Digital Transformation in India Resulting in Overall Financial Inclusion

Digital Transformation in India Resulting in Overall Financial Inclusion

'Implementation of 5G Technology the Catalyst of Change for an Overall Inclusive Growth.’

?Digital linkage via Aadhar, has changed the way India transacts, spends, invests, banks and shops leading to overall financial and social inclusion for overall growth of the economy and growth across Tier 2 and Tier 3 cities across the length and breadth of the country.

?The Indian economy has been one of the most resilient economies in the world post the pandemic. The recovery in the Indian economy is due to the support of the Government and RBI. The growth and recovery has been due to the digital connectivity and penetration of telecom providers and high speed internet connectivity. The reach of 4G technology has connected the length and breadth of the country with high speed internet at the lowest cost in the world. A man sitting in a remote village in any part of the country may not have close connectivity to a bank or a post office must have 4G connectivity thereby connecting him to the rest of the world and has resulted in using technology to shop, transact, bank and connect to the world.

?In India, 99% of the adult population is part of the Aadhaar digital identity system and 60% of that population is under the age of 40. With over 75 crore smartphones, 133 crore Aadhaar cards, more than 80 crore internet users, it has resulted to connect the people at the bottom of the pyramid and people residing in rural India to connect and get benefit of technology resulting in social as well financial inclusion.

?With 5G telecom technology being introduced in Metros now and the length and breadth of India being covered with 5G within the next 12 months, the decade for digital lead growth has just started and will result in overall social and economic growth of the country. Technology will drive growth across sectors and help shape a new digital India.

?One of the biggest problems that Digital India has solved is last mile connectivity for Government schemes with total transparency, almost no leakage and timely transfer of subsidy and support of the various Government schemes. The Jan Dhan-Aadhaar-Mobile combination resulted in the poorest receive timely effective Government scheme transfers. Financial benefits worth nearly INR 23 lakh crores have been transferred using Direct Benefit Transfer technology in the last few years thereby resulting in a total savings of around INR 2.22 lakh crores of public money. The impact of UPI has been immense and in February 2021, India’s UPI system crossed 2.7 billion transactions with over 100 million users, merely three years after its launch. UPI now fulfils more than half of all digital transactions in the country. The Indian Government is exploring launching the UPI app internationally.

?With this technology push, it has enabled banks to provide digital banking to the masses and also resulted in making India the fastest growing market for FinTechs in the world. FinTech Investments in India almost doubled to USD 3.7 billion in 2019, up from USD 1.9 billion the previous year. Thereby making India the leading FinTech country of the world only after USA and UK. Business and consumer level benefits due to India’s real time instant payment was expected to reach USD 92.4 billion, adding, that it will have an impact of USD 54.9 billion or 1.12% in India’s GDP.

?UPI has changed the way small businesses transact right from small unorganized shop keepers and traders to taxi and rickshaw drivers who use UPI to make and accept payments and with further push in terms of technology in form of 5G technology it will further ease the way to use technology with ease of access.

?India accounted for the largest number of real-time transactions in 2021 of around 49 billion compared to a modest figure by China (18 billion transactions), whereas the combined volume of world’s leading economies the US, France, UK and Canada was only 7.55 Billion.

The global digital transformation market size is expected to grow to USD 1100 billion by 2025, at a CAGR of 16.5%. Indian digital transformation market is expected to reach USD 710 billion by 2024, registering a CAGR of 74.7%. With the major growth drivers being advance technologies like IOT (Internet of Things), Big Data, Analytics and Web3.0 leading to a complete digital transformation of the economy.

?5G technology will further enhance speeds and will make banking faster and more accessible with Net banking and reduce the overall transition time for making investments, money transfers and e-commerce transactions. A fairly larger audience will have access to financial products like insurance and subsequent claim settlement etc. Thereby helping the spread of IOT. With implementation of VR / AR and smart wearable devices will result in banking going to the next level in terms of overall ease and convenience of transacting because of the less than a millisecond with faster data transfers will also result in banking adopting the next generation of metaverse to facilitate transactions.

?With the implementation of 5G, systems and processes of banking will improve and become more efficient as well. Banks connect their branches to data centres via MPLS (Multi-Protocol Label Switching) or leased line network for better reliability and faster bandwidth. The faster bandwidth, lower latency and higher reliability combined with the network slicing capabilities of 5G can potentially create a new network backbone. Thereby helping create more Mobile banking branches and micro ATM access even in areas where creating physical brick and motor infrastructure is a challenge. In India, the Institute for Development and Research in Banking Technology (IDRBT), set-up by the Reserve Bank of India, is using 5G and blockchain to develop next-gen National Digital Financial Infrastructure (NADI) that provides a roadmap for digital financial services growth.

?Digital transformation of the Indian economy is across sectors, from helping shape smart cities meeting demand of rapid urbanization in India, to the BFSI (Banking, Financial Services and Insurance) sector, to education sectors in form of E-Pathshala to digital governance. The transformation of the economy with the help of digital technology will be across the board resulting in overall inclusive growth and financial inclusion of the Indian economy.

?In these turbulent times, essences of real growth in a developing nation like India which is marching towards a USD 5 trillion economy needs to be holistic and more inclusive. The tech enabled digital growth will help reach the last mile effectively and result in a more holistic inclusive growth and will result in increase in overall GDP and per capita income of the people of the country. The implementation of 5G across the country in the next 12 months will create the base for the growth of the Indian economy in the next decade. India will lead the growth story of the world using a digital tech enabled platform and result in wealth creation across the board.

?_Dr. Farzan Ghadially.