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

The government’s objective of financial inclusive is “to bank the unbanked.” The digital push will provide the necessary impetus to the process. As the architect of the UIDAI Shri Nandan Nilekani says, “the government is focusing on minimizing cash and driving financial inclusion and making sure payments are electronic as much as possible. The government spends as much as USD 80 billion annually on different subsidies, all of which will gradually be put on this electronic platform.”

With use of digital payment system, it is estimated that non-cash contribution to payment transactions will increase from current level of 22 per cent to 40 per cent by 2020 and further to 50 per cent by 2025. Of this, digital payments are expected to contribute to around 26 per cent by 2020 and 37 per cent by 2025 according to Google Inc and Boston Consulting Group.

Digital Infrastructure

It is estimated that of the USD 500 billion of total payments through digital payments instruments by 2020, the largest contribution would come from person to merchant (P2M) of around USD 200 billion, followed by business to business (B2B) of approximately USD 150 billion and peer to peer (P2P) of around USD 45 billion. To support these volumes, a competitive digital payment landscape has been built-up involving telecom companies, banks, wallet companies, e-commerce / tech firms and, most recently, payment banks.

Unified Payment Interface (UPI) is an integrated open architecture system that will bring together services like Immediate Payment Service, Automated Clearing House, Rupay etc. onto one platform. UPI provides the infrastructure to all payment services providers (banks, fintechs and payments banks) that will enable secure, real-time peer-to-peer, person-to-merchant and business-to-business payments.

Once the UPI is rolled out, individuals and businesses can their manage money held in multiple accounts at different banks through a single mobile application. The smartphone will be turned into a bank. Users will be able to make payments for online purchases as well as groceries and also send and receive money from friends and family. All they have to do is to download a UPI-linked bank app, create a virtual identity (like an email address) and share that with the counter party. It is a matter of pride that India’s UPI is likely to be more advanced than anything available in China or even the West.

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