DIGITAL platform enables a customer to make or receive


process of providing and ensuring access to appropriate and formal financial products
and services to the excluded and undeserved population of the society such as
weaker sections and low income groups at an affordable cost in a fair and transparent
manner by mainstream institutional players. through digital means is called as
digital financial inclusion. The
goal of financial services made available via digital means is to contribute to
the reduction in poverty and deliver on the recognized benefits of financial
inclusion in developing countries. Financial inclusion means the sustainable
provision of affordable financial services that bring the poor into the formal
economy. An inclusive system includes a range of financial services that
provide opportunities for accessing and moving funds, growing capital, and
reducing risk. Such services may be provided by banks and other traditional
financial services organizations, or by non-bank providers.

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a full-service bank offering a basic transactional
account for payments, transfers, and value storage via mobile device or payment
card plus point-of-sale (POS) terminal

a limited-service niche bank offering such
an account via mobile device or payment card plus POS terminal

a mobile network operator (MNO) e-money

a nonbank non-MNO e-money issuer


the four models function via three components

(i)     a
digital transactional platform,

(ii)  an
agent network

customer’s access device.

these components in place, payments and transfers, as well as credit, savings,
insurance, and even securities, can be offered digitally to excluded and
underserved customers.

transactional platform

A digital transactional
platform enables a customer to make or receive payments and transfers and to
store value electronically through device such as mobile phones that transmits
and receives transaction data and connects—directly or through the use of a
digital communication channel—to a bank or nonbank permitted to store electronic
value. Any Innovative digital financial service will typically involve at least
one bank and one nonbank in both the electronic storage and management of data
and the holding of customers’ funds. Two main factors that plays a crucial role
in protecting customer’s funds

a)      Participation
of the holder in a deposit insurance system.

b)      Specific
type of account in which the insured funds are held.

Coverage limits may apply
to the account that pools multiple customers’ funds as a whole or to customers’
individual balances. Even if the customers’ funds are insured, if they are
pooled and a third party (such as an MNO) is responsible for storing and
managing records of customers’ account balances, then there are certain risks related
to real-time accuracy and reconcilability of the records of the failing holder
of funds with those of the entity managing the accounts.

(ii)  Retail agent

Retail agents that is armed
with a digital device connected to a communications infrastructure helps in transmitting
and receiving transaction details will enable customers to convert their cash
into an electronically stored value and to transform stored value back into
cash. Depending on applicable regulation and the arrangement with the principal
financial institution, agents may also perform other functions.

 Customer’s access device

The device used can be
digital, such as a mobile phone that helps in transmitting data and information
or an instrument, such as a payment card that connects to a digital device
(e.g., POS terminal).



financial inclusion also involves some risks for the same
vulnerable financially excluded and underserved customers that benefit them from
the opportunities. Access to digital financial services do not always benefit
the society without involving risks to customers as well as to the providers.
Digital financial inclusion introduces participants in the new market and allocates
them their roles and risks (both new and well known) in different ways compared
to the traditional approaches to retail financial service delivery. The three
key components of digital financial inclusion models correspond to the three
main triggers of new or shifting risks. They are

(i) the new parties
and arrangements involved in the management and storage of account data   and the holding of customer funds.

 (ii) the digital technology.

the use of agents as the principal customer interface.

three components, as well as the typical profile of the financially excluded or
underserved customers in question, introduce various risks such as operational
risks, consumer-related risks, and risks related to financial crime.


of familiarity with the products, services, and providers and their resulting
vulnerability to exploitation and abuse by the customers leads to novelty risks.


Agents and agent networks
introduce new operational, financial crime and consumer risks, many of which
are due to the physical distance between agents and the provider or the agent
network manager and the resulting challenges to effective training and
oversight. Operational risks include fraud, agent error, poor cash management by
the agent, and poor data handling. In addition to the financial crime risks of
fraud and theft (including data theft), agents may fail to comply with antimony
laundering and combatting the financing of terrorism (AML/CFT) rules regarding
customer due diligence, handling records, and reporting suspicious transactions.
Agents may also take actions that reduces transparency (e.g., on pricing,
terms, and recourse), engage in abusive treatment of customers which includes
overcharging or failing to handle sensitive data of the customers confidentially.
Agent-related risks due to
the new providers offering services are not subject to the consumer protection
provisions that apply to banks and other traditional financial institutions.


