MFS adoption easier in rural areas: IIM-A study

As against the existing channels of delivery of banking and financial services in the rural under-banked areas, adoption of mobile financial services (MFS) may tend to be easier, says a study by the Indian Institute of Management, Ahmedabad (IIM-A).

Conducted by faculty members Rajanish Dass and Sujoy Pal, the working paper has tried to study factors benefiting as well as detrimental to adoption of MFS in under-banked rural areas. The paper defines MFS as one encompassing a broad range of financial activities that consumers engage in or access using their mobile phones, namely mobile banking (m-banking) and mobile payments (m-payments).

Findings of the study "indicate that the demand for banking and financial services and the amount of hardships faced in availing these services through the existing channels of delivery can act as strong drivers for MFS adoption among the rural under-banked".

On the other hand, factors like lack of trust on technology and lack of technology readiness were found to act as barriers to the adoption of MFS. Adoption of MFS in under-banked rural areas also witnesses lesser resistance due to lack of probable risk involved in technology. "Factors like perceived risk and concerns about privacy and security of the MFS that were found to be pronounced in the existing studies that were conducted on population having adequate accessibility to various alternative channels of financial services, was not observed in the case of the rural under-banked population.

This can also be related to lesser resistance among the rural under-banked in switching from the existing channels of financial service delivery to MFS as compared to the population that is comfortable with the accessibility and quality of the banking and financial services available to them through the existing channels," the study further states.

The study also revealed that the demand of core banking and financial services as well as hardships faced by the population in availing such services through existing channels of delivery were prime drivers for adoption of mobile enabled financial services among the rural under-banked. As for the prime bottlenecks, the paper suggest lack of trust and low technology readiness as deterrents in adoption of MFS.

Moreover, highlighting perceived financial cost as a matter of concern among the rural people, the study suggests that such bottlenecks "could be removed or reduced through increased awareness and usage among the peers".