Ways second biggest economy by 2030. To accomplish

Ways Digital Economy benefits the
Indian Government

It’s
been more a year since the Indian government came up with demonetization to its
citizens. After some initial jitters, the nation has begun to adopt the
alternative ways and solutions i.e digital payments. While a large number of
people have been using the digital payment strategies even before
demonetization but the count has significantly increased in the recent months
after this structural reform.

This
technical innovation i.e digitization of payments across the nation–
independent of whether the transactions happen in urban or rural area – looks
encouraging. With new initiatives from the Indian Government for its citizens,
i.e adopting digital payments, the dream of the advanced digital economy in
India isn’t that far.

Coined
in 1995, digital economy is a term that merely refers to a nation’s economy
that depends on digital payment technologies. Digital economy totally changes
the way individuals have been doing business throughout recent years. With the
development of the internet in the previous 2-3 decades, digital economy has
been developing abundantly across various nations. The digital economy, apart
from making transactions and payments simpler, is also expected to make new
market development and growth opportunities and come up with new jobs. Some
economists and experts even foresee that the digital economy will turn into the
most noteworthy and significant business opportunity in the following years to
come.

India and digital economy

India
includes 15 per cent of the total world population, and with a growth rate of 7
to 8 for per cent, India can turn into the second biggest economy by 2030. To
accomplish this, the Indian Government considers the digital economy as the
essential growth enabler.

How will government benefit from
digital economy?

By
implementing digital payment strategies, as Digital Point of Sale (Digital
POS), Unified Payments Interface (UPI), portable wallets, Mobile Point of Sale
(mPOS), and so on, our nation is moving towards making a Digital economy that
will benefit the general population (Aam Admi) and the Indian Government in
different ways. Some of the significant advantages that government witnesses
from the digital economy are:

 

·       Removal of Black Economy

When
the transactions are made digitally, they can be effectively checked or
monitored. Any payment made by any client or customer to any merchant will be
recorded. Thusly, there will be no means or methods for unlawful transactions
to happen. By restricting the cash based transactions and using only digital
payments, the Indian Government can efficiently remove the black money.

 

·       Increase in Revenues

This
is one of the most obvious and common benefits of the digital economy. At the
time when the transactions are digitized, monitoring sales and taxes becomes
convenient. Since every transaction is recorded, the clients or the customers
will get a bill for their purchase, and the merchant are bound to pay the sales
tax to the government. This, in turn, increases the revenue of the Indian
Government – subsequently bringing about growth of the overall financial status
of the nation. 

 

·       Empowerment to People

One
of the biggest advantages of moving towards digital economy is that it gives a
strength or empowerment to the citizens. At the point when the payments move
digital, each and every individual is bound to have a bank account, a cell
phone, etc. This way, the government can easily transfer the subsidies directly
to Aadhaar-linked bank accounts of people. To put it in an easy manner, people
no longer have to wait to receive the subsidies and incentives that they are
bound to receive from the government. This feature is already in many urban
areas. One case of such would be the LPG subsidy that the government provides
for the Aam Admi. This subsidy payment is done through bank transfers nowadays.

 

·       Paves the way to e-governance

 The quicker, more secure, and more effective
other option or alternatives to conventional Government, e-governance will be
the ultimate outcome of the digital economy. From birth certificate to death
certificate, everything is accessible online – hence it is helpful for people
to get to the data they require. Digital economy will pave an approach to
e-governance, where delivery of all government services would be done
electronically.

 

·       Creation of new jobs

 The Digital economy has a great deal of
possibilities to improve and enhance potential job opportunities in new markets
and additionally expanding employment opportunities in some portion of the
existing occupations in the Government. Likewise, the unemployment rate in the
nation will undoubtedly decrease.

 

Whatever
the Government benefits by digital economy, directly have a positive impact on
each and every citizen’s life.

However,
the let-down here is that as indicated by the World Bank, “almost a billion
Indians are able to tap the benefits of a digital economy.” To move
towards a Digital India and accomplish a better growing economy, each and every
citizen must use digital payments even for their petty expenditures.

 

Following
a transition from a product to a customer-centric business model, traditional
banks are trying to reach out to the rural masses and penetrate the non-banking
segment. The success of non-banking companies due to latent credit demands and
increased consumption in the last few years has proved that there is value for
financial services companies in investing in the rural population. Fintech
companies are now enabling the mass adoption of technology by collaborating
with various traditional banking and non-banking players and ensuring that
services reach the rural strata quickly and efficiently.

Fintech
has evolved from start-ups that want to take on and compete with incumbents to
a broader ecosystem of different businesses that are, in many cases, looking
for partnerships. Fintech start-ups don’t just need capital, they need new
approaches to drive change and deliver innovation.

