Financial Inclusion in India: Tech’s Impact on BFSI and Jobs
Financial inclusion as defined by RBI is “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”. The financial landscape in India is undergoing a profound shift driven by rapid technological transformations in the industry. Financial inclusion, aiming to provide affordable services to all, especially the underserved, has gained momentum with new age technologies.
This blog explores how technology is impacting the sector and promoting financial inclusion in India, highlighting key advancements, job creation effects, and future challenges.
Technological Advancements and Growth Figures
The Indian BFSI sector, which includes commercial banks, insurance companies, NBFCs, cooperatives, mutual funds, fintechs, and others, is predominantly dominated by commercial banks, holding over 64% of total assets. In recent years, the industry has experienced remarkable technological progress. Developments like mobile banking, digital wallets, blockchain, and AI have transformed financial services, improving customer access and driving growth in digital insurance, investments, and credit services.
The global fintech sector has also seen significant growth. The World Bank projects the global digital payments market to reach $16 trillion by 2027, with a CAGR of around 10%. India is among the fastest-growing fintech markets in the world, and it accounts for 46% of all digital payments. According to MoS Finance India, total digital payment transactions volume increased from $0.276 billion (INR 2,071 crore) in 2018 to $1.8 billion (INR 13,462 crore) in 2023 at a CAGR of 45%. This global surge in digitization underscores the critical role of technology in expanding access to financial services.
Integration of Offline Banking with Technology
As of 2023, the Indian banking sector reported deposits of approximately $2.2 trillion and loans of about $1.67 trillion. Despite rapid digitization, offline banking remains crucial for comprehensive financial inclusion. Many in rural India still rely on traditional banking due to limited digital infrastructure and literacy.
Hybrid banking models use digital innovations to enhance offline services, ensuring customers who need face-to-face interactions can still access banking. For example, many banks now offer mobile banking vans and digital kiosks in rural areas, allowing digital transactions with staff assistance. This approach leverages banking technology in India to address the needs of diverse customer segments while fostering trust and familiarity with digital tools, gradually encouraging the adoption of fully digital banking services.
How Technological Advancements Aid Expansion and Impact Job Creation
Earlier this year, the Finance Minister emphasized India’s need for significantly larger banks, potentially three times the size of SBI, to meet increasing demand. This highlights critical growth imperatives for the sector. The move towards technology-driven financial inclusion has greatly influenced India’s job market, creating a demand for skilled professionals.
For instance, job growth in the BFSI sector spans various levels: Entry-level positions (0-3 years) account for 23%, intermediate roles (4-6 years) for 21%, and mid-senior level positions (7-10 years) for 16%. There is strong demand for BFSI jobs in India particularly for sales and tech roles, driven by the sector’s focus on expanding digital services and improving customer engagement. The need for salespersons to promote credits is increasing, prompting the hiring of 25-30k frontline salespersons in Q1 alone, with expectations for further growth as demand rises and infant attrition remains a persistent challenge in the sector.
Recent data highlights remarkable growth in credit card sales, insurance, and demat account openings. India, traditionally not credit card-centric, is witnessing a shift with over 100 million cards in circulation, representing a 5.5% penetration among its 1.4 billion population. The introduction of UPI-based credit cards is expected to further boost growth, with FY24 transactions totaling Rs 1,64,586 crore, up 20% from the previous year. Demat accounts have surged to 150 million, highlighting significant workforce involvement in their management. The insurance sector employs over 2.2 million sales agents, underscoring its expansive reach and employment potential.
Technology significantly enhanced sales efficiency and reach across sectors. Salespersons use CRM systems and digital tools for precise audience targeting and effective customer relationship management. Digital platforms streamline onboarding with e-KYC processes, ensuring swift and secure client verification. Automation and AI-driven analytics provide insights into customer behavior, enabling personalized sales strategies and higher conversion rates.
The industry’s evolution requires upskilling new entrants to meet standards and foster financial inclusion in untapped regions, expanding banks’ outreach capabilities. Moreover, the BFSI sector is increasingly focusing on temp staffing to manage its varying demands. This approach offers flexibility and caters to the sector’s evolving needs, ensuring that skilled professionals are available for short-term assignments and peak times. By prioritizing temp staffing, organizations can quickly adapt to market changes and maintain a competitive edge. Temp staffing thus becomes a crucial strategy for staying agile and responsive.
Future Directions and Conclusion
Looking ahead, technology-driven financial services in India show great promise. AI and machine learning will enhance personalization and efficiency, while blockchain technology will revolutionize cross-border payments and smart contracts, promoting financial inclusion. However, challenges such as digital literacy barriers in rural areas and cybersecurity threats persist, requiring educational initiatives and balanced regulations.
As India advances towards becoming the world’s third-largest economy, with a projected GDP exceeding $7 trillion by the decade’s end, financial inclusion will play a crucial role. Expanding the BFSI sector and leveraging fintech innovations present significant opportunities, but the existing skill gap in the Indian workforce is a major challenge. This gap needs to be addressed through specialized education programs, industry-academia collaboration, and government support.
At TeamLease, we understand the critical need to address the skill gap in the BFSI sector. Our offerings encompass skilling, reskilling, and learning & development (L&D) programs specifically designed for the BFSI industry. With a strong history in staffing and recruitment, TeamLease is dedicated to closing the skills gap and facilitating a smooth transition to the future.
Unlock the potential of India’s workforce with TeamLease’s industry-focused skilling and staffing solutions. Contact us to discover more about our services!
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