technology-related risks

poor quality and unreliability of the digital technology causes risks like disrupted
service and lost data which includes payment instructions (e.g., due to dropped
messages), as well as the risk of a privacy or security breach resulting from
digital transmission and storage of data. These privacy and security risks are
of a great concern as large number of agents handle customers’ transactional
and other data and the profile of previously excluded and underserved


Helps in easy access to formal financial services such as payments, transfers,
savings, credit, insurance, securities, etc. Migration to account-based
services typically expands over time as customers need to gain familiarity and
build trust in digital transactional platform. Government-to-person payments,
such as conditional cash transfers, that can enable digital stored-value
accounts provides a path for the financially excluded into the financial system.

provider as well as customers have to incur only a small amount of costs
through this digital transactional platform. It also allows customers to transact locally in irregular, tiny amounts,
helping them to manage their characteristically uneven income and expenses.

If the customer has any additional financial
services needs and financial circumstances, it is made possible by the payment, transfer, and
value storage services embedded in the digital transaction platform itself, and
by the data generated within it.

aids in promoting the economic
empowerment by enabling asset accumulation and, for women in particular, increasing their
economic participation.

It reduces the risks of loss, theft, and other financial crimes posed by
cash-based transactions, as well as the reduced costs associated with transacting in cash and through
informal providers.


1.      Product-
and model-specific issues in digital financial inclusion.

In some countries, credit
and insurance products are also offered in addition to payments, transfers, and
value storage, to previously excluded and underserved customers via digital transactional
platforms. Such products and the complex relationships among the banks and nonbanks
combining to offer them introduce both operational risks to the provider and
customer risks. When the products are bundle such as life insurance packaged
with a prepaid mobile plan, both regulation and supervision becomes more
complicated which will require coordination among regulators

2.      Consumer
protection issues.

New financial services
and products offered digitally to excluded and underserved customers pose challenge
to the traditional thinking about disclosure and recourse and raise other
consumer protection issues. Some policy makers are leaning towards product
standards and guidelines to complement digital innovations in disclosure and
recourse. If the consumer suffers a loss, liability can be unclear due to the
multiple parties involved in service delivery: both agents and third-party
providers of communications and technology services.

Increased need for cross-sectoral
coordination and communication.

Digital financial
inclusion requires significant cross-sectoral coordination and communication
among regulators and supervisors. This is true both at the country-level (e.g.,
credit, insurance, and investments offered via digital transactional platforms
require the attention of multiple financial regulators and supervisors, and may
call for involvement of the telecommunications regulator as well) and at the
global level of SSBs and other international bodies, such as the International Telecommunications

4.      Customer
identity—new opportunities and challenges in the digital context.

Financial identity for
poor people carries the potential for both inclusion and AML/CFT gains, but
also raises privacy and fraud risks when services are delivered digitally.
Meaningful and manageable privacy principles which will involve work at both
the national and global level offers the prospect of win-win solutions.



Lack of awareness of digital
financial literacy, especially among the rural population is a major challenge
in the country, more so in light of the Government’s recent demonetization and
plans to make India a cashless economy. There is an urgent need to create
awareness among the citizens, especially in rural and semi-urban areas
regarding basics of digital finance services.

The project titled “Digital Finance for Rural India: Creating Awareness
and Access through CSC’s aims to enable the CSCs to become Digital
Financial hubs, by hosting awareness sessions on government policies and
digital finance options available for rural citizens as well as enabling
various mechanisms of digital financial services such as such as IMPS, UPI,
Bank PoS machines etc. This
project intends to target around 1 crore (10) Million rural citizens across
India such as Farmer, Women, Marginalised Section, Hawkers, Small Traders and Artisans
and would reach out to all 2, 50,000 Gram Panchayats across the country through
200,000 CSCs which are operational across rural and semi urban locations. The overall objective of the project is:

enable the CSC’s to become Digital Financial Education Hubs, by hosting
awareness sessions focused in their community and Panchayat.To
inform rural citizens about government policies and about digital
financial options available to themTo enable
citizens to access and use electronic payment system (EPS) such as IMPS,
UPI, Bank PoS machines etc.To
sensitize and enable merchants at Panchayat level to use Electronic
Payment System.Create
awareness in rural India through workshops and awareness drives.



