Ways Digital Economybenefits the Indian GovernmentIt’sbeen more a year since the Indian government came up with demonetization to itscitizens. After some initial jitters, the nation has begun to adopt thealternative ways and solutions i.e digital payments. While a large number ofpeople have been using the digital payment strategies even beforedemonetization but the count has significantly increased in the recent monthsafter this structural reform. Thistechnical innovation i.e digitization of payments across the nation–independent of whether the transactions happen in urban or rural area – looksencouraging.
With new initiatives from the Indian Government for its citizens,i.e adopting digital payments, the dream of the advanced digital economy inIndia isn’t that far.Coinedin 1995, digital economy is a term that merely refers to a nation’s economythat depends on digital payment technologies. Digital economy totally changesthe way individuals have been doing business throughout recent years.
With thedevelopment of the internet in the previous 2-3 decades, digital economy hasbeen developing abundantly across various nations. The digital economy, apartfrom making transactions and payments simpler, is also expected to make newmarket development and growth opportunities and come up with new jobs. Someeconomists and experts even foresee that the digital economy will turn into themost noteworthy and significant business opportunity in the following years tocome. India and digital economyIndiaincludes 15 per cent of the total world population, and with a growth rate of 7to 8 for per cent, India can turn into the second biggest economy by 2030. Toaccomplish this, the Indian Government considers the digital economy as theessential growth enabler.How will governmentbenefit from digital economy?Byimplementing digital payment strategies, as Digital Point of Sale (DigitalPOS), Unified Payments Interface (UPI), portable wallets, Mobile Point of Sale(mPOS), and so on, our nation is moving towards making a Digital economy thatwill benefit the general population (Aam Admi) and the Indian Government indifferent ways. Some of the significant advantages that government witnessesfrom the digital economy are: · Removalof Black EconomyWhenthe transactions are made digitally, they can be effectively checked ormonitored. Any payment made by any client or customer to any merchant will berecorded.
Thusly, there will be no means or methods for unlawful transactionsto happen. By restricting the cash based transactions and using only digitalpayments, the Indian Government can efficiently remove the black money. · Increasein RevenuesThisis one of the most obvious and common benefits of the digital economy. At thetime when the transactions are digitized, monitoring sales and taxes becomesconvenient. Since every transaction is recorded, the clients or the customerswill get a bill for their purchase, and the merchant are bound to pay the salestax to the government.
This, in turn, increases the revenue of the IndianGovernment – subsequently bringing about growth of the overall financial statusof the nation. · Empowermentto PeopleOneof the biggest advantages of moving towards digital economy is that it gives astrength or empowerment to the citizens. At the point when the payments movedigital, each and every individual is bound to have a bank account, a cellphone, etc. This way, the government can easily transfer the subsidies directlyto Aadhaar-linked bank accounts of people.
To put it in an easy manner, peopleno longer have to wait to receive the subsidies and incentives that they arebound to receive from the government. This feature is already in many urbanareas. One case of such would be the LPG subsidy that the government providesfor the Aam Admi. This subsidy payment is done through bank transfers nowadays. · Pavesthe way to e-governance The quicker, more secure, and more effectiveother option or alternatives to conventional Government, e-governance will bethe ultimate outcome of the digital economy.
From birth certificate to deathcertificate, everything is accessible online – hence it is helpful for peopleto get to the data they require. Digital economy will pave an approach toe-governance, where delivery of all government services would be doneelectronically. · Creationof new jobs The Digital economy has a great deal ofpossibilities to improve and enhance potential job opportunities in new marketsand additionally expanding employment opportunities in some portion of theexisting occupations in the Government. Likewise, the unemployment rate in thenation will undoubtedly decrease. Whateverthe Government benefits by digital economy, directly have a positive impact oneach and every citizen’s life.However,the let-down here is that as indicated by the World Bank, “almost a billionIndians are able to tap the benefits of a digital economy.” To movetowards a Digital India and accomplish a better growing economy, each and everycitizen must use digital payments even for their petty expenditures.
Followinga transition from a product to a customer-centric business model, traditionalbanks are trying to reach out to the rural masses and penetrate the non-bankingsegment. The success of non-banking companies due to latent credit demands andincreased consumption in the last few years has proved that there is value forfinancial services companies in investing in the rural population. Fintechcompanies are now enabling the mass adoption of technology by collaboratingwith various traditional banking and non-banking players and ensuring thatservices reach the rural strata quickly and efficiently. Fintechhas evolved from start-ups that want to take on and compete with incumbents toa broader ecosystem of different businesses that are, in many cases, lookingfor partnerships. Fintech start-ups don’t just need capital, they need newapproaches to drive change and deliver innovation.Fintechand financial services are competing less and coming together:· Financial Institutionsare embracing the disruptive nature of Fintech. 77% of Financial Institutionswill increase internal efforts to innovate.· Financial Institutionsare to partner and integrate.
82% to increase Fintech partnerships in the nextfive years.Initiativesby the Government of India like “Broadband for All”, which aims to cover 2,50,000villages through the National Optical Fibre Network (NOFN) and theever-expanding 4G and 3G networks of Indian telecom companies will ensureInternet connectivity even in remote areas, which is a critical necessity forthe use of digital and technology solutions. Earlier the higher investmentrequired in technology was a barrier towards its adoption in financialservices. However, with the pay-per-use and cloud models, capital- intensivetechnology is within the reach of varied sizes. Sales force transformation andthe use of analytics and technological integrations with other partners canhave a considerable impact on the top line banking players. In2017, India became the second fastest nation to adopt Fintech technology in theWorld as per the Ernst & Young Fintech Adoption Index – just next by China.China’s astounding development over the most recent couple of decades hasgenerally been driven by its massive disbursal of credit all through theeconomy, and its insight to adopt and deploy new innovation to enhanceframeworks.
