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Billion-strong Marketplace: Bridging the Digital Divide in Rural India

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India is at its inflection point as it recovers from the turbulence caused by the ongoing pandemic. Information Technology today plays a crucial role in the banking industry. The banking sector has created strong and agile infrastructure by leveraging its benefits and by adopting reformed services such as contextual banking and Open Application Programming Interface (API).

The banking industry has steadily moved forward with digitalization to offer services to customers at their fingertips. With Indian Banking Industry competing with big players across the world, the rural banking customers still face challenges in embracing digital payments.


Also Read: 3 digital trends transforming the finance process


According to the World Bank’s report, India is the second largest telecommunication market. In 2020, the penetration rate of smartphone in India has reached 54 percent. Despite of this, digital literacy of India’s mobile phone users is a mere 6%. Even with zero-balance bank account initiatives, the response and reception to digital banking and transactions is still very low.

The Digital Push

The rural sector holds critical importance for the socio-economic development of India. Government of India has launched multiple initiatives to drive digital banking in rural areas. To bridge the digital divide, they launched a scheme called Digital Finance for Rural India: Creating Awareness and Access through Common Service Centers (CSCs) to push digital services such as IMPS, UPI, Mobile banking, POS machines, etc.

The government, along with technology companies, is trying to promote digital adoption by reducing the asset cost to the merchants. Costs of devices such as biometric scanners and POS machines have been reduced to promote wider adoption and deeper reach.

Leveraging Fintech

Big tech players as well as fintech firms have contributed significantly towards accelerating the digital adoption in rural areas. They benefit from the large pool of untapped market (more than a billion users) with limited to no access to digital infrastructure, 5G, smart devices, banks, etc.

The industry is working towards tapping the rural markets by offering curated services that suit their needs. There are many examples of fintech companies that have developed mobile application for Loans, credit cards, UPI payments to help rural users with access to such offerings. Mobile apps such as Gpay and PayTM are widely and commonly used in rural areas at vegetable vendors, grocery shops, etc.

According to a McKinsey report, the rural population is likely to form 63% of the total market share in India by 2025 despite urbanization.

Challenges and Way Forward

Lack of financial literacy, digital literacy and interest, and poor infrastructure are the biggest barriers to digital adoption in rural India.

The first step to bridge the digital gap is to plan and lay an infrastructure that serves every person across the hinterland. Launching low-cost smartphones with seamless access to the internet and digital apps, improved internet connectivity, continuous electricity, banks, and banking services such as ATMs, mobile banking and so on.

Apart from digital infrastructure, financial and digital literacy is crucial. Under initiatives such as Common Service Center (CSC), basic computer education, self-help groups have helped build an ecosystem that have increased adoption rate.

Mass adoption of digital initiatives can be driven by hyper-localization, incentivizing cashless and digital transactions. Multi-lingual options within mobile apps will also boost adoption and usage. Incentivizing innovations across fintech and IT companies will help to create new offerings that are customized for the rural masses.

Banks can boost digital adoption by tweaking few of their standard banking services. For instance, low interest credit facilities, small-ticket loans, and credit cards can help to bring the unbanked into the formal banking system.


The rural economy will become the next digital economy of India. Adoption of digital payments can lead to more digital revenue, innovation across banking and digital products, and will create a billion-strong marketplace. IT and fintech companies must understand that customization is the key. Creating tailor-made offerings that are based on their average source of income, frequency of purchase, tastes and preferences will help in bridging the digital divide and make India a digital-first nation in no time.

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