Cost Benefit and Usage Behavior Analysis of ICT in Financial Inclusion

12 Pages Posted: 14 Sep 2011

See all articles by Suvankar Mishra

Suvankar Mishra

affiliation not provided to SSRN

Sandeep Nath

affiliation not provided to SSRN

Tarun Handa

affiliation not provided to SSRN

Date Written: August 20, 2011


The road map to Financial Inclusion has seen considerable promotions of technological and institutional innovations, to achieve financial access and remove pilferages. Digital technology, today, is pervasive. Everything, from governance to education to health rides on modern digital technology. Without that, delivery of services is very difficult. Illustrious of the rich technology penetration, India today has more mobile phone subscribers (720 million) than bank account holders (50 percent of India's population).

Enrollment of the Unique Identification Number (UID) and linking the UID to the beneficiary's bank account number is considered as a highlight, to ease the process of identification and reduce leakages. Several technology solutions such as mobile banking, card and mobile technology etc. have been enabled, yet the end-user still remains disillusioned as the real benefits need to be accrued.

Innovation in ICT has created a mechanism to create a cashless eco-system, that has provided the citizens, a reason to change, but the moot point is, access to such technology remains restricted to a specific segment in the society.

Adaptability determines the usage behavior and the readiness to accept the paradigm shift into a cashless eco-system dynamically. Increasingly sophisticated customer segmentation technology, with more accurate targeting of sections of the market has led to restricted access to financial services by some groups. A sizable majority of the population continues to remain excluded despite opportunities created by ICT.

What will facilitate the rural, unbanked segment to actively use the transactional eco-system? Today, technology for financial institutions and service providers involves wide allocation of Smart Cards, which store customer data and information. A magstripe card easily costs Rs.30-40 and stores data in an offline mode, causing untimely reconciliation and settlement with the bank. High costs involved in implementing smart card technology, offline transactions, no visibility on the agent's float and opportunity costs lost in reconciliation, tracking, and settlement makes it unviable for the banks on the long run. The eco-system becomes obsolete by affecting the commission to the agents and the roll-out of services to the customer.

A widely deployed infrastructure (BC), low-cost technology channel (multi-centric online transactional platform), and the end-user's accessibility to safe and convenient electronic payment system (mobile money), creates a viable solution.

The electronic payment system is a 'transactional rail', on which a broader spectrum of financial services can ride. Rolling out need based products and services and ensuring continuous usage among users creates a habit. This habit is leveraged to disburse other products, thereby increasing usage and creating multitude of changes in the eco-system.

A Matrix of Alternatives provides a holistic channel to move from cash based eco-system to a cashless system. The recommended strategy is to provide a platform that transcends through a tele-channel (GSM/GPRS/Internet), authenticating the end-user through a PIN/Fingerprint/Voice (IVR), thereby enabling the user to transact at the nearest agent/kiosk. The point is to make the user agnostic to the presence of any entity (Agent/Kiosk) and provide a user-friendly interface to use.

Simplicity and Proximity are the cornerstones to successful implementation of ICT in Financial Inclusion. Today, a customer is required to go to a physical point to transact using an application in a mobile phone or a PoS terminal. Tomorrow, the same customer can transact using a simple application in the mobile phone, by sitting at home.

The paper elucidates, how cost-benefit, in transactions and as commissions to the agent will increase the value of an electronic payment system as well as leverage the usage-behavior to aggressively attract the customers and create trust. Information brings about openness, accessibility, democratization, decentralization, and as a result total transformation.

ICT catalyzes transformation and bridges the long haul in providing financial access. It does not require reinventing the wheel, but leveraging the existing channel to route the services.

Keywords: ICT, Matrix of Alternatives, Business Correspondent (BC)

Suggested Citation

Mishra, Suvankar and Nath, Sandeep and Handa, Tarun, Cost Benefit and Usage Behavior Analysis of ICT in Financial Inclusion (August 20, 2011). Available at SSRN: or

Suvankar Mishra (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Sandeep Nath

affiliation not provided to SSRN

Tarun Handa

affiliation not provided to SSRN

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