The new apps, developed by banks such as Kotak Mahindra and DCB Bank, require internet connectivity for the initial installation (or transfer from a device or computer that has already downloaded the app) but once downloaded, the apps work offline. In a nation where mobile internet connectivity is scarce outside of major cities, this is a game changer.
These apps offer the user a range of banking services. For example, DCB’s customers can enquire about their account balance, generate a mini statement, and request a cheque book offline with the bank's app. Kotak Bharat’s app allows the user to transfer money, top-up their mobile and locate nearby Kotak ATMs and branches offline. Kotak’s even allows users the ability to purchase accident insurance or life insurance. Clearly, these apps are aimed at making banking for those in rural areas, where branches are limited, much more convenient and accessible.
Furthermore, these apps are also extremely secure. They use encrypted SMS data which can only be decrypted by the bank itself. Often, the apps are extremely fast and convenient for a user, in some cases even quicker than phone banking or ATMs. Most importantly, these apps and services are largely free. The Indian government had previously promoted the usage of USSD (unstructured supplementary service data) banking, in which users dial codes to conduct transactions including checking account balances and subscribing to services. The uptake was slow, mainly due to the Rs 1.5 cost for every USSD request, even for just a balance inquiry.
Another indication of the government and industry commitment is the recent creation of an Innovation Lab in Bengaluru by Kotak Mahindra. The Lab partners with, and invests in, fintech start-ups and will start an accelerator, organize hackations and innovation competitions.
In many ways, these are attempts to achieve the same progress that China has made in its efforts to advance financial inclusion and shift the attention away from the top 20% of consumers, where is where most of the industry and merchants are currently focused. Similarly, the Government of India and the Reserve Bank of India have also promoted financial inclusion. In December 2015, the RBI expressed its thinking that “access to finance, especially for the poor, is empowering because financial exclusion often leads to broader social exclusion.” Despite its best intentions, India is still a few steps behind China, firstly having to give all citizens access to banking methods, regardless of how rural the setting.
One caveat to the effectiveness of these offline mobile banking applications is that most smartphone users in India are not the underbanked customers the RBI is seeking to help. There are only 225 million smartphone users in India or about 18% of the total population, and it can be assumed that these smartphone users are not predominantly the rural and underprivileged customers. Thus, these offline apps may not be helping the people that need them most.
Nevertheless, the development of offline mobile banking applications in India is a clear indication that attempts are being made to improve financial inclusivity and points to Indian financial institutions starting to embrace fintech and efforts to innovate the banking sector.