Page 34 - Banking Finance December 2024

ARTICLE

Access Survey. Since then, various governments initiated smartphone and growing use smartphones and
digital foundation as base for increase in financial affordable internet data. Developing world's first
inclusion. Launch of Aadhaar, and the biometric digital smartphone 'Simon' goes to IBM, sold by BellSouth
ID system in 2010 was a game changer which allowed (formerly part of the AT&T Corporation) in 1994. In
open bank accounts by reducing time and cost of the India the first affordable touchscreen smartphone
"Know Your Customer" (KYC) process. Only 30 per cent 'Nokia 5800 XpressMusic' was launched back in 2008.
of Indian population had a bank account by 2014. The There were 34.18 million smartphones users in 2010,
key structural change in access to financial services and reached to 938.27 million in 2022.
arose with the launch of the 'Pradhan Mantri Jan Dhan
The number of smartphone users in India was estimated
Yojana (PMJDY)' scheme in August 2014. to reach over one billion and 1.55 billion by 2023 and
A range of features of PMJDY include a no-frills, zero- 2024 respectively, as per recent data by market
balance account with a debit card, access to mobile research firm Statista. Apart from internet,
banking for funds transfer, overdraft facilities, and bank Smartphones are playing an important role in India's
account provides life insurance coverage for account digital transformation. Smartphone and access to
holders. Bank accounts under PMJDY could be opened internet data made the need to motivate for digital
using the Aadhaar ID and subsequently linked to it for banking services among customers.
the transfer of government benefits. By 2017 around 7. Affordable Internet Data: Transformation of banking
90 per cent of the population possessed an Aadhaar and landscape began in the 2010s with the internet
half of them linked their Aadhaar number to their bank accessibility. As learned above access to internet data
accounts. It is further supported by rapid changes in is prime factors for the current growth of the digital
technology and digitalisation gave an opportunity to banking transactions. After launch of 5G, the speeds of
expand financial inclusion. Financial inclusion cannot be internet has seen a 3.59 times increase, with median
more effective until small businesses, youth, women and download speed increasing from 13.87 Mbps in Sept.
people from rural are part of the formal banking system. 2022 to 50.21 Mpbs in August 2023 (Shinde, 2nd Oct.
Therefore, aim of increasing financial inclusion was 2023). India rank 47th on the basis of mean broadband
depended on digital banking. Opening bank account speeds and is steadily raising from 101th in 2020 to 47th
thorugh the PMJDY scheme might be the pre-plan of in 2023 reads a study by Ookla (Kechiche, S. (2023).
government to motivate people go for digital payments As on December, 2022, around 88 per cent of
after Demonitisation. households with smartphones, as well as internet
5. Demonetisation: On 8th November, 2016, the connectivity, are around 88 per cent. Therefore, increase
Government of India all of a sudden announced the in internet speed another factor supported the growth
demonetization of major banknotes, withdrawn 86 per of the digital payments ecosystem. Reduced processing
cent of currency from circulation and constraining the time, ease of use, network connectivity, cyber security
use of cash. (Lahiri, Amartya. 2020). The aim of and compatibility are the key factors which motivate
demonetisation was to seize undeclared income, users to adopt digital banking. People have
increase tax base, destroy counterfeit currency, and smartphones and access internet data this helped go
remove corruption and to speed up formalisation of the for digital banking and automatically encouraged
economy. Whatever may be the motive, but people buy products and services online.
demonetisation forced people use electronic payments. 8. Online Shopping: Online shopping is another driver of
There was no option except use of electronic banking the growth of digital payments ecosystem in India.
services during the period of demonetisation. People COVID-19 pandemic forced to go for online shopping and
slowly started banking transactions in digital mode due it became the new normal. The number of annual
to owning smartphone is affordable and affordable online shoppers was 105 million in 2019 and reached to
internet data. 185 million by 2021 indicating the force of COVID 19 in
6. Owning Smart Phone: Across the world there is real going with online shopping. Indian e-commerce market
transformation in providing financial services digitally. is expected to reach $200 billion by 2026 from US38.5
The change is possible and supported by affordable billion as of 2017 (Economic Diplomacy Mission, 2020).

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