Internet Penetration & Low-Cost Mobile Devices Are Driving Credit To Underbanked Masses In India

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India has the world’s second-largest unbanked population in the world with a whopping 135 million people having no access to formal banking services. On the other hand, the country has become a breeding ground for business innovations in the fintech space. Scholastically called as financial technology, it has contributed largely to the start-up explosion as well as financial inclusion in the recent past. 

The mobile phone usage in India has been skyrocketing in the present decade which is also facilitating the growth of financial literacy in the country. According to financial experts, fintech solutions are all set to transform the financial and social ecosystem in the near future.

Connecting the dots, this article explores how the mobile phone revolution is disrupting the traditional financial practices and benefitting the underbanked masses of India.

The Digital Boom

If there is a single thing that has become a revolutionary storm in the rural as well as urban space alike in India recently, it is the mobile phone. This small gadget has penetrated to the rural households faster than TV or any other electronic devices. In fact, the country is the fastest growing smartphone market in the world, with 30 million smartphone purchases happening in each quarter.  

One of the major driving factors of rising mobile phone sales is the availability of low-cost devices. Being a cost-conscious economy, there is a huge market for low-end phones which have incredible features. To capitalize on this, smartphone manufacturers continue to launch budget devices. The average expenditure for owning a mobile with the internet has been decreasing since 2014 owing to mobile phone affordability for the underprivileged population. 

Furthermore, the internet penetration in India is on a path of exponential growth. According to Boston Consulting Group, the internet penetration in India stood at 8% in 2010 and rose to almost 25% in 2016.  It is expected to hit 55% or more by 2025 and the numbers will likely reach 850 million.

Although smartphones and internet are majorly used for entertainment and communication purposes, mobile finance solutions are attracting unbanked masses to financial products and services. 

Mobile Phone Leads to Financial Inclusion

According to a World Bank Report, there are 1.7 billion adults who are unbanked globally and two-thirds of them own a mobile phone. The report also states that digital technology could take advantage of existing cash transactions to bring people into the financial system.

Financial inclusion is defined as a system in which “individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.” The mobile phone is evolving as a catalyst for financial inclusion among the underbanked population in India.

It is gaining momentum in the Indian rural setting. Coupled with rising internet penetration, low-cost mobile devices are fuelling the growth of mobile finance allowing unbanked and underbanked masses to have access to savings, credits, loans, etc. with lesser effort than before. They can avoid tedious paperwork involved in the traditional banking sector to avail services and get tasks done within seconds using the smartphone anywhere and anytime.

Alternative Financial Options

The smartphone and internet penetration have not only helped the underbanked population get access to traditional banking services, but have also introduced alternative financing options to them. In fact, mobile finance has opened up opportunities for the underprivileged masses to avail financial products that suit their requirements, like funding for education, farming, medical expenses, small businesses, to name a few.

Mobile finance is a general term which can be categorized into mobile payments, mobile microfinance, and mobile banking. On the mobile payment front, growth is majorly seen in P2P (person-to-person) and P2B (person-to-business) models. The accessibility of borrowers and lenders to the brick-and-mortar store is not valid in these models as it uses mobile technology.

Unlike the traditional banks, the eligibility criteria for borrowers and lenders in P2P models are less stringent, making it easier for the people to access credit. Borrowers can enjoy low-interest rates and lenders get high-interest rates in this model when compared with interest rates at traditional banks. As a result, small businesses and individuals have smooth access to credits in the P2P model which is a major advantage for them. 

Subsequently, financial products are becoming easily accessible for the underbanked masses with a very basic mobile infrastructure. 


Financial inclusion of underbanked masses was a major challenge in traditional banking methods. With the evolution of modern fintech solutions, it has become an achievable target for institutions. The availability of low-cost devices and cheap internet packages has opened up huge opportunities for the rural population who have remained unbanked for ages.

Sumeet is the lead content writer at RupeeCircle, where he articulates with innovative storytelling. When he's not writing or editing content for RupeeCircle's blog, he's a stand up comedian and a full time entertainer. Connect with him on Facebook and Instagram!

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