Fintech organizations are helping MSMEs to expand, develop, and godigital- a procedure that, as per a KPMG-Google report, would drive 5 timesgreater business, increment MSME commitment to the GDP by 10 percentagepoints by 2022, and help India establishthe framework for a sustained of financial development and success. This Budgetcomes at a vital time for the Indian economy and its Fintech industry, thevanguard of digitization and innovation driven proficiency – the expectationslisted above, and to what degree they are acknowledged, would decide the courseof the nation’s success for years to come. Some Fintech Trends willbe Game Changers in 2018TheIndian fintech scene accompanies an additional; new incentives by the IndianGovernment to support fintech companies and promote a cashless society haveopened up a number of opportunities for fintech organizations where first-moveradvantages are tremendous.
Because of the Government’s initiatives, there hasbeen a sharp increment in consumer adoption of fintech. In thesetimes of uncertainty, only one thing is certain – change. Below are some of thefintech 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. MachineLearning – Banks in 2018 will begin adopting new regressionmodels fuelled by machine learning to come up better ways to convey bestofferings. The brightest data researchers will be associated with this deliveryand they will be helped by insights into customer behaviour, expectations andresponses. These experiences will bepicked up by adopting big data tools and will empower banks to foresee customerneeds and meet them in a customised way.3.
Blockchain – AsNITI Aayog is making ‘IndiaChain’, India’s biggest blockchain network, tolessen fraud, accelerate contract enforcement, and enhance transparency,obviously blockchain is no more the elephant in the room that nobody willaddress. Several potential players have just started pilot ventures to measurethe feasibility of adopting blockchain into their ecosystem. As blockchain isvirtually unhackable because of time stamps that check an data entry in adistributed ledger, banks will investigate options to use the power ofblockchain 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 moreAs theIndian fintech space develops to reach an expected $2.
4 billion by 2020, 2018will be a vital year in that journey. Clients and customers are progressivelyopen to keeping banking innovations and advancements driven by technology andinnovation, government regulations are driving the charge, and private playersare making major investments. This leads to prominent and greater financialinclusion as everybody gets access to advanced banking services and anextensive variety of financial offerings. These trends are sure to play a keyrole in this transition. Budget 2018: Unlocking India’s potential in thefintech industry 2017has been a fantastic year for the Fintech business in India, impelled on by thepositive policy environment, the expanding penetration and development of newtechnology. The Fintech business has helped make digital payments an everydayactivity in India, building up the most developed digital payments framework among nationsincluding the UK, China, and Japan, as indicated by a report by FIS, theUS-based banking technology provider. The accessibility, availability, andinstantaneous of payments has helped the value of transactions utilizingdigital wallets increased by 64% from December 2016 to December 2017.
TheseFintech organizations have additionally expanded the supply of credit to theMSME division, which is frequently monetarily excluded. Generally, the Fintechspace has driven the Indian economy to a way of an all the promising changeinto being inclusive and information driven while rapidly driving growth. Whileprogress has been made, there is still much ground to be look after and covered- India should raise the stakes and aggressively elevate these patterns tounderstand its monetary potential in greater measure, and a positive Budget2018-19 would be the best vehicle to accomplish that objective. Here are aportion of the desires of the Indian Fintech area from the Finance Ministry forBudget 2018-19: · Pushtowards a digital first economy Whiledigital payments are presently projected to supersede cash by 2022 as per industryreports, this wonderful force that has been made in the digital paymentsecosystem, but it will require more strategy support to be maintained. TheIndian Government has made essential supply-side framework – UPI, India Stack,eKYC, and Aadhar – yet it must address demand side concerns and keep acontinuous effort incentives for digital payments their providers to help theecosystem gain greater adoption and synergy. · Theproceeded with progress of GST – simplification and information sharing GSTis an incredible forward jump towards a landmark tax reform, yet it willrequire consistent evolution to help augment its useful effect upon thecountry’s economy. The administration has demonstrated some cheerful readinessin tending to concerns and mitigating questions, however the Budget speaks toan awesome chance to bring genuinely necessary clearness in its execution.
Further, GST has made an up to this point incomprehensible database of expensepaying organizations, speaking to a fortune trove of information that can be anenormous advantage in deciding the financial soundness of candidates. Makingthe GST information available through a secured API to Fintech players thatlend to the various sectors credit departments and legacy BFSI players would helpmake a more consistent credit process for endless MSMEs in the nation. · MSMEoutreach – CGS and Mudra Asindicated by the NSSO survey, just 4% of the 5.
77 crore small venture unitsreviewed at the time approached institutional finance. The Indian Government,recognizing this as an area of concern, they came up with the Micro UnitsDevelopment and Refinance Agency (MUDRA) Bank to give truly necessary credit tothese small business units. Mudra Bank looked to refinance and supply withcredit conveyance to India’s MSMEs, confronting an INR 32 billion deficit inrequired back, as indicated by the International Finance Corporation.
Lamentably, this plan doesn’t have any significant bearing to the manyexpanding Fintech players in the Indian market, hoping to supply credit anddigitize India’s MSME area.