S.R.M.

UNIVERSITY
FACULTY OF MANAGEMENT

MS18B202: Technology in Banking

Management
TOPIC: Banking Opportunities in Rural
Market through Technology

SUBMITTED TO:- SUBMITTED BY:-

Mr. G.S.Arun Prasad Akash Choudhary

R.Irainithi

Gokul Ranganath .C

Shahid Afridi
 INTRODUCTION
The banking sector in India has witnessed a complete transformation in its operations both in
its functioning and delivery of services. Today technology being the main driving force for
businesses has enabled banking customers to sit back at home and operate their accounts
without walking into the banks for anything and everything. As the advancement of
technology has taken place with immense use of internet, mobiles and online bill payments
banking sector in India has got a new facet altogether.

Now the focus has been shifted to rural banking as most of the banks have become
technology enabled and it has been made compulsory for all Indian banks to open at least
one-fourth of their incremental branches in the rural areas. As the operational expenses of
the public sector banks have shot up extensively, it has become a huge problem for the public
sector banks to open up and run them, making the rural banking profitable

CURRENT SENARIO OF RURAL BANK

Regional Rural Banks (RRBs) are Indian Scheduled Commercial Banks (Government Banks)
operating at regional level in different States of India. They have been created with a view of
serving primarily the rural areas of India with basic banking and financial services. However,
RRBs may have branches set up for urban operations and their area of operation may include
urban areas too.

The area of operation of RRBs is limited to the area as notified by Government of India
covering one or more districts in the State. RRBs also perform a variety of different functions.
RRBs perform various functions in following heads:
 Providing banking facilities to rural and
semi-urban areas.
 Carrying out government operations like
disbursement of wages of MGNREGA
workers, distribution of pensions etc.
 Providing Para-Banking facilities like
locker facilities, debit and credit cards,
mobile banking, internet banking, UPI
etc.
 Small financial banks.
 Strategic Design Solutions for Rural Banking
Today when we say bank in an Urban area we think of new disruptive technologies such as
internet banking, digital wallets, distributed ledger technology, etc., These technologies are
increasingly changing the way we go about our day-to-day lives, but it appears that efforts
towards reaching the last mile (RURAL INDIA) is just not in the right direction.

In the pursuit of higher profitability and less risks, many banks are concentrating on catering
only tier 1 and tier 2 cities and not concentrating on rural India where 70% of India’s
population rests with limited or no access to technology. Unless banks can join the risk dots
across their ecosystem, they will continue to spend at a very high rate with devastating
results.

Rural Banking: Key Challenges and constraints

Have you ever wondered why most people in rural India do not have bank accounts? Even if
they open bank accounts, they do not use it. WHY?
Because,

 Villagers do not trust the bank

 Transaction fees is prohibitively expensive
 Even if the bank provides local credit options, very low people apply for it because
they do not want to risk losing their collateral
 Procedures for opening an account or seeking a loan are cumbersome and costly
 Rural banks do not provide flexible products and services to meet the income and
expenditure patterns of small rural borrowers.

Two-thirds of companies doing business in India plan to rapidly accelerate the expansion of
their business in rural markets. But Banks do not want to serve the rural poor. WHY?

Because,
 Serving the rural poor is a high-risk
 High-cost proposition for banks
 There is the uncertainty about the repayment capacity of poor rural borrowers
 Small loan sizes
 The heterogeneity of borrowers
 Widespread illiteracy
Efficient use of technology and low-cost banking channels will help banks in India turn their
rural operations into profit. The recently launched Pradhan Mantri Jan Dhan Yojana has
boasted the profitability of banks in rural India. There is no doubt that India’s rural markets
have become a powerful economic engine. Banks must find new ways to promote their
services introduce flexible products and establish their credibility in rural markets.

How can we make Rural banking easier, more accessible, more simple and human?

Endless solutions could be offered, but we thought it would be worthwhile to sketch 4

solutions for the banks in rural India. Here we are presenting 4 disruptive solutions for the
banking industry that will drive the financial boom in Rural India.

Solution 1: Aadhaar enabled

biometric Banking:

Aadhaar card which is used as an

unique identity for a resident of
India can foray its utility to
banking segment helping in
accessing various banking
facilities. Aadhaar enabled
banking can be introduced where
debit and credit cards can be
replaced by biometrics of villagers.

ATM kiosks can have biometric devices where people can just walk in and use their
fingerprints to access their bank accounts which are linked to their Aadhaar card. The ATMs
can have local language interface which villagers can easily understand. Once the villager
puts his fingerprint, his account will open, and he can make money transfers, withdraw
money, check his balance, etc. This will help illiterate people also to operate bank accounts
comfortably. Of course this is the easiest scenario, but almost every operation can be
completed that way.

Such ATMs can also add extra features like payment of utility bills, tax payment, book
railway tickets/ air tickets, mobile recharge, fund transfers, open a Fixed Deposit, loan
account enquiries, etc. By adding the above features to the ATM, villagers can easily
perform all their basic banking activities on their fingertips.

