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24 OCT,2022 | MEDC
Digital banking in India is off to a promising start. The Prime Minister has dedicated 75 digital banking units (DBUs) across the country via video conference. With this initiative, India is being ushered into an era of an accelerated digital banking template. This is going to have a positive spillover effect, uplifting other parts of the financial ecosystem, thus eventually helping to enhance our socioeconomic competitiveness. The PM has said that DBUs would provide maximum services through minimum digital infrastructure – which is the need of the hour. DBUs will act as a powerful enabler in our financial ecosystem and enhance the ease of doing business by facilitating seamless banking transactions. It is also heartening to note that commercial banks (both public and private sector), have responded positively to this initiative.
Technology has the potential to reach India's unbanked population and ensure rapid productivity growth. The benefits of the digital age are – unfortunately – not being shared equally, and this is a unique occasion to (at least partially) rectify that anomaly. Hundreds of millions of Indians are still on the wrong side of a persistent digital divide, and they need to have a greater say in how the financial system of this country needs to be run. That will help them transfer money, run a business, and connect with their community more effectively, thus benefiting economic activity in the country as a whole.
Being outside the financial system has multiple drawbacks, including reduced ability to get access to loans, insurance or life assurance. But digitalization of the banking system alone will not solve these issues. The one common thing that all lasting technological innovations have is a consistently superior user experience. It is essential to get regular feedback from the users that the innovation is meant for, and attempt to sincerely incorporate their suggestions into the newer versions of the technology. One of the key barriers to a widespread adoption of financial technologies is that they are usually not designed with the needs and constraints of low-income people in mind, as little is known by financial institutions about the psychology of this group. That needs to change.
The digital surge will reshape the world of finance. Thanks to the pandemic, more people than ever before are banking and making payments online. What we are witnessing today is just the beginning of the digital banking revolution. But digitalization – in India, at least – does not spell the death of the traditional banking system. Rightly or wrongly, brick-and-mortar banks are now well entrenched throughout the country, albeit to different degrees in different places. Regulators will not let them perish. Thus, the new and the old will coexist in India's banking system, with the precise features of the hybrid system varying from location to location.
Banking … which forms the core of retail finance … has not been immune to change, particularly that brought about by Covid. Digital banking, which is a potent force for financial inclusion, will bring together millions more into the economic mainstream in the coming months. Given the convenience that many of these systems offer, changes in public behavior and acceptance seem likely to stick. Both banks and FinTechs are racing to integrate the digital services they offer the public. That can only be good news.
*Picture Credit: Google
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