.

DIGITAL
FINANCIAL
SERVICES
A study to understanding consumers'
perspectives, experiences and
knowledge of digital finance/banking

April 2022
Authors

Savitha T, Project Manager, CAG

Keerthana Thangavel, Researcher, CAG

Acknowledgments:

The authors would like to thank those civil society organizations of Tamil Nadu who
administered the consumer survey across thirty districts of Tamil Nadu and thank the
communications team for their support in cleaning and disseminating the report.

Sincere thanks to S. Saroja (CAG) for providing good counsel, detailed reviews, and
suggestions on the report. Her inputs enhanced the rigour of the analysis and increased
the effectiveness of the message.

Disclaimer: The information in this report is taken from a study conducted by

CAG across thirty districts of Tamil Nadu. The authors accept no liability whatsoever
for any direct or consequential loss arising from the use of this document or its
contents.

Citation: Savitha, T. and Keerthana, T., 2022. A study to understanding consumers'

perspectives, experiences and knowledge of digital finance/banking. [online] Chennai.

Copyright: Unless specified otherwise, all content in this report is licensed under a
Creative Commons Attribution 4.0 International licence CC-BY-NC-SA 4.0
About CAG
CAG is a 36-year-old non-profit and non-political organisation that works towards
protecting citizens' rights in consumer, civic and environmental issues and promoting
good governance processes including transparency, accountability and participatory
decision-making.
Glossary and abbreviations
PIN - Personal Identification Number

CVV - Card Verification Value

URLs - Uniform Resource Locators

BHIM - Bharat Interface for Money

UPI - Unified Payment Interface

VPA - Virtual Payment Address

IMPS - Immediate Payment Service

RBI - Reserve Bank of India

NEFT - National Electronic Fund Transfer

NPCI - National Payment Corporation of India

PPI - Prepaid Payment Instrument

RTGS - Real Time Gross Settlement

OTP - One Time Password

ATM - Automated Teller Machine

IVRS - Interactive Voice Response System

CSOs - Civil Society Organisations

SMS - Short Message Service

Contents
Chapter 1 Introduction

1.1 Digital Financial services

Chapter 2 Study Methodology

2.1 Data collection

Chapter 3 Findings of the survey

3.1 Awareness of Online banking

3.2 Using online banking

3.3 Span of using online banking services

3.4 Types of online banking platforms

3.5 Reasons for using digital platforms

3.6 Daily transactions

3.7 Engaging agents for transactions

3.8 Devices used

3.9 Issues with digital banking

3.10 Customer Care Support

Chapter 4 Consumer Guidance Seminar

Chapter 5 Public Awareness Messaging

5.1 How cautious one should be

5.1.1 Beware of Fraudulent calls/messages/emails

5.1.2 Get rid of Phishing

5.1.3 Have a complicated password/Bank card/PINs/CVV

Chapter 6 Conclusion
1 INTRODUCTION

This is the age of the internet. Online financial services have restructured the financial
network, with great numbers of people now accessing digital financial services.
According to the World Bank database, in developing countries alone, the number
grew from 57% in 2014 to 70% in 2017. Another recent study says that the absolute
number of online financial services users will surpass 3.6 billion by 2024, up from 2.4
billion in 2020; a 54% increase. It says that these developments will be driven by the
increased number of popular digital banks. This has set the stage for a slew of scams -
each one more sophisticated than the one before and all intended to make us part with
our hard-earned money.

1.1 Digital Financial Services

Digital finance has become a part of everyday life. It eases a range of day-to-day
activities like bill payments, shopping and accessing other financial services. While
the current share of those accessing online digital services from urban and
semi-urban communities is already massive, we anticipate further growth in the
coming years.

At the same time, accessibility to digital financial services remains a challenge in

rural and remote localities. The huge urban-rural divide, lack of digital financial
education, not having smartphones, gender disparity and poor data/ network
connectivity are some of the reasons for this. But India is determined to take digital
financial services to every nook and corner of the country, as was evident from
Finance Minister Nirmala Sitharaman’s budget speech.

While it’s undeniable that digital financial services have recast the financial scenario
across the world, equally undeniable is the fact that it has grown to pose serious
threats to consumers through fraud, phishing, data misuse and privacy breaching. If
we are to keep this space free from the criminal-minded and thus safe for users, we
need robust protection technologies, swift redressal mechanisms and vigilant
consumers.

