Connecting the world with cash: Trends in India and Southeast Asia

Understanding the “digital divide”

The term “digital divide” used to simply refer to people who can connect to the internet as opposed to those who can’t.  Now, it refers to much more than that, including consumers’ ability to have access to a bank. In some regions of the world where populations and economies are growing, so is their digital divide with their financial institution. As digital technologies grow exponentially, it could be argued that some consumers are being left behind.

Southeast Asia is considered one of the most rapidly evolving regions in the world with projected economic expansion of 5.1 percent for all members of the Association of the Southeast Asian Nations (ASEAN). With a total population of approximately 640 million people, when combined, the ASEAN nations have the 5^th largest economy in the world. But the region also has some of the highest numbers of consumers who don’t have access to a bank account—approximately 73 percent according to KPMG.  

In India, the “digital divide” is an even more prevalent issue. The country has the second-largest internet userbase in the world. Despite this, over half of India’s population remain without digital connectivity (so for every person who can connect to the internet, there’s another person who cannot); and the rates of connectivity are particularly low for those living in rural communities (ETTelecom, 2021). 

If financial inclusion remains a critical strategy for financial institutions and governments alike, how best should we address both the unbanked (those without any bank account) and the underbanked population (those who do not have adequate access due to location or connectivity). For many, the answer is cash. 

That helps explain why, even nearly three years after the demonetization of the 500 and 1000 rupee notes, cash remains the preferred payment method for consumers. According to the Reserve Bank of India, most survey respondents preferred cash due to a lack of internet and point-of-sale infrastructure, followed by the complexity of digital transactions and their unfamiliarity with digital payment systems.

So, to counter the digital divide, deployment of self-service solutions is critical to reach marginalized and vulnerable communities in Southeast Asia and India.

According to RBR, “at the end of 2026, the installed ATM base in India is expected to reach 263,000”. Initially, when the Reserve Bank of India demonetized some of its currency, there was panic amongst cash dependent consumers, which caused availability issues so FIs focused largely on maintaining their current estates. This, followed by the pandemic, has slowed deployment of new solutions. As India begins recovery from the effects of the pandemic, emphasis will shift to replacing or modernising ageing ATM fleets.

Similarly, security legislation such as anti-skimming protection, CIT controls such as cassette swap capability and updating operating systems to Windows 7 or above, has put pressure on financial institutions to replace – as the cost of upgrading ageing estates versus deploying end-to-end managed solutions through as-a-Service models is realised. Particularly as the cost of carrying cash increases. 

Interestingly, the banking consumer of today is far more demanding than they’ve ever been before. Customer retention is no longer assumed. Consumers don’t stay with a bank provider simply because generations of their family have before. Bank switching has never been more simple and with a wealth of information at the touch of a button, substitute products and services are easily found. Proactive steps need to be taken to ensure higher rates of retention.

That’s why offering technology that mirrors other aspects of daily life is critical to nailing the customer experience. Functionality such as multi-touch display for tablet-like interactions, contactless technology for mobile pre-stage and ATM marketing for a more personalized experience will make for a more positive interaction with your brand. Not to mention that if your physical fleet is designed to attract the digital-first consumer, you empower brand recognition in even the most rural locations.

Despite cash being consumers’ preferred way to pay, digital payments are increasing in these regions, where connectivity permits. And while that growth is partially due to the adoption of contactless payments, consumers are also using their contactless cards to access cash at the ATM. It’s clear that while access to cash is critical, consumers still wish to experience the physical in a “digital” way – so, deploying solutions that are in line with the modern-day consumer is the name of the game.

Related: How the payments industry was disrupted in 2020

To mitigate the effects of digital acceleration, financial institutions must take access to cash and self-service solutions seriously. As financial inclusion and ATM security remains of key importance to local governments and consumers alike, offering self-service in rural locations will not only promote inclusion but will also empower positive brand reputation. After all, retaining loyal consumers and acquiring new ones is critical for business growth.