Fintech
and financial services are competing less and coming together:

·       Financial
Institutions are embracing the disruptive nature of Fintech. 77% of Financial Institutions
will increase internal efforts to innovate.

·       Financial
Institutions are to partner and integrate. 82% to increase Fintech partnerships
in the next five years.

Initiatives
by the Government of India like “Broadband for All”, which aims to cover 2,50,000
villages through the National Optical Fibre Network (NOFN) and the
ever-expanding 4G and 3G networks of Indian telecom companies will ensure
Internet connectivity even in remote areas, which is a critical necessity for
the use of digital and technology solutions. Earlier the higher investment
required in technology was a barrier towards its adoption in financial
services. However, with the pay-per-use and cloud models, capital- intensive
technology is within the reach of varied sizes. Sales force transformation and
the use of analytics and technological integrations with other partners can
have a considerable impact on the top line banking players.

 

In
2017, India became the second fastest nation to adopt Fintech technology in the
World as per the Ernst & Young Fintech Adoption Index – just next by China.
China’s astounding development over the most recent couple of decades has
generally been driven by its massive disbursal of credit all through the
economy, and its insight to adopt and deploy new innovation to enhance
frameworks. Fintech organizations are helping MSMEs to expand, develop, and go
digital- a procedure that, as per a KPMG-Google report, would drive 5 times
greater business, increment MSME commitment to the GDP by 10 percentage
points  by 2022, and help India establish
the framework for a sustained of financial development and success. This Budget
comes at a vital time for the Indian economy and its Fintech industry, the
vanguard of digitization and innovation driven proficiency – the expectations
listed above, and to what degree they are acknowledged, would decide the course
of the nation’s success for years to come.

 

Some Fintech Trends will be Game
Changers in 2018

The
Indian fintech scene accompanies an additional; new incentives by the Indian
Government to support fintech companies and promote a cashless society have
opened up a number of opportunities for fintech organizations where first-mover
advantages are tremendous. Because of the Government’s initiatives, there has
been a sharp increment in consumer adoption of fintech.

In these
times of uncertainty, only one thing is certain – change. Below are some of the
fintech trends that could become major game changers in 2018.

 

Next-gen
chatbots – 2017 saw a several noteworthy banks in
India, for example, HDFC, ICICI, and YES Bank, among others, embracing
chatbots for supporting client collaborations and for customer
interactions. As of now, these chatbots are said to have the intelligence of
a 2-3-year old. In any case, as machines don’t experience the ill effects
of physical or learning fatigue,
the development of a chatbot could be best portrayed as more exponential
than linear. In this way, in 2018, we could expect that more chatbots will
be sent with enhanced quality of interaction, speed of response and accuracy
in decision-making.

2.    
Machine
Learning – Banks in 2018 will begin adopting new regression models fuelled by
machine learning to come up better ways to convey best offerings. The brightest
data researchers will be associated with this delivery and they will be helped
by insights into customer behaviour, expectations and responses.  These experiences will be picked up by
adopting big data tools and will empower banks to foresee customer needs and
meet them in a customised way.

3.    
Blockchain – As
NITI Aayog is making ‘IndiaChain’, India’s biggest blockchain network, to
lessen fraud, accelerate contract enforcement, and enhance transparency,
obviously blockchain is no more the elephant in the room that nobody will
address. Several potential players have just started pilot ventures to measure
the feasibility of adopting blockchain into their ecosystem. As blockchain is
virtually unhackable because of time stamps that check an data entry in a
distributed ledger, banks will investigate options to use the power of
blockchain to transform backend operations.

