South Indian households top multi-service digital financial services adoption: Report
New Delhi, July 8
Households in India's South region showed the highest multi‑service digital financial services adoption at over 70 per cent, while stark regional differences in access, trust and usage metrics pointed to a need for products that match irregular incomes, a report said on Wednesday.
The report from PwC India and Dvara Research Foundation found that combining digital channels with physical touchpoints - a "phygital" model - produces the strongest enrolment and sustained engagement.
Digital‑only approaches drove enrolments but struggled to convert access into meaningful outcomes, while human touchpoints sustained engagement and trust.
"Informal finance complements formal finance sources as households using both formal and informal sources often show deeper formal engagement," the report said.
The report was prepared from a survey of 4,000 households across 18 districts in seven states.
On regional trends, the report said that in the East, 37 per cent of households never sought financial advice and 23 per cent sought but did not receive it, while 78 per cent of informal loans came from a single source, creating high concentration risk.
The West showed a sharp activation gap - digital financial services acceptance exceeds 95 per cent but 65 per cent of formal credit users reported having faced denial.
Newer customers have the highest access scores but the lowest usage scores, the report added.
The South is network‑driven, where 44 per cent of advice came from third‑party providers and 40 per cent from social networks; formal providers provided only 13 per cent of the financial advice.
The North faces self-exclusion and rural infrastructure gaps as 40 per cent lacked physical access within walking distance, and newer customers showed low trust and conversion was poor from access to engagement.
DFS acceptance in the North is the lowest of all regions at 75.67 per cent, the report said.
The findings suggested that account openings and digital onboarding are necessary but no longer sufficient.
"FSPs must redesign credit, savings, and insurance products around irregular cash flows, pair digital channels with trusted human touchpoints, and measure success through resilience and lived outcomes," the report said.
"India's financial services ecosystem has made remarkable progress in expanding access. The next frontier is financial health. That means designing products around real household cash flows, combining digital scale with human support, and measuring success through resilience, meaningful usage, and long-term customer outcomes," said Vivek Belgavi, Partner and Leader, Financial Services Advisory, PwC India.
— IANS
Reader Comments
Interesting report but I'm not surprised. My parents in rural Tamil Nadu still prefer going to the local post office or the bank branch for any financial advice, even though they use UPI daily. The trust factor is huge. Also, the point about irregular incomes is spot on - so many people in India earn daily wages or have seasonal work, and our financial products don't account for that. We need more flexible savings and credit options.
The north-south divide is real. I work in a fintech and we see registration numbers from UP and Bihar are way lower than from Karnataka or Tamil Nadu. But it's not just about infrastructure - there's a cultural hesitation too. People in the north often prefer gold or land investments over digital instruments. The report is right that just opening accounts isn't enough; we need to build trust and show real benefits.
Fascinating data. The report's emphasis on "financial health" rather than just access is crucial. In the West, the 65% credit denial rate among formal users is alarming - it suggests the system is rejecting people who might benefit the most. India's informal finance networks often step in where banks fail, but that concentration risk is dangerous. A hybrid model that combines digital efficiency with local human advisors could be the solution.
Finally, a report that understands the Indian reality! For too long, financial inclusion has been measured by number of accounts opened, not whether people actually use them. My mom has 3 bank accounts from various government schemes but uses only one actively. The "activation gap" in the West is a real issue - high awareness but low meaningful usage. And the suggestion to design products around irregular cash flows is brilliant. We need micro-savings, micro-insurance that works for a daily wage earner. 🇮🇳
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