The digital financial inclusion revolution is here

At the beginning of the millennium hundreds of millions of Indians had absolutely no access to the Indian financial system. They had no bank accounts and no means to get legitimate credit. Many resorted to local moneylenders and paid exorbitant interest rates, sometimes becoming bonded labourers for life to repay those debts.

In 2014 the Pradhan Mantri Jan Dhan Yojana was launched and was a spectacular success. Today more than 430 million Indians avail this facility, finally coming into the banking system. It made it to the Guinness Book of World Records for the most bank accounts opened in a week as part of an inclusion programme. Rural Indians started getting seamless Direct Bank Transfers from almost all government departments.

2016 was a landmark year for online finance. The demonetisation programme pushed many Indians to try for digital payments and the upward trend continues to this present day. Brands like Paytm became household names. In 2016 UPI (Unified Payments Interface) was launched by the government and crossed 100 million users this year.

All this was facilitated by the Jio Revolution which made India the economical mobile broadband capital of the world. It was all seamless during the Covid Crisis by which time every India was quite familiar with the world of online money. As a medium, our smartphone can take care of most of our buying needs today.

Now we have the Reserve Bank of India’s Account Aggregator framework, which will allow consumers to consolidate all their financial data into a single portal for smoother transactions. In the first week, the GST network, 8 banks, 4 NBFCs said they would be joining the platform which will strengthen India’s entire lending ecosystem and democratise credit. What UPI did for online payments, account aggregation plans to do for the overall credit system in this country.

Tax authorities, insurers, pension funds, financial startups, tech giants like Amazon, telecom operators, healthcare players… they could all come aboard in the future. If privacy issues are sorted out then the credit system will become really convenient for small businesses and the average citizen. Taking a loan of different types and different time periods will be seamless for all.

The endgame of all this is a digital currency and the democratization allowed by cryptocurrencies. The government is planning to come out with a bill on this aspect of the economy and one hopes that it will be a progressive rather than a regressive bill. In an era that is heading towards rapid digitization and techceleration, the financial system cannot be left behind.

100% Indians coming on to the banking-credit system seemed like a pipe dream in 2000, but could actually be achieved in the 2020s.