Smart
workflows – With the assistance of embedded AI helping
the backend operations of banks, they will have the capacity to rapidly
recognize bottlenecks in their operation work processes and bring in
significant improvements in process efficiencies.Automated
personalisation – Banks will use the power of fintech to
customize the offerings that clients and users see on all of their
gadgets. Banks will change the appearance of apps based on actual usage.
This will influence clients and users to feel more associated with banks
and it will likewise set the phase for efficient self-service. There will
likewise advancements in providing be pre-filled information on the basis
of their past interaction history, preferences and banking habits.Open
banking- With the initiatives, for example, Unified
Payments Interface (UPI) and Aadhaar Enabled Payment System (AEPS),
banking will turn out to be more ‘open’ in 2018. With more APIs exposed by
banks, the way carrying out payments and other banking transactions would
be incredibly quickened as well as simplified.Physical
and digital merger –Fintech has made it feasible for banks to
reach customers who are data rich however credit poor. In a nation like
India, where such huge numbers of individuals still don’t approach banking
facilities, fintech works better by offering a ‘phygital’ (a mix of
physical and digital) involvement. The goal here is effective self-service
that empowers clients to walk into a branch and make use of basic
automated services. Canara Bank has effectively executed such a framework
with CANDI, and more banks will take action accordingly in 2018 to remove
the boundaries between physical and digital banking.Extended
digital coverage– Until now, most digital banking solutions
have been fundamentally focused at retail customers. In 2018, banks will
extend digital coverage to different zones, for example, corporate banking
and SME banking and furthermore change internal operations to derive the
best out of digital transformation initiatives.Agile
architecture –Digital solution are digging in to stay and
as courses of events contract, budgets tighten, and lifecycles shorten,
banks will follow new architecture paradigms such as micro apps, micro
services and more. These will empower banks to introduce changes
altogether faster with insignificant effect on existing service and deployments.Security–Data
is the new oil and with so much information being produced each second,
hackers are continually devising approaches to acquire it. As most digital
safety or cyber safety efforts up till now have been reactive rather than
being  preventive in nature, banks
will now start to adopt extra measures to ensure data security at all
stages using a combination of encryption, OTPs, biometric validation and
many more

As the
Indian fintech space develops to reach an expected $2.4 billion by 2020, 2018
will be a vital year in that journey. Clients and customers are progressively
open to keeping banking innovations and advancements driven by technology and
innovation, government regulations are driving the charge, and private players
are making major investments. This leads to prominent and greater financial
inclusion as everybody gets access to advanced banking services and an
extensive variety of financial offerings. These trends are sure to play a key
role in this transition.

 

Budget 2018: Unlocking India’s potential in the fintech industry

 

2017
has been a fantastic year for the Fintech business in India, impelled on by the
positive policy environment, the expanding penetration and development of new
technology. The Fintech business has helped make digital payments an everyday
activity in India, building up the most developed  digital payments framework among nations
including the UK, China, and Japan, as indicated by a report by FIS, the
US-based banking technology provider. The accessibility, availability, and
instantaneous of payments has helped the value of transactions utilizing
digital wallets increased by 64% from December 2016 to December 2017. These
Fintech organizations have additionally expanded the supply of credit to the
MSME division, which is frequently monetarily excluded. Generally, the Fintech
space has driven the Indian economy to a way of an all the promising change
into being inclusive and information driven while rapidly driving growth.

 

While
progress has been made, there is still much ground to be look after and covered
– India should raise the stakes and aggressively elevate these patterns to
understand its monetary potential in greater measure, and a positive Budget
2018-19 would be the best vehicle to accomplish that objective. Here are a
portion of the desires of the Indian Fintech area from the Finance Ministry for
Budget 2018-19:

 

·       Push towards a digital first economy

While
digital payments are presently projected to supersede cash by 2022 as per industry
reports, this wonderful force that has been made in the digital payments
ecosystem, but it will require more strategy support to be maintained. The
Indian Government has made essential supply-side framework – UPI, India Stack,
eKYC, and Aadhar – yet it must address demand side concerns and keep a
continuous effort incentives for digital payments their providers to help the
ecosystem gain greater adoption and synergy.

 

 

·       The proceeded with progress of GST –
simplification and information sharing

GST
is an incredible forward jump towards a landmark tax reform, yet it will
require consistent evolution to help augment its useful effect upon the
country’s economy. The administration has demonstrated some cheerful readiness
in tending to concerns and mitigating questions, however the Budget speaks to
an awesome chance to bring genuinely necessary clearness in its execution.
Further, GST has made an up to this point incomprehensible database of expense
paying organizations, speaking to a fortune trove of information that can be an
enormous advantage in deciding the financial soundness of candidates. Making
the GST information available through a secured API to Fintech players that
lend to the various sectors credit departments and legacy BFSI players would help
make a more consistent credit process for endless MSMEs in the nation.

 

 

·       MSME outreach – CGS and Mudra

As
indicated by the NSSO survey, just 4% of the 5.77 crore small venture units
reviewed at the time approached institutional finance. The Indian Government,
recognizing this as an area of concern, they came up with the Micro Units
Development and Refinance Agency (MUDRA) Bank to give truly necessary credit to
these small business units. Mudra Bank looked to refinance and supply with
credit conveyance to India’s MSMEs, confronting an INR 32 billion deficit in
required back, as indicated by the International Finance Corporation.
Lamentably, this plan doesn’t have any significant bearing to the many
expanding Fintech players in the Indian market, hoping to supply credit and
digitize India’s MSME area.