India takes global pivot in financial inclusion

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By Prerana Meher

New Delhi, October 20: In recent years, the financial landscape of India has experienced a profound transformation, and this change has been largely driven by the forward-thinking policies and initiatives of the Narendra Modi-led government at the Centre. With a particular emphasis on the role of Digital Public Infrastructure (DPI), India has seen the rise of innovative fintech solutions that are making financial services faster, cheaper, more efficient, and accessible to millions of people.

FinTech, Financial technology companies, has made a significant impact on a global scale. These innovative startups and businesses have redefined the way financial services are delivered, and they’ve been doing so at an astonishing pace. Globally, the fintech sector generates approximately $245 billion in annual revenue, making up just 2 percent of the global financial services revenue.

However, experts predict that this sector is on a trajectory to reach an impressive $1.5 trillion in annual revenue by 2030. India’s fintech industry, too, is making remarkable strides. It is projected to generate around $200 billion in revenue by 2030, potentially contributing to about 13 percent of the global fintech industry’s total revenue. This projection speaks to the increasing significance of the Indian fintech sector on the global stage.

One of the key factors in India’s fintech success story has been the concept of the India Stack. The “India Stack” is a strategic approach that underpins India’s success in the fintech sector. It is essentially a layered system of digital public infrastructure designed to provide a solid foundation for various digital services, including financial services. This approach, together with the JAM trinity, i.e., Jan Dhan Yojana (universalization of bank accounts), Aadhaar (biometric identity system), and mobile connectivity has played a pivotal role in the digitization of financial services and the emergence of a vibrant fintech ecosystem.

According to the World Bank’s Global Findex Database for 2021, India has achieved significant progress in increasing the percentage of adults holding bank accounts, doubling from 35.23% in 2011 to 77.53% in 2021. This figure surpasses the global average of 69%. Additionally, data from the Reserve Bank of India reveals that before 2014, there were only 24.30 crore Basic Savings Bank Deposit Accounts.

However, after the implementation of the Pradhan Mantri Jan Dhan Yojana, in just nine years until August 2023, this number surged to 74.6 crore bank accounts, marking a remarkable growth of 207%. The Jan Dhan scheme, launched by the government in 2014 to universalize access to bank accounts, played a pivotal role in accomplishing this remarkable progress.

During the first year of its inception, the PMJDY scheme witnessed the opening of 17.90 crore accounts, and since then, there has been a consistent and substantial increase in the enrolment of accounts. The number of Jan Dhan accounts has more than tripled, growing from 14.72 crore in March 2015 to 50.63 crore as of August 2023.

The spread of mobile connectivity has also been a game-changer, with the number of internet users through mobile phones skyrocketing from 70 million in 2014 to a whopping 800 million in 2022. During this period, digital transactions in India saw exponential growth, from 1.2 billion in 2014 to approximately 91 billion in 2022. BHIM UPI has emerged as the preferred payment mode for citizens, with 803.6 crore digital payment transactions worth Rs 12.98 lakh crore recorded in January 2023.

The Unified Payments Interface (UPI) has played a pivotal role in the fintech revolution in India. UPI has not only made digital payments simple and accessible to all but has also sparked innovation in the fintech space. This innovation has led to the growth and development of other payment systems, including the Bharat Bill Payment System (BBPS), which has witnessed phenomenal growth, with over 10 billion transactions totalling Rs. 15 trillion in value in August 2023.

As the Indian economy continues to grow rapidly, so does the demand for financial services. The Modi government has laid the foundation for an inclusive, competitive, and robust financial landscape. These initiatives have not only created opportunities for Indian innovators but also for international entrepreneurs looking to collaborate in this dynamic market.

It is essential that technological advancements in fintech evolve in a responsible manner and are beneficial to the people at large. Fintech players and the government should ensure that these innovations are scalable and interoperable, all while maintaining responsible digital practices.

Fostering innovation through fintech, coupled with the nation’s robust digital public infrastructure, has positioned India as a global leader in the fintech revolution. The prospects of continued growth and innovation in the financial sector is a testament to transforming India’s financial landscape.