Households in India's South region recorded the highest multi-service digital financial services (DFS) adoption rate of over 70 per cent, according to a report released on Wednesday, 8 July 2025 by PwC India and Dvara Research Foundation. The findings, drawn from a survey of 4,000 households across 18 districts in seven states, reveal stark regional disparities in access, trust, and usage — and argue that India's financial inclusion story must now move beyond account openings toward genuine financial health.

Key Findings on Regional Adoption

The South's lead is driven by network effects: 44 per cent of financial advice in the region came from third-party providers and 40 per cent from social networks, while formal providers accounted for just 13 per cent of advice. This peer-driven trust ecosystem appears to have accelerated multi-service uptake well beyond national averages.

In contrast, the North recorded the lowest DFS acceptance rate of all regions at 75.67 per cent, hampered by self-exclusion and rural infrastructure gaps — with 40 per cent of households lacking physical access to a financial touchpoint within walking distance. Newer customers in the North showed low trust levels and poor conversion from access to active engagement.

The 'Phygital' Model Outperforms Digital-Only

One of the report's central conclusions is that combining digital channels with physical touchpoints — described as a 'phygital' model — produces the strongest enrolment and sustained engagement. Digital-only approaches drove initial sign-ups but struggled to convert access into meaningful financial outcomes. Human touchpoints, by contrast, sustained engagement and built the trust needed for deeper product usage.

The report also found that informal finance plays a reinforcing role: 'Informal finance complements formal finance sources as households using both formal and informal sources often show deeper formal engagement,' the report noted. This challenges the conventional view that informal credit is simply a barrier to formal inclusion.

Regional Stress Points: East and West

In the East, financial advice gaps are acute — 37 per cent of households never sought financial advice, and 23 per cent sought it but did not receive it. Additionally, 78 per cent of informal loans in the region came from a single source, creating high concentration risk for borrowers with no fallback.

The West presents a different kind of dysfunction: DFS acceptance exceeds 95 per cent, yet 65 per cent of formal credit users reported having faced denial. This activation gap — where access does not translate into approved credit — points to product-design and underwriting failures rather than demand-side reluctance. Notably, newer customers in the West have the highest access scores but the lowest usage scores, suggesting onboarding is not translating into habitual engagement.

What Financial Service Providers Must Do Next

Vivek Belgavi, Partner and Leader, Financial Services Advisory, PwC India, 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.'

The report calls on financial service providers (FSPs) to redesign credit, savings, and insurance products around irregular cash flows — a critical gap given that a large share of India's low-income households earn through agriculture, daily wages, or informal trade. It also urges FSPs to pair digital channels with trusted human touchpoints and to shift success metrics from account openings to resilience and lived outcomes.

As India's DFS infrastructure matures, the report signals that the next phase of financial inclusion will be won not by expanding reach alone, but by deepening the quality and relevance of what that reach delivers.