There has been slow take-up of DFS in India
The market is mostly feature phone-based.
Non-banks have been able to offer prepaid payment instruments. However, the semi-closed PPIs (so called ‘wallets’) permitted for non-banks did not allow for cash-out. This made it difficult to offer a valuable product to unbanked and underbanked users.
India moved away from a closed banks-only model and introduced a new enabling framework characterized by a new ‘Payments Bank’ concept developed by the Reserve Bank of India (RBI).
MNO Airtel was the first to launch a payments bank in India.1 Their customers use their mobile number as an identifier for the account number. The bank will be fully digital and paperless, with even account opening being done using Aadhaar-based eKYC.
Airtel entered into a pact with Kotak Mahindra Bank, which agreed to acquire a 20% stake in the new payments bank.
The government introduced the biometric-based Aadhar identity scheme as part of the the 'India Stack,' which allows residents access to many new government and payment services.
The telecommunications regulator TRAI has set a cap on USSD pricing as well as setting the number of menu items for USSD sessions.3