2 Study Methodology
2.1 Data Collection
The study was developed and administered targeting general consumers across 30
districts in Tamil Nadu viz. Mayiladuthurai, Theni, Dindigul, Tiruppur,
Thiruvanamalai, Thiruvarur, Nagapattinam, Vellore, Coimbatore, Salem, Erode,
Namakkal, Cuddalore, Kancheepuram, Thiruvallur, Tirunelveli, Nilgiris, Sivagangai,
Thirupattur, Madurai, Karur, Pudukotai, Ramanathapuram, Thanjavur, Villupuram,
Krishnagiri, Dharmapuri, Ranipet, Chengalpattu and Chennai. The study focused
on: 1) Inclusivity 2) Data Protection 3) Safety and Sustainability. The study followed
a random sampling technique with close-ended questions and targeted 3644
participants.

3 Findings from the study

3.1 Awareness of online banking

The majority of the respondents, about 83% have knowledge or have heard about
online banking. While the remaining 17% were not aware of it.

Fig 1: Awareness of online banking - the percentage of respondents who had some awareness of
online banking

3.2 Using online banking

Of the majority (86%) who have heard about online banking, only 60% actually use
online banking services, while around 40% do not use it for the following reasons:
not knowing how to use it, not trusting online banking platforms, not feeling safe and
comfortable using it, not having any access to smart technology to use this feature,
illiteracy and personally preferring to visit banks to avail services.
Fig 2: Using online banking - the percentage of respondents who don’t use online banking and their
reasons.

3.3 Experience (in years) of using online banking services

Respondents reported using online banking for more than 10 years. Around 48.4%
comprising young adults and senior citizens report having begun with online banking
only recently (under 2 years). 33.3% of respondents report using the services
between 2 and 5 years. Around 16.6% of respondents report using it over a period of
5-10 years. Only 1.6% of the respondents report the experience of using online
banking services for over 10 years.

Fig 3: Experience (in years) of using online banking

3.4 Online banking platforms by popularity

The study assessed the use of different banking platforms found to be popular among
the general public. These are bank applications, net banking, bank cards, digital
wallets and the UPI platforms. Out of these, the most used platform was found to be
net banking, followed by bank cards, UPI platforms and bank applications. The least
used was the digital wallets.

In recent days, UPI platforms have gained

popularity as they allow customers to
make and accept payments from users of
different payment apps. Among the UPI
platforms, Google Pay, Phone Pe and
Paytm have been reported as the preferred
apps.

3.5 Reasons for using digital platforms

The respondents reported ease and convenience as

the top reason for accessing digital financial
platforms. The second top reason was that it saves
time and money. Respondents also reported opting
for digital platforms as it facilitates e-commerce
transactions.

3.6 Help with daily transactions

Respondents were asked to specify how they carry out their daily transactions and if
they typically got assistance from family members, children, or their friends. 1948
respondents reported carrying out transactions themselves. 254 of these respondents
also, on occasion, needed help from their children and their friends.

Fig 4: Help with daily transactions

3.7 Engaging agents for transactions

It is a well-known fact that people who are

socially and educationally deprived depend on
external agents to do their daily transactions, avail
bank services and make ATM withdrawals. There
are risks associated with such dependency.
According to the survey, almost half of the
respondents (48.8%) are not aware of the fact.
According to the survey findings, the reasons why
they engage with external agents are for business
purposes, it is easy and convenient, and saves
time.

3.8 Devices used

The most used device or gadget for online banking was found
to be mobile phones, followed by home computers and then
net-centre computers.
3.9 Issues with digital banking

More than half (52.1%) of respondents reported

facing issues while using digital banking. Out of
these, problems like server connectivity, delay or
failure in a refund, double transactions and
money debited in failed transactions were the
foremost complaints from respondents.
Respondents also reported facing other issues
like wrong transactions, money lost in transit,
accounts getting hacked, compromised personal
information, difficulty in understanding the
terms, and too many distractions like pop-up ads
during transactions.

3.10 Customer Care Support

More than half of respondents

(around 52.6%) have
approached customer care for
redressal of their grievances,
out of which, 28.7% have had
a bad experience contacting
and getting their complaints
rectified. The reasons which
were reported as causing an
unpleasant experience were
no response/ solution being
given, no action being taken, not being able to reach the executive, and availability of
an IVRS facility only.

4 Consumer Guidance Seminar

Following the study, CAG organised a consumer guidance seminar titled “Digital
Financial Services”, to disseminate the study findings among CSOs of Tamil Nadu
and create awareness on the subject. CSOs, consumers, students, and faculty members
from two colleges in Chennai participated.
 Keeping the
theme of safe
online
transactions
central to the
event, Mr.
Vinodh
Rajkumar from
the RBI
elaborated on
the different
payment
methods,
explaining how
systems like the UPI are one of the biggest networks in the world. ‘They are meant to
make our lives easier and the RBI goes to great lengths to ensure that the systems it
regulates are safe to use. However, we need vigilant consumers’ he said. ‘We have
redressal mechanisms in place, but these will not apply if the customer has shared his
PIN or OTP’.