Solution 2: App based Rural Retail Banking:

Ask a villager how difficult it is for him to operate a Smartphone. But what if someone he
trusts operates the Smartphone or tablet for him? What if in rural areas, Banks can provide
retail shopkeepers with a common tablet or mobile phone banking application?

In this case, customers can just walk into the store, and with the help of their trusted
retailer, perform any banking activities like fund transfer, balance enquiry, withdraw money,
open a fixed deposit and perform internet banking transactions on the app. Loan account
holders can also check their outstanding balance, request for IT certificates and also can
make part payments through the App.

This concept is used by Store king whom an e-commerce company is serving rural India.
Store King Kiosks are installed at various shops in rural areas of India and has a large variety
of products, ranging from electronics and appliances to digital goods like mobile/DTH
recharges. Customers walk into the store and with the help of the retailer, browse and shop
on the Store King kiosk. Banking industry can adapt the same concept which will help them
reach 850 million rural populations, digitizing rural India.

Solution 3: Fingerprint based payments

the rising popularity of biometric based applications among users of digital products, which
convinces us that the fingerprint based interfaces are the future: fast, familiar and easy.
Banks can provide all retail shopkeepers with a common mobile phone app that can be used
for receiving Aadhaar enabled payments bypassing credit and debit cards, pin and
password. Here a villager walks into a kirana store, makes purchases, and while making
payment he can use his fingerprint instead of debit/credit card. Read more

This fingerprint will be linked to his Aadhaar card which in return will be linked to his bank
account, and hence money will be debited
from his account. If you still think we are
cracking a poor joke, you can check this
below article 😉
Solution 4: Payment banking through SMS:

Consumers look for services in all the spaces. Banks can grab this opportunity by providing a
payment banking system like Vodafone Mpesa where transactions are not only limited to
Smartphone’s or web portal, but also it can be made through SMS or dial in numbers like
*400# or *99# without the use of internet.

Through such payment system in rural India, a villager can deposit money, send money to
any mobile number, send money to any bank account, make prepaid recharge, postpaid bill
payments, DTH recharge, utility payments, merchant payment, withdraw money, etc.

The IoT and Rural Banking in India

Can IoT transform last mile delivery of financial services to rural India?

While rural banking in India is heavily reliant on

channel partners and distribution networks, an
emphasis on digitizing and automating would
give rise to greater cost efficiencies, as well as
increased banking transparency and
accountability. The Internet of Things (IoT) can
bridge the information gaps that currently
prevent banks from making social inclusion a
reality for all. The financial services industry,
however, appears to be taking it slow.

The IoT is steadily altering businesses and customer relationships, with data at the core of
this transformation. The case for IoT gets stronger when combined with emerging
technologies, such as distributed ledger technology (also known as block chain), artificial
intelligence, and advanced analytics. So, will IoT be the next game changer for banking, one
that is equitable for all customers?

There exists real potential for IoT to improve operational efficiencies in the banking sector,
along with delivering an engaging customer experience. IoT can be a strong enabler,
ensuring financial inclusion, enhancing security, and creating new business models and
partnerships.
Bringing Banking to the Unbanked

A significant problem in India involves trying to make inroads into rural banking, which has
seen a lack of consistency in service delivery by its outsourcing partners. Business
correspondents — a banking model where banks provide services to the unbanked
population using third-party agents — still hasn’t achieved its objective of improving
financial inclusion. Though 278 million accounts have been opened under the Pradhan
Mantri Jan Dhan Yojna (Prime Minister's People Money Plan is India's National Mission for
Financial Inclusion to ensure access to financial services), 30% of the accounts lie dormant.
Agent inactivity and lack of product knowledge adds to the problem. Without access to their
own accounts and the information to use them, rural users continue to live outside the
promised domain of banking.

Tracking Agent Activity

Rural banking activity often involves having bank officials accompany an agent of the bank
on their field trips to ensure service continuation and adherence to service level agreements.
This is both time consuming and costly. Instead, if the process of monitoring agents were
automated, banks could focus more on core areas of business, such as expanding services,
taking corrective actions faster, or creating new partnerships and alliances for additional
revenue streams.

One of the ways IoT can help would be to track the agents as they venture out on their daily,
weekly, or monthly client visits. IoT sensors can be placed on their vehicles, bicycles,
motorbikes, or vans. Data captured on travelled times, duration of the visit, and number of
breaks taken are important parameters that can be used to ascertain the veracity of the
agents’ claims about visiting clients and dispensing services at their doorsteps.

Sensors attached to the micro-ATMs carried by the agents, along with account usage data,
can be triangulated with location data to determine whether customers actually can access
and use their accounts as needed. This is particularly useful in preventing fraud, such as
misappropriation during loan disbursement, cash withdrawals, or deposits. Additionally, IoT
can be used to monitor and ensure banking services reach clients in the event of natural
calamities or disasters.

Furthermore, business correspondents are expected to regularly conduct financial literacy

programmes to educate rural communities about banking services. For banks, the only way
to determine if the programmes are indeed carried out is by doing random checks. IoT can
assist with this as another component of asset or personal tracking activity.

