Digital financial services and India’s emerging middle class
In the digital financial services (DFS) sector, there is a recurring story told about India. It goes something like this: “There’s a huge market, with immense potential. India’s government is engaged, proactive, and willing to take bold steps. There is lots of activity, lots of players, and lots of products. Things are really heating up.”
But if you take a closer look at the numbers, there is room for debate, if not skepticism. Nationally, the averages for active bank account use, overall bank account enrollment, and mobile phone ownership are 42 percent, 63 percent, and 60 percent, respectively. How broadly or deeply will new digital service offerings positively disrupt the financial lives of the underserved and unserved throughout India?
There is no denying that these national averages are indicative of real obstacles to meeting the financial and payments needs of most Indian citizens. As with all averages, however, when we break them out into specific segments, the picture can change dramatically. This is true in the case of India’s emerging middle class (EMC). India’s EMC resides in less urban areas along the periphery of Tier 1 cities, referred to as Tier 2, 3, and 4 centers. The EMC is also defined as having an annual income of around $2,500 – $15,000 USD. And given their shifting life goals and aspirations, as well as their growing income levels, this segment has potential to play the role of catalyst in mainstreaming DFS adoption.
To shed light on the distinct attitudes, abilities, and behavior patterns of this segment, NetHope recently released a report: Decoding the Unexplored Middle: A Study on Digital Financial Services for the Emerging Middle Class. With a charitable contribution from Visa’s Global Financial Inclusion Unit and support from Deloitte Touche Tohmatsu India LLP in conducting the primary and secondary research and authoring the report, this document presents observations and findings from quantitative and qualitative data from 650 customers and 250 merchants from 37 cities across all four regions of the country.