Ms. Anubhutie Singh, Dvara Research, who spoke on accessibility, said that as per a
survey conducted by Dvara Research, only 34% of women use smartphones in India
whereas it is 55% among men; this clearly shows the disparity in usage. She said that
RBI has come up with new techniques to address the gap in digital finance by
including an SMS option in feature phones - these could be used to make digital
payments to anyone in India. Ms. Singh went on to emphasise the need for safe digital
transactions. ‘A nation like India that is committed to creating successful and
extensive digital ecosystems that revolutionise our economy cannot afford to have
large segments of its population apprehensive of using digital services. When
financially fragile individuals are burnt even once by these scams, they don’t want to
try accessing digital services ever again’ she said, narrating the story of a small-time
vendor who had lost money to a scammer. ‘We need to keep these human touchpoints
in mind when developing policies’, she added.

Mr. Yogesh Sapkale, from Moneylife Foundation, explained how the KYC details,
shared by consumers, were often misused and emphasised the need for a centralised
KYC process that could be monitored in a better manner. He also spoke about the
available grievance redressal mechanisms in detail. He warned against posting
personal information on social media as ‘scammers can easily glean information from
this that we had never intended to share’.
5 Public Awareness Messaging

At the end of the study, CAG developed a booklet (in English and Tamil) and a series
of social media messages that were distributed to members of the public. The aim was
to create a more vigilant public. Some of the excerpts from the messaging activity are
recorded here:

These are the common terminologies that a user (and the reader, in this instance) need
to be familiar with, to understand digital safety.

E-Wallets - E-wallet is a digital wallet on an application (app) where money from the
bank account can be transferred and stored to make purchases/transactions easy.

URL - It is the internet address that appears in the search bar

BHIM - BHIM is a UPI based payment interface that allows real-time fund transfer
using a single identity like your mobile number or name

VPA - It is a unique identifier that you can use to send and receive money on UPI.
Think of it as an email ID that you can use to transfer money.

UPI - It is a payment interface in digital platforms that uses VPA for a person to
person and person to merchant transactions.

IMPS - IMPS is an innovative real-time payment service that is available round the
clock. This service is offered by the NPCI which empowers customers to transfer
money instantly through banks and RBI authorized PPI issuers across India.

NEFT - NEFT is a nationwide centralised payment system owned and operated by the
RBI.

RTGS - It is a payment settlement system that transfers money from one bank to any
other bank in real-time and on a gross basis.

5.1 How cautious should one be

5.1.1 Beware of Fraudulent calls/messages/emails

Fraudsters may call/message/e-mail you or your family members requesting money
transfers. There are high possibilities that these are spam messages. Check in and
confirm with the family member and their whereabouts before responding to such
calls. Even if such calls pretending to be from your bank, never give out your online
banking password, OTP, ATM or mobile banking PIN, CVV number, or expiration
date. Remember that no bank or its staff will ever call or email you to ask for these
details. Never reply to emails claiming to be from your bank and requesting the
above information. Such instances should be notified to your bank right away.

5.1.2 Get rid of Phishing

Disregard any advertisement you may get over email / SMS with claims that you can
make money with little or no effort/ risk/ investment. It's a trick. These deals appear
to be too good to be true, and you may lose money as a result. You may get emails/
messages with links that may appear to be legitimate. However do not click on the
links if it appears unsolicited (ie, from an organisation or a service you have not
contacted yourself). They will direct you to harmful websites and/or your data may
be compromised

5.1.3 Have a complicated password/Bank card/PINs/CVV

To prevent scammers from guessing passwords, always use strong passwords and
unique ID/password combinations for various accounts. Use upper and lower case
alphabets, numbers, and special characters in your passwords to make them more
secure. Passwords like Jan@2018, admin@123, password@123, or your date of birth
should be avoided. Change the passwords on your online banking accounts on a
regular basis. Make sure the bank card credentials, PIN and CVV numbers are safe
and secure. Do not disclose or write it down.

6 Conclusion

The internet has transformed how financial services work. It has brought ease and
convenience at levels we have never known before. But along with this have come the
scams - clever, complicated schemes that either steal our identity and then our money
or get us to willingly part with our money, and personal details. No one is exempt
from this; but particularly vulnerable are the senior citizens and semi-literate
population who have been forced to come to terms with a cashless society. CAG
found that nearly half of the users audited (who use digital financial services) are
unaware that using third parties for online banking transactions is risky. Apart from
the convenience digital finance brings to our lives, digital financial services can also
be extremely empowering. But for this to really be a boon to the public, we need a
combination of secure systems, redressal policies and a vigilant public.