Setting the stage to bank the unbanked in India

According to the World Bank, bank account penetration in India has increased dramatically from 35% to 53% between 2011 and 2014. Thanks to India’s financial inclusion initiative, Jan-Dhan Yojana, a record breaking 125.5 million bank accounts have been opened since its launch August 15, 2014. However, the majority of these accounts, around 84.5 million, are empty.

Government bodies, including the Reserve Bank of India, are undertaking a number of initiatives in the country to boost the adoption of banking services. The Direct Benefit Transfer for LPG scheme for instance, sees government subsidies directly deposited into consumer bank accounts. This alone propelled the activation of eight million fresh accounts during a 10-day period ending January 31, 2015, and reduced the number of zero balance accounts by four percent.

Banks will see further rapid growth in the number of accounts and hopefully their usage too, as momentum for these types of initiatives continues to grow. As there remain an estimated 400 million unbanked Indians, supporting such growth can be a daunting task. There are however some simple solutions available to banks, that can streamline operations, reduce costs and improve efficiency. For example, they could consider:

  • Instant card issuance – would allow customers to use their cards immediately. Banks could issue EMV compliant cards on the spot, therefore increasing the card activation rate and usage, which saves costs .
  • A strong authentication server – helps organizations enhance identity assurance through multi-factor authentication. A flexible, token-agnostic server enables banks to combine different schemes with a wide variety of mobile, hardware, and software tokens. It can also support organizations’ use of more advanced technologies such as PKI, transaction signing, and end-to-end encryption.
  • Mobiles for transactions – mobiles can be transformed into strong authentication devices, generating One Time Passwords and transaction signatures for secured access, across all banking channels. They can also be used for Out-Of-Band authentication, a method which verifies the user’s identity through a channel other than the one used to initiate a transaction.
  • A trusted services hub – would help banks to deploy a variety of secured services, quickly and efficiently, and to the broadest user base. It should be flexible and device-agnostic, so that banks can choose a security framework that suits them the best.

Currently, Indian banks are not uniformly geared up for this sudden rise in the number of accounts, debit cards, and transactions. Effective financial inclusion will only really be achieved when banks have the flexibility to choose the most appropriate solution for easy and secure banking.

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