Published On: Fri, Nov 18th, 2016

Fintech will revolutionise financial sector, advance inclusion – Shri. V.P.Nandakumar

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The digital India programme is a flagship initiative of the Indian government with the vision of “transforming India into a digitally empowered society and knowledge economy.” By deploying the JAM (Jan Dhan, Aadhar and Mobile) trinity, the government hopes to extend the reach of the formal financial system to the farthest corners of the country. The masses should be able to get access to the formal banking channels for both savings and loans.  With digital transformation, banks will be able to bring down operating cost and also increase efficiency and productivity to such an extent that serving the needs of customers at the margins actually becomes profitable.

Promise of Digital Payments

The digital payment landscape in India has been developing at an exponential pace. Although at a nascent stage, it is witnessing high volumes of digital payment transactions. With a population of over 1.25 billion, India is one of the largest markets for payments.

According to a report by Google Inc and Boston Consulting Group, India’s digital payments sector growth will be worth around USD 500 billion by 2020, a substantial increase from current estimate of approximately USD 40 – 50 billion.  This means the country will observe USD 500 billion flowing through digital payments, which is expected to contribute to around 15 per cent of the country’s GDP. To support this momentum, India will move towards the most advanced digital payment ecosystem over the next five years, backed by Unified Payments Interface (UPI) and Aadhaar, as also as a growing internet user base, smartphone penetration and a conducive regulatory environment.

Traditionally, India has been a cash economy. Currency in circulation in India accounts for 18 per cent of the GDP as compares to 3.5 to 8 per cent in the mature markets such as UK, USA etc. In 2015, cash contributed just 20 – 25 per cent of overall consumer payment in developed nations, like UK, USA, France and Germany as compared to 78 per cent in India. However, the trend shows a steady decline, having come down from 89 per cent in 2010 and 92 percent in 2005. Clearly, the rate of shift from cash to non-cash has quickened in recent years reflecting the increased use of non-cash instruments such as cards, and digital payment (electronic/ ECH payment, mobile wallets etc.)

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Fintech will revolutionise financial sector, advance inclusion – Shri. V.P.Nandakumar