How digital wallets are powering financial inclusion and credit access
How many of you know that digital wallets actually started in Kenya—launched by a telecom operator?
It was called M-Pesa, and it became a lifeline for many, especially women working in far-off towns and cities. At the time, there were no formal or affordable systems for sending money home. People had to rely on others traveling back to their villages with cash, a method that was risky and unreliable.
Vodafone, through its Kenyan subsidiary Safaricom, introduced a solution: a mobile wallet system. Every worker had a phone. Every family back home had one too. Using mobile SMS or a simple app, money could be transferred instantly. Family members could walk into a local shop (acting as an agent), show an ID, and withdraw cash. It was secure, fast, and didn't require a bank account.
Years later, this same model made its way to India, especially to cities with large migrant worker populations from rural areas. While Vodafone didn't pioneer mobile money in India, Airtel did with Airtel Money, and Vodafone followed with M-Paisa. Soon after, players like MobiKwik, Paytm, Freecharge, and later PhonePe entered the space.
For many Indians, especially in rural areas, these digital wallets became their first step into the formal financial system. Before that, sending money home often meant giving it to a co-worker or friend and hoping it arrived safely. Banks had little presence in remote geographies, and expanding there wasn't financially viable due to low transaction volumes.
As a result, a new kind of financial ecosystem began to emerge. What started as peer-to-peer money transfers evolved into wallets enabling merchant payments, utility bill payments, and even micro-credit, by linking debit or credit cards to digital platforms.
Today, nearly every adult owns a mobile phone. Teenagers, too, often have phones, given to them for education, safety, or communication. This widespread access has meant that even those who are illiterate or digitally inexperienced can make digital payments using simple apps or QR codes. Events like demonetisation in 2016 triggered a massive surge in digital wallet usage, as people scrambled to cope with the cash crunch. Later, during the COVID-19 pandemic, digital wallets and UPI became essential for contactless transactions, whether buying groceries or receiving wages.
What began as a workaround for limited banking access has now become a core pillar of India's digital economy, enabling financial inclusion on a scale the country had never seen before.
India is now one of the youngest nations in the world, with a massive population from Generation Z and Generation Alpha, many of whom will soon become credit-eligible. These digital natives have grown up using smartphones. For them, digital wallets and UPI have often been the first introduction to formal financial tools, laying the foundation for broader financial inclusion. Importantly, this digital adoption hasn't been limited to urban areas. Reports show that youth in deep rural geographies have also embraced digital payments, thanks to the accessibility and simplicity of platforms like UPI. Today, UPI is not just India's largest digital payment system, it also offers credit on UPI, expanding access even further.
Driving this transformation is India's 'Digital Trinity', Aadhaar, mobile phones, and Jan Dhan accounts, which has brought even small merchants into the digital economy. This ecosystem has rapidly accelerated the adoption of digital transactions across the country.
While India still faces challenges in infrastructure and access, it has leapfrogged in financial technology. From mobile wallets to real-time payments to credit on UPI, India has redefined what financial inclusion can look like, bringing millions into the formal economy in just a few short years.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or professional advice. While every effort has been made to ensure accuracy, readers should verify details independently and consult relevant professionals before making financial decisions. The views expressed are based on current industry trends and regulatory frameworks, which may change over time. Neither the author nor the publisher is responsible for any decisions based on this content.
Sachin Seth,Chairman CRIF High Mark and Regional MD CRIF India & South Asia
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