As reported by ‘SBI research’, India has leapfrogged in digital payment post the demonetization move. Further, NITI Aayog mentioned that the digital payment rose by 55% in 2016-17 against a 28% growth in the five year period ending 2016. There has been no slump noticed in the digital payments and is only expected to increase in the coming years.
The future of digital payments is very bright through mobile wallets and United Payment Interface (UPI). As India moves from cash based society to a cashless society, digital applications such as mobile wallets and UPI have become indispensable. The initiatives by the Government around Jan Dhan accounts and benefits of cash transfer allowed the un banked sector to be banked. With these initiatives, there was a significant rise in the number of new accounts opened. A large mass of the society was far away from the organized sector of banking. This has been a major reason behind the success of Jan Dhan, with individuals opening new accounts and being a part of the organized sector. The number of accounts that have been opened has surpassed expectations and on the last count, the Jan Dhan Yojana accounts had topped Rs.64, 000 crore.
This has a huge implication not only for banking and financial industry but also across industries supporting this segment such as technology, IT and telecom. There are two major impacts on the banking industry. One is the increased coverage or geographical reach which allowed the Banks to serve the millions of accounts, some of them with a zero balance. Second, the semi urban and rural communities still rely on cash which puts an increased pressure for ATMs to be provisioned. These two factors increase the cost and margin pressure on the banks which has an impact on the profitable urban operations.
The achievement of this has been possible due to the telecom and technology industry. Both the industries have served customers across the length and breadth of the country. India accounts for 100% telecom penetration which has also helped individuals achieve prosperity. The telecom and technology industry has made digital payments possible. It has enabled mobile wallets for the purchase of goods and payment of bills, and UPI has allowed the safe and secure transfers between two individuals who have access to a phone.
Further, micro ATM’s have provided an ideal option to deploying full scale ATM’s. All these factors have made universal banking possible in addition to the cost reduction and margin pressures on the banks. The entire process has been made easy by telecommunications. It has allowed for seamless connectivity and inter-operability between banks, clearing houses as well as financial institutions. It has also allowed for the implementation of all the apps that enable digital payments and banking. Initiatives by the government around ‘Bharatnet’, smart cities and enabling WiFi across villages will work as a catalyst in empowering the Indian citizens to transact digitally. The Indian digital revolution is powered by technology which is a disruptive force.