Remote Asset Security

Banks can deploy IoT to secure communications that are received from and sent to their
customers. Know-your-customer documents, account statements, micro-ATM slips, and cash
are transported under insecure conditions between the business correspondents’ offices and
clients’ residences. This often results in mismanagement of, and fraudulent activities related
to, customer data and banking assets. Even after the documents reach banks, it’s difficult to
pinpoint at which juncture the fraud could have happened. Using IoT, a bank can track and
obtain real-time information on the status of its remote assets without relying on the
intermediary layer of agents.

Sounding Early Event Triggers for ATMs

amongst banking channels, it’s ATMs, after the internet and phone IVRs, which incur the
lowest transaction costs for banks. However, even with a low ATM penetration of 40,000-
plus ATMs in rural areas, banks face the enormous challenge of replenishing ATMs on a
timely basis due to unpredictable usage patterns. Also, fixes can be done as-needed, rather
than having machines down until regularly scheduled maintenance takes place.

IoT can be used to track cash levels in the ATMs. Real-time information on available cash
can give banks enough response time to plan the replenishment cycles. IoT sensors also can
help with maintenance of ATM machines, signaling banks with predictive maintenance
alerts so as to enable machine repair before they break down or letting banks know that a
machine is in a non-functional mode.

Security of ATMs can be another challenge that IoT

can help overcome. Sensors can detect unauthorized
movement inside ATM booths – for instance,
detecting the presence of more individuals than
permitted or malicious attempts, such as tampering.
Using IoT data, preventative security measures, such
as a delay in cash dispensing or relaying alerts to
the banks, can be triggered.
 GO DIGITAL OR ONLINE BANKING
SYSTEM HELP RURAL PEOPLE?
Yes! Digital banking /online banking helping
rural people a lot. Now rural people are part
of digital mainstream and they are doing
online transactions through online banking
like balance check, money transfer, online
shopping,chequebook request etc. Earlier Rural people have to go to bank branch for their
banking needs but through online banking their visit to bank branch significantly come
down. In many instance I found that banking correspondents or any village youth is helping
rural people for online banking and they are getting benefits like increase savings, bills
payments, fee payments and receiving payments. Online banking developed trust among
villagers that any time they can use their money without going to bank.

Currently in India mobile penetration is growing and internet usages is increasing. Almost all
major Indian Banks have their own digital banking /mobile banking facilities. National level
MFIs are also developed their digital platforms. BHIM.UPI, Paytm, mobile valets etc. are
increasing their outreach and facilitating rural people for digital banking. No doubt digital
banking is helping rural people in a big way. I have found in remote areas shopkeepers are
having POS machine are accepting card payments.

ADAPTATION STRATEGIES

A few adaptation strategies are listed as follows by which Indian rural consumer fees
confidence on m-banking system-

 There is inappreciable internet facility available across the whole rural India due to
this consequence m-banking are not well-known by Indian rural consumer.
 Another hurdle for adaptation of this mechanism by the rural Indian consumer is
that its complexity. Due to its complexity, rural common people frequently avoid this
mechanism for access for completion of their daily transactions.
 Lack of compatibility with rural consumers is also a major point by which adaptation
of it creates problems among Indian rural peoples.
 Show a lack of interest in m-banking by rural peoples.
 Lack of knowledge regarding the internet, recent technology, computerized banking
different services.
  Use of the internet is much
expensive by which creates problems
for adaptation of this mechanism.
 Internet connection speed is
inappreciable so that most of the
rural people avoid using this
mechanism.
 The government needs to make the
plan for attracting rural people
towards m-banking like Digital India
launch by the Indian government to
attract masses of peoples towards a digital system for completion of their daily
needs.

CHALLENGES
A few points listed below which are more significant challenges for implementation of
m-banking system in every corner of India-

 Internet security and risk are not up to mark. Consequences of this, most of
the Indian consumers avoid it for financial transactions and sharing of
confidential information from one point to another point.
 Indian geographical condition is not same on every corner of India that is big
challenges to ISP and Indian government policymakers.
 High-speed internet not available in rural areas.
 The cost of internet connection by rural peoples not affordable.
 Make additional charges by the bank on using of m-banking different
services.
CONCLUSION

India is a developing country due to that fundamental technological advancement for

society modernization is not appreciable as compared to developed nations. But, in India,
mobile penetration is high due to its cost-effectiveness of mobile devices. By mobile
phone, basic services utilization will go to high such as mobile banking.

In recent times, every bank provides services on the mobile phone, but it has not captured
the general public attention. Technological advancement going rapid pace especially in
the mobile devices like improved display, memory size, processing speed etc by which any
type operations perform in quickly from anywhere, anytime.
In this paper, we discussed about banking technology in rural area regarding internet
banking and his/her difficulties for operating new technology. The main hurdle of
technology in rural population is that availability of resources like ATMs, online banking
etc, but it is also in limited areas in rural. The main hurdle of internate-banking in Indian
rural population is that technology illiteracy, a misconception regarding safety and
security, lack of awareness of mobile banking etc. The availability of alternate channels is
few in rural India compare to the urban India. The mobile phone usage is good in rural
India so banks can easily reach to rural population with the help of mobile banking