digital payments and financial services can help countries achieve their 2030

Development Goals. While digital finance would contribute to nearly all of the

major goals in some way, it could have a
significant impact on ten of them.
Digital financial inclusion directly supports ten of the 17 UN Sustainable
Development Goals





Poor people and small businesses
are able to invest in their future
More government aid reaches the
poor as leakage is reduced


Farmers are better able to invest
during planting seasons and smooth
consumption between harvests
More food aid reaches the poor as
leakage is reduced

health and well-being

government health spending as leakage is reduced
inclusion for women can increase spending on health care


Digital payments to teachers reduce
leakage and absenteeism
Micro tuition payments increase
Financial inclusion for women can
increase spending on education


Digital reduces women’s physical
barriers to gaining an account
Women have more control over their
finances and their businesses

and clean energy

Mobile pay-as-you-go schemes create
access to clean energy
Better targeted subsidies increase
use of renewable energy

work and economic growth

Greater pool of savings increases
lending capacity
Data history of poor and small
businesses reduces lending risks

innovation and infrastructure

Digital finance enables new
business models and products
More public and private capacity to
invest in infrastructure


Financial inclusion gives greatest
benefit to very poor people
More government aid available as
fraud and theft are reduced

justice and strong communities

Digital records of financial
transactions increase transparency and enable better monitoring of corruption
and trafficking


Financial Literacy is the knowledge and skills for effectively using digital
devices for financial transactions. It is simply the ability to have a
relationship with a bank/Financial Institution to keep the money safe, use facilities
to transact using own money in the most secure way and to be aware of one’s own
financial identity


India focuses on the biggest digital transformation in recent history, Union
Budget 2017 had a section on Promoting
Digital in the budget speech apart from Policy
Provisions in the Union Budget to impact these
changes. Keeping this in mind, it is necessary to empower every citizen with
the information and knowledge necessary to join the revolution and help India
progress along the path of a Less-cash economy.


(A) Inform citizens about government policies, initiatives
and digital financial options available for them

is essential to ensure that every citizen regardless of financial status,
current literacy levels and geographical distance from the main cities is
empowered with all necessary information. India is a diverse country with
languages, cultures changing every 100 kilometers, to standardize a method or
approach to imparting a program with mass impact is next to impossible. Thus a
standard template can be created which can be customized to meet the needs of
various target groups. A decentralized approach lead locally with the
assistance of local communities is the best and most efficient way. The
government should make policies but local administration should be take the responsibility
of measuring success along with periodic program tracking and reviewing success

(B) Building Awareness of Digital Payment Methods

Financial Literacy is the (convenient) marriage of all three paradigms:
Digital, Finances and Literacy. An Individual and family may be at various
different stages of each or all put together. The government provides volunteers
for building such awareness among people. For example, for a rural farmer who
doesn’t even own a bank account, a USSD method of payment on mobile is not
suitable. However, helping the farmer open a bank account and learn to
understand how to put cash and withdraw from the bank account can be the first
step followed by how to use a bank card and transacting on mobile.

 (C) Imparting
knowledge of Safety and Security of Digital Payments

a digital world, safety and security is of importance to everyone. Thus the
knowledge of safety and security need to be imparted in the minds of people
using the digital payments.


(A) Digital Payments Infrastructure to allow digital
transactions: Merchants and Consumers

goal of education is not to increase the amount of knowledge but to create the
possibilities for a child to invent and discover, to create men who are capable
of doing new things. ”


possibilities and avenues for customers (consumers using the service or
merchants providing the service) is key to ensuring the education drive bears
fruit and allows the citizens of a Digital Economy to transact digitally as
effortlessly and without barriers. Consumer choice is paramount and should
drive what merchants provide for payments as well

(B) Assisting less-cash behavior shift

amount of hand holding will be needed through this transition period. Its
foolhardy to presume a onetime effort can result in long lasting change. Using
public service communication channels like National TV, Radio, Print and
Digital campaigns will ensure the message is delivered to recipients and
reiterated many times over. consumer issues and pain points with active
listening and fast action are other necessary actions.

(C) Incentivizing less-cash behavior

most effective method in introducing trial and creating a habit is incentives,
carefully timed to an individual’s progress in usage of a product with periodic
interventions to ensure instant gratification and drive habit change. Monetary
incentives such lotteries, cash backs and prizes will certainly motivate
individuals to first try and later stick to paying digitally.