India is on the cusp of a great digital revolution, and the government is leading from the front promoting ‘Digital India’, an initiative to provide digital infrastructure to all citizens and transform the country into a digitally-empowered knowledge economy. It also focuses on promoting e-governance and services on demand to be consumed by decision-makers across fields, for generating greater economic value. With the recent reforms by the current government, the digitisation process is expected to have a transformative impact on digital financial transactions which will help channelize thus far untapped economy into the mainstream financial and banking system.
Digitisation is also expected to boost investments and lower cost of credit allowing industry and businesses to flourish. However, considering the complexity associated with the implementation across the country, the entire digitisation will happen over a period of time and may undergo a series of ups-down before it yields the desired results.
The government expects to weed out corruption and black money, and clean the opaque and lethargic systems at various government-people interface through the digitisation process; this would result in higher economic growth and tax revenues.
Digitisation would enhance the formal process in the economy, where money trail would ensure that people pay taxes on money they have earned. This would help to transfer resources from tax evaders to the government; while income can be used for welfare programmes.
Digitisation is seen as next significant step to be pursued by the government after demonetisation. The centre firmly believes that demonetisation, Goods and Services Tax (GST), along with Jan Dhan Yojana, Aadhar, Mobile numbers (JAM) vision, which are integrated with the ‘Digital India’ initiative will have an epoch making impact on the economy and lives of people.
Transforming India Digitally
The shift to digital payments has been a great revolution. Technology firms and start-ups have come a long way in the shortest time possible to offer best of e-wallet services to customers for making online payments. Mobile wallets were the single largest beneficiary of demonetisation, following Prime Minister Narendra Modi’s announcement on 8th November 2016 that sucked out 86% of the country’s currency in circulation. In the meantime, common man on the street has embraced this fresh digital way of life with much ease and comfort.
Commenting on demonetisation, Nandan Nilekani, former UIDAI Chairman, and ex-CEO of Infosys said, “Demonetisation is going to witness massive activation of digitisation of financial services in the country. The more important thing is when the economy becomes formal, when everybody's financial transactions are digitised, India is going to go from data poor to data rich, and that will make it more and more difficult for people to do dishonest things or to be outside the system. You will reduce the amount of black money in the system.”
Fintech startups, primarily wallets and payment gateways, have seen an enormous business surge, following, the announcement of demonetisation. Sequoia-backed MobiKwik, has seen a 20-fold increase in peer-to-peer transfers, and 200 percent surge in app downloads.
Market leader Paytm, backed by Alibaba had added over 14 million users in November, and is currently processing 5 million transactions a day. Payment gateway PayU, which acquired Citrus Pay, saw daily transaction volume skyrocket 80 percent. Tiger Global-backed Razorpay has witnessed volume surge up to 50-70 percent over pre-demonetisation levels, after seeing an initial spike of 150 percent.
Vijay Shekhar Sharma, Chief Executive Officer, PayTM addressing the media on digital payment said, "I do not believe, that we need to go back to the old cash-based economy. People are not choosing (digital payment) out of fear, digital is a sign of progress, and not of obligation."
Jitendra Gupta, Managing Director, PayU India speaking to media on digitisation said, “We are mostly prevalent in cities like Jaipur and Chandigarh, our call centres are flooded with queries from merchants who wish to accept digital payments. The number of transactions per day has grown more than six-fold since demonetisation.”
However, there’s has been serious security concerns with digitisation. India has the second largest number of smart-phone users in the world, while improving internet services continues to boost growth of smart-phone users. This has prompted sectors like banking and financials to rapidly migrate their services to internet and mobile platforms, without comprehending the threats associated with them. Banking customers have become frequent victims of internet-based frauds, phishing, vishing and other malware attacks.
The centre is pushing hard towards ensuring cyber security for the cashless economy, realising the need for greater awareness of web security in India, which can provide safe and secure experience to internet users. The key to cyber security lies in creating proper structured cyber security policies, along with citizen awareness programmes.
Sanctifying Financial Transactions
The government has launched a revolutionary digital initiative, BHIM (Bharat Interface for Money) app to unleash the power of mobile phones for digital payments and financial inclusion. The mobile app is based on the Unified Payment Interface (UPI), meanwhile over 125 lakh people have adopted the BHIM app so far. BHIM allow users to send or receive money to other UPI payment addresses, or scanning QR code, or account number with IFSC code, or MMID Code.
Aadhar Pay, a merchant version of Aadhar Enabled Payment System is expected to be launched shortly. This initiative will explicitly benefit those who do not have debit cards, or mobile wallets, or mobile phones. As part of the digitisation programme, the government has set an ambitious target of 2,500 crores digital transactions for 2017-18, through UPI, USSD, Aadhar Pay, IMPS and debit cards. Increased amount of digital transactions will enable small and micro enterprises to access formal credit and expand their business.
The digital revolution is anticipated to cover rural India also; the ‘DigiGaon’ initiative is expected to be launched shortly, for providing telemedicine, education and skills through the digital medium. The government is also planning to provide high-speed broadband connectivity through optical fibre network in more than 1.5 lakh Gram Panchayats (according to the Union Budget 2017), with Wi-Fi hot spots and access to digital services at affordable tariffs by end of 2017-18.
The government has taken various measures to encourage electronic payments at numerous places, currently, over 365 toll plazas across national highways have been equipped with Point of Sale (PoS) machines, while e-wallets, such as Paytm, MobiKwik and Freecharge have been introduced for making toll payments. Initiatives such as Wi-Fi at railway stations, bus stations, community centres, etc. can go a long way in ensuring millions of Indians being added to the mainstream economy.
