leaders with the largest customer base. However, despite the central
bank announcing a plan for inclusive digital financial programs in 2015, only 13%
of Bangladeshis have a registered mobile money account and 28% are over the
counter (OTC) mobile money users through agents. Digital payment methods have
captured only a very small part of the Bangladeshi markets. As per the Inter Media FII Tracker Survey (2013), only 4% and 3% of the surveyed Bangladeshis thought that bank account and mobile
money is the best medium of transaction respectively and cash remains the most
popular transaction tool. About one in five OTC users said
they have not registered because using an account is difficult (CGAP, 2015). Wallet transactions in
Bangladesh often require five or more steps, the menus can be unintuitive to
work through and transactions are time-limited, so transactions often time out (CGAP,
2015) Along with leaving customers frustrated, there could be risks around loss
of funds in  such transactions and has
led to discouraging wallet use.2 Moreover, ongoing
surveys in rural Bangladesh reveal that the people are mostly interested in
exploring tools which safeguard them from economic and natural shocks, in
particular help them ‘pay & receive.’ ‘borrow & repay,’ and ‘store and
retrieve’ money during such times than pursuing regular channels of savings,
loans and insurance. Additionally, recent developments include a much greater emphasis on market segments
and particularly small businesses.1
It is
imperative that research is able to convey what the products being offered
truly mean, aligning them with the needs of the people.