By Rajeev Jhawar (firstname.lastname@example.org)
During the past five years, the Government of India has been working stalwartly towards achieving the vision of Digital India, that aims to transform India through the power of technology and bridge the digital divide. Other programs like Start-up India, Stand-up India and Skill India were designed to become a significant adjunct to this larger narrative.
The Reserve Bank of India (RBI) has been playing a catalytic role in permeation of FinTech into the economy, propelled by its Payment and Settlement System Vision – 2018. FinTech or digital innovations have emerged as a potentially transformative force in the financial markets. With the rapid adoption of digital payments across the country, aided by the introduction of innovative products in the payment space, RBI is focused on strengthening infrastructure and ensuring safety and security of digital transactions.
Further to accentuate digitization of payments and enhance financial inclusion through digitization,RBI has decided to constitute a high level committee, appointing Infosys co-founder and former Chairman of Unique Identification Authority of India(UIDAI), Nandan Nilekani as the Chairman of five-member committee, which inter alia shall:
- review the existing status of digitization of payments in the country, identify the current gaps in the ecosystem and suggest ways to bridge them;
- assess the current levels of digital payments in financial inclusion;
- undertake cross country analyses with a view to identify best practices that can be adopted in our country to accelerate digitization of the economy and financial inclusion through greater use of digital payments;
- Suggest measures to strengthen the safety and security of digital payments;
- provide a road map for increasing customer confidence and trust while accessing financial services through digital modes;
- suggest a medium-term strategy for deepening of digital payments;
Lastly, the committee shall submit its report within a period of 90 days from its first meeting.
The road to digitization of payments
As per RBI’s annual report 2017-2018, the payment and settlement systems recorded robust growth in 2017-18, with volume and value growing at 44.6 per cent and 11.9 per cent, respectively, on top of an increase of 56.0 per cent and 24.8 per cent, respectively, in 2016-17. The share of electronic transactions in the total volume of retail payments increased to 92.6 per cent in 2017-18, up from 88.9 per cent in the previous year with a corresponding reduction in the share of paper based clearing instruments from 11.1 per cent in 2016-17 to 7.4 per cent in 2017-18.
Multiple factors and official & behavioral trends are fueling this shift towards economy. Improved internet connectivity and high rate of permeation of smartphones in the Indian market has altogether shaped India’s payments landscape in favor of digital payment.
Furthermore, flagship government initiatives such as ‘Digital India’ would act as key catalysts for this change.