Empowering India Digitally
Digital India programme is being implemented to transform the country into a digitally empowered knowledge economy, making citizen services available by increasing internet connectivity and improving online infrastructure. The vision of Digital India programme is inclusive growth in areas of electronic services, manufacturing and products, and creating job opportunities. The programme is focused on three important areas – provide digital infrastructure as a utility, governance & services on demand, and digital empowerment of citizens. Some of the amenities which will be delivered through this initiative are digital locker, e-education, e-health, e-sign and national scholarship portal.
The government aims to achieve growth on multiple fronts with Digital India, few of the pillars of the programme that are being identified are - universal access to internet, public internet access platform, e-governance – reforming government through technology, e-kranti - electronic delivery of services, information for all citizens, electronics manufacturing, and information technology for employment.
The government has formulated a national e-governance plan (NeGP). Centre and State both have taken initiatives to ensure that government services are available to citizens electronically, such as school certificates, voter Id, ration card, online payment gateways; while government databases and government schemes are also easily available to information seekers. The e-governance initiative has steadily evolved from computerisation of government departments that encapsulate finer points of governance, such as citizen-centricity, service orientation and transparency.
To enhance the scope and quality of e-governance in the country by bringing in transformational process re-engineering, focusing on integrated services, interoperable systems, and making the best use of the emerging technologies, eKranti or NeGP 2.0 with a focus on electronic delivery of services has been conceptualised. e-Kranti is an essential pillar of the Digital India initiative, the programme aims to ensure a government-wide transformation by delivering all services electronically to citizens through integrated and interoperable systems via multiple modes while ensuring efficiency, transparency and reliability of such services at affordable costs.
Integration of services and platforms such as Aadhaar platform of Unique Identity Authority of India (UIDAI), payment gateway, mobile seva platform, sharing of data through open Application Programming Interfaces (API), and middleware such as National and State Service Delivery Gateways (NSDG/SSDG) can be facilitated for integrated and interoperable service delivery to citizens and businesses.
Building Smart Infrastructure
The concept of smart cities that’s focused on improving lifestyle through efficient management of resources without any wastage, has been conceptualised on digitisation, which is crucial for this massive transformation. The concept can provide a smart solution to monitor a wide range of issues related to city living and amenities, connecting every citizen. The technology platform can connect various stakeholders, such as various authorities, public bodies, private entities and other players. The programme will act as the backbone of information sharing and connectivity in smart cities, and will facilitate, people’s participation in governance and administrative programmes, inducing growth and social capital.
Technology can be leveraged as a one stop solution in smart cities for addressing the lacunae in the distribution of public services; mobile apps and web-enabled services can be used for real time updates about timings and schedules of bus and other transport services. Digitisation will enable real time evaluation of public life in these cities, which will increase safety and security and reduce crime. Devices such as camera, smart meters and mobile applications and cloud services will provide comprehensive solutions to solve the issues of urbanisation.
Power utility companies have launched mobile applications for bill notification, presentment and payment, as well as for outage management, while opportunity for digitisation is present across the industry value chain, from power generation to customer relationship management. As utility companies are pursuing digitisation, the impact has been positively felt by customers.
In the construction industry, digitisation can help companies improve their productivity and efficiency. Initiatives such as electronic tendering, digital procurement, can save time and money for construction companies. Digitisation can play an important role in accelerating and speeding infrastructure projects, including the stalled ones.
Digitisation has brought a new dimension to the local economy, from new jobs, to more innovation and a booming start-up community. The opportunity in India has never been better; it holds immense potential to create a significant value for India and its citizens. Digitisation of the government outposts across the country will not only bridge the rural-urban divide, but also ensure efficient delivery of government services, subsidies and benefits. Besides, it will transform our industries and change the way we work and how governments serve its citizens.
Making Tomorrow’s Future
According to a study by Google (Alphabet Inc.) and Boston Consulting Group, India is headed for an exponential increase in digital payments over next few years; the digital payment industry will grow by 10 times to touch $500 billion by 2020, and contribute 15% of Gross Domestic Product (GDP), the report predicted. Increasing penetration of smart-phones, the entry of several non-banking institutions offering payment services, consumer readiness to adopt digital payments, progressive changes in the regulatory framework will power the digital trend, the report added.
The proliferation of smart phones, which are growing around 25 million every three months, and set to reach over 700 million users by 2020 and 330 million internet users, means a huge capacity for enterprises to connect with users, and for generation of data. With the introduction of tablets and smart-phones with iris identification ability, secure transactions are bound to grow multi-fold.
According to a PwC report, digitisation in the industrial sector is set to grow to 65% in the next five years, as it is a priority for most CEOs in the industry, while more than a quarter of the Indian companies in the survey have rated their level of digitisation high.
India is leapfrogging in digital technology, while the payments ecosystem is gearing up to increase transactional efficiency. Disbursal of government benefits into bank accounts of poor and deprived is one of the first steps, universal acceptance of digital payments is crucial to ensure that these funds are also used digitally. Adequate incentives should be given to common people, so that they feel encouraged about digital payments. Transaction fees need to be minimised, especially on low-ticket transactions. Tax rebates should also be given to merchants doing a significant share of their sales through digital method. All these determined attempts for digitisation will definitely help in changing India’s socio-economic landscape.
The government hopes to achieve growth on multiple fronts with Digital India programme, through targeting ‘nine pillars of Digital India’ which have been categorized under broadband highway, universal access to internet, public internet access programme, e-governance, e-kranti, information for all, electronics manufacturing, technology for jobs, and early harvest programmes. However, these are early days, but one can remain rest assured that it’s a great beginning with India leapfrogging in digital technology into next higher orbit.