The Digital India campaign has been quite the buzz for a while now. Thanks to demonetization last year, there has been a drastic upward trend in digitizing financial transactions and going cashless altogether.
Emerging digital technologies are redefining Finance. It is all about expanding services to customers and potential new revenue streams to providers. The demonetization drive may have been a painful few months, but the initiative has opened up avenues for growth in Digital Finance. Paytm’s claim-to-fame is proof that opportunities are surging in the Digital Finance domain.
We are certain that Digital Finance is a sunshine sector today. Here are three major factors that are driving the growth of a digital economy:
- A growing pool of digitally evolved consumers
India today is the second largest online market in the world, behind China, with over 348 million internet users. Last year, despite the large base of internet users, only 26% of our country’s population accessed the internet. The good news is that internet penetration is rapidly growing and we are forecasted to reach an internet user base of 555.3 million. The trend has been that Indians are turning to mobile internet. A report by Internet and Mobile Association of India stated that in 2015, about two-thirds of internet users accessed the internet through their mobile devices. The growth forecast of the internet user base proves the huge potential for trade & commerce.
- Equipped players
Many private players have started offering mobile payments, shopping, peer-to-peer and bill payment options – including banks, e-commerce businesses and individual online/mobile wallets. Some of the most popular players are Paytm, Airtel, FreeCharge and Mobikwik. Following the demonetisation drive, these companies partnered with retailers both big and small to enter the market due to the demand for digital cash.
- GOI & RBI promoting financial inclusion through digital payments and payment banks
In 2014, 11 companies were issued licences by the Reserve Bank of India to operate as payment banks. These payment banks are meant to aid the rural unbanked population with basic banking benefits via mobile phones. This is a first-of-its-kind public-private partnership designed to encourage consumers and small merchants/ shopkeepers to come together on a digital platform.
Adding to these are efforts of the Government of India to help consumers adapt to mobile banking and commerce in the coming years. Prime Minister Narendra Modi has been promoting digital payments for a cashless economy through Bharat Interface for Money (BHIM) app based on United Payments Interface (UPI).
Further to this, the McKinsey Global Institute report last year, estimated a boost in the GDP of all emerging economies, such as India, by as much as $3.7 trillion by 2025 due to Digital Finance.
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