Indian consumers are slow to adopt digital financial services – here’s why

Despite India’s aspirations to become a cashless society and encourage innovation in digital financial services, consumers have been slow to adopt and use such services. For that to change, service providers need to offer services that are simple, as good as cash, don’t eat up data plans and work on feature phones.

Those are the findings of a new research report from Omidyar Network that focuses on understanding the current context and behaviors of a diverse sample of Indian consumers regarding their digital consumption and readiness for digital financial services on key issues, such as ease of use, trust, and social collaboration. The report also offers providers a practical set of recommendations to better reach financially underserved consumers in the country with digital financial offerings.

Basically, it all comes down to understanding what consumers really want, said Tilman Ehrbeck, partner at Omidyar Network.

“We believe that a deeper understanding of consumers’ behaviors and aspirations is at the crux of unlocking higher usage and providing services that are more relevant to consumers’ real needs,” said Ehrbeck.

Key findings from the research report:

• Smartphones vs feature phones: Even though smartphone adoption is expected to reach a projected 54% of the Indian market in the next three years, a large portion of surveyed consumers—especially those in rural areas—indicated they are comfortable with keeping their basic feature phones. This is primarily due to the greater resilience and longer battery life of lower-end phones, but also because internet access is not seen as a priority for these consumers. This means digital financial services providers will need to cater to both technologies in their offerings to broaden their customer base.
• Data-consciousness: The survey found that Indian consumers are frugal when it comes to data usage and look for creative ways to save data, such as constantly alternating between 2G and 3G depending on the function in use or pooling resources to set up shared Wi-Fi hot spots. Consumer adoption is also influenced by the number of individuals in their social network who use the same app. This means digital financial services apps need to be lean in data usage and leverage pervasive platforms, such as Whatsapp or UCBrowser.
• Same as the old money: Consumers are willing to leapfrog traditional financial services and adopt digital if they find convenience, relevance, and alignment with socio-cultural norms. Despite the low comfort level and lack of familiarity with digital financial services, through prototyping sessions, many surveyed consumers expressed a willingness to start using such apps if the technology addresses unmet needs, offers convenience, and doesn’t challenge socio-cultural norms. To shift consumers from existing informal cash–based financial solutions to formal digital financial products, solutions need to capture their full relationship and experience with money, such as allowing consumers to create partitions or “virtual jars” within an account, and offer them tools that can help with cash flow management of micro- and small businesses or household expenditures.
• Keep it simple: Current digital financial offerings are seen as overly complex even by savvy consumers. Surveyed consumers consider those who use financial service apps to have a specialized skill and cite difficulty grasping financial jargon in on product offerings and legal terms and conditions. According to the research, consumers’ lack of trust in their own abilities is one of the biggest hurdles today for adoption of digital financial services. Lowering the stakes for consumers to experiment with digital offerings is a must for providers. Prototyping sessions revealed that simple actions such as removing jargon and complex user interfaces, communicating in local languages, offering easy proof of transaction and grievance redressal, and using bank correspondents to onboard customers, can go a long way in building consumers’ confidence to transact digitally.

“Trust has always been the cornerstone of the banking and financial services industry,” said Smita Aggarwal, investments director at Omidyar Network. “But what we have learned from consumers in the field is that providers tend to prioritize time and resources in building trust in their brand, when trust in product reliability and users’ self-trust are the ones that really move the adoption needle.”

Complicating matters is the finding that adoption of digital financial services is influenced mainly by individual personality traits, socioeconomic status, and access to technology. The Omidyar report groups these into five category profiles (or “personas”):

Each persona type requires a different pathway (see graphic below) through which providers can initiate or increase engagement with their digital financial services, thereby offering a valuable framework to unlock customer acquisition and help scale digital financial services in India.

The full report, “Currency of Trust: Consumer Behaviors and Attitudes Toward Digital Financial Services in India,” can be downloaded here.