Unified Payments Interface (UPI) is slowly but steadily emerging as the preferred method of financial transactions in rural and semi-urban India, according to a recent report.
A recent report by EY and the Confederation of Indian Industry (CII) revealed that 38% of the payment mode survey respondents from rural and semi-urban areas of India are choosing UPI as their primary transaction mode, with the age cohort between 18 and 35 showing even greater willingness to use the QR-code-based national payment system.
At the same time, despite the rising popularity of UPI, 19% of respondents still relied solely on cash, while 11% did not prefer UPI in the least. Moreover, while the adoption of digital payments continues to rise, trust in traditional banking remains robust. The survey revealed that 86% of account holders in rural and semi-urban areas still prefer visiting physical bank branches. That calls for an omnichannel approach to banking in the given regions.
Nevertheless, the growing dominance of digital payment methods underscores the importance of boosting financial inclusion through technology. Besides payment transactions themselves, the increase in fintech acceptance in rural areas also reveals a strong need for individuals to learn more about saving, investing and financial management.
According to the report, 96% of respondents expressed a willingness to save and invest, offering financial institutions an opportunity to design tailored investment products. Moreover, 55% showed interest in enhancing their financial management skills, focusing on areas like savings, budgeting, loans, and insurance.
“As India moves towards becoming a $5 trillion economy, financial inclusion must be at the core of this growth strategy,” says Saurabh Chandra, Senior Partner & Financial Services (Domestic) Consulting Head at EY India. It calls for a collaborative approach to drive sustainable and inclusive growth in the financial sector.
Specific attention should be paid to the gender gap that exists in India’s financial inclusion. The report highlights notable gender disparities in financial literacy and access to digital banking. While 69% of women use digital banking services, only 44% engage in regular transactions. Additionally, awareness of government financial inclusion programs remains inconsistent, with 18% of women unaware of schemes such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) and Atal Pension Yojana (APY).
Another category that might be less prone to using digital payments is senior citizens. Separate startups like GenWise already address this issue, aiming to empower India’s elderly population with the speed and convenience of UPI digital payments in its app-based online club for senior citizens. However, collaborative industry efforts among financial institutions, policymakers, and technology providers would be much more efficient than a siloed approach.
Therefore, the report recommends implementing short-term measures to understand unbanked populations and enhance their access to financial tools through technology and education initiatives. For lasting impact, it advocates creating a tech-driven financial ecosystem powered by AI and automation offering personalized and secure services.
“The shift towards digital payments is evident, but we must focus on empowering under-banked communities with the tools and knowledge they need to thrive in this evolving ecosystem.”
Vijay Rai, Chairman – CII Delhi Panel on Emerging Technologies & IT/ITES
