Digital Financial Inclusion next big challenge, says Economic Survey

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While the digitalisation of financial services has seen wide acceptance across the country and made it available on mobile phones, the next big challenge is Digital Financial Inclusion, says the Economic Survey.

According to the survey, DFI involves arranging cost-effective digital means to reach currently financially excluded and underserved citizens with a range of formal financial services suited to their needs.

The growth of such solutions has been facilitated by digital public infrastructure (DPI) set up by the government and includes platforms like unified payments interface (UPI), Aadhaar, e-KYC, Aadhaar-enabled Payment System, UPI, Bharat QR and Account Aggregator, among others.

The essential components of DFI include the availability of digital transactional platforms to enable customers to make or receive payments and devices to enable such transactions. The survey adds that the Covid pandemic has helped accelerate the shift towards digital payments among the public and the DPIs were ready to take the load on the consumer shift.

“While measures were afoot towards digitisation of financial services in India, the COVID-19 pandemic gave further momentum to the process when the most vulnerable and excluded citizens were severely affected. The government encouraged innovation and developed a well-stacked digital infrastructure and technology-led system. This has evolved into an inclusive, cost-efficient, and responsible DPI,” the survey adds.

The survey says that DFI has enabled millions of people in the formal and vast informal economy to accept payments, settle invoices, and transfer funds anywhere in the country using mobile phones.  The cheap data plans and smartphones also helped accelerate this journey.

Providing digital identity

The DPIs bring a comprehensive digital identity, payment, and data-management system under the India Stack platform, which consists of three interconnected layers that provide a digital identity to every Indian while facilitating easy, cost-free, mobile-first digital transactions.

This is expected to bring more Indians into the ambit of the digital credit ecosystem.

“Digital credit can be a powerful agent for sustainable and inclusive growth by empowering individuals and firms to cultivate economic opportunities,” the survey adds.

The report also quoted an International Monetary Fund (IMF) research, which says that an increase in digital financial inclusion in payments can lead to a 2.2 percent rise in average economic growth, likely driven through the consumption channel and higher formalisation.