On Friday, September 8, the World Bank heaped praises on India’s Digital Payments Infrastructure (DPI) in view of its transformative impact on India under the Narendra Modi government. According to the World Bank, India has reached incredible milestones in just six years, which would normally take nearly five decades to achieve.
The World Bank underlined in its G20 Global Partnership for Financial Inclusion (GPFI) document how India has built a robust digital public goods infrastructure through initiatives such as Unified Payments Interface), Jan Dhan, Aadhar, ONDC, and CoWin.
The GPFI document, prepared in anticipation of the G20 Summit hosted by India, noted the significant steps taken by the Narendra Modi-led government and the pivotal role of government policies and regulations in shaping the DPI landscape.
World Bank lauds the “JAM Trinity”
The World Bank underscores the significance of the “JAM Trinity” (Jan Dhan, Aadhar, Mobile), which combines universal bank account access, Aadhaar identification, and mobile connectivity. “India’s financial inclusion strategy relies on the JAM trinity of Jan-Dhan, Aadhaar, and mobile and integrates digital ID for more efficient account-opening and payment applications for access to financial services,” the document read.
“While DPIs’ role in this leapfrogging is undoubtable, other ecosystem variables and policies that build on the availability of DPIs were critical. These included interventions to create a more enabling legal and regulatory framework, national policies to expand account ownership, and leveraging Aadhaar for identity verification,” the World Bank document stated.
The World Bank document lauds India’s DPI approach, noting that India has accomplished in six years what would have taken five decades. JAM Trinity has increased financial inclusion from 25% in 2008 to over 80% of adults in the previous six years, a process that has been shortened by up to 47 years because of DPIs.
From its inception, the number of Pradhan Mantri Jan Dhan Yojana accounts opened has nearly tripled, rising from 147.2 million in March 2015 to 462 million by June 2022; women own 56% of these accounts, totalling over 260 million.
The Jan Dhan Plus programme encourages low-income women to save, resulting in over 12 million women customers (as of April 2023) and a 50% increase in average balances in just five months, as against the entire portfolio in the same time period. It is estimated that by engaging 100 million low-income women in savings activities, public sector banks in India can attract approximately Rs 25,000 crore ($3.1 billion) in deposits.
UPI- India’s popular retail digital payment option
Moreover, the document stated that the Unified Payments Interface (UPI) is India’s mobile-based quick payment system that allows users to make round-the-clock payments instantly by utilising a Virtual Payment Address (VPA) that they create. According to the World Bank, the UPI payment system has proven to be extremely popular for retail digital payments in India, and its usage is rapidly expanding. In May 2023 alone, more than 9.41 billion transactions worth over Rs 14.89 trillion were carried out. The total value of UPI transactions in fiscal year 2022-23 was nearly half of India’s nominal GDP.
The DPI has also improved efficiency for private organisations by lowering the complexity, cost, and time required for commercial activities. Several Non-Banking Financial Corporations have also enabled an 8% increase in SME lending conversion rates, a 65% reduction in depreciation expenses, and a 66% reduction in fraud detection costs.
Notably, industry estimates indicate that the usage of DPI reduced banks’ costs of onboarding consumers in India from $23 to $0.1.
Cost savings with digitised KYCs
Furthermore, India Stack has digitised and simplified KYC procedures, resulting in cost savings. Banks that implement e-KYC reduced their compliance costs from $0.12 to $0.06. The cost reduction made lower-income clients more appealing to service and generated profits to develop new products.
UPI-PayNow and the cross-border payments
The UPI-PayNow interconnection between India and Singapore, which is scheduled to go live in February 2023, corresponds with the G20’s priorities pertaining to financial inclusion and enables faster, cheaper, and more transparent cross-border payments.
Account Aggregator Framework and the Data Empowerment and Protection Architecture
The Account Aggregator Framework in India intends to boost the country’s data infrastructure by allowing consumers and businesses to share data only with their consent via an electronic consent framework controlled by the Reserve Bank of India. A staggering 1.13 billion cumulative accounts are enabled for data sharing, with a total of 13.46 million consents acquired by June 2023.
Individuals have sovereignty over their data under India’s Data Empowerment and Protection Architecture, allowing them to exchange information among providers. DEPA fosters innovation and competition by promoting customised product and service access without requiring new entrants to invest considerably in pre-existing client relationships.
PM Modi hails World Bank’s G20 GPFI document as a “testament of India’s rapid progress and innovation”
India's leap in financial inclusion, powered by Digital Public Infrastructure!
— Narendra Modi (@narendramodi) September 8, 2023
A G20 document prepared by the @WorldBank shared a very interest point on India's growth. India has achieved financial inclusion targets in just 6 years which would otherwise have taken at least 47…
Taking to X, Prime Minister Narendra Modi in response to the World Bank’s report posted, “India’s leap in financial inclusion, powered by Digital Public Infrastructure! A G20 document prepared by the @WorldBank shared a very interest point on India’s growth. India has achieved financial inclusion targets in just 6 years which would otherwise have taken at least 47 long years. Compliments to our robust digital payment infrastructure and the spirit of our people. It is equally a testament to rapid progress and innovation.”
G20 meeting in New Delhi
The New Delhi G20 Summit, which will bring an end to a series of meetings over the course of the year, is going to be held in New Delhi on 9-10 September this year. The 43 Heads of Delegations- the largest ever in G20-will be participating in the final G20 Summit. The G20 Summit is a forum for international economic cooperation and represents 85 per cent of the global GDP, over 75 per cent of the global trade and two-thirds of the global population.
