Digital Banking

Digital Banking

‘We need banking but we don’t need banks anymore. Digital technology provides a low-cost way for people in developing countries to send money to each other, buy and sell goods, borrow and save as long as the financial-regulation environment is supportive.’

Bill Gates

Introduction

Financial Inclusion is considered to be the core objective of many developing countries since last decade as many research findings correlate the direct link between financial exclusion and the poverty prevailing in developing nations. According to World Bank report ‘Financial inclusion, or broad access to financial services, is defined as an absence of price or non price barriers in the use of financial services’. The term Financial Inclusion needs to be interpreted in a relative dimension. Depending on the stage of development, the degree of financial inclusion differs among countries. It has been a surprising fact that India ranks second in the world in terms of financially excluded households after China. For the inclusive growth process of economy the Reserve Bank and Government have provided high importance to the financial inclusion.

Financial inclusion or inclusive financing is the delivery of financial services, at affordable costs, to sections of disadvantaged and low income segments of society. There have been many formidable challenges in financial inclusion area such as bringing the gap between the sections of society that are financially excluded within the ambit of the formal financial system, providing financial literacy and strengthening credit delivery mechanisms so as to improvise the financial economic growth.

Thus the term ‘Financial Inclusion’ can be defined as the process of ensuring access to financial services, timely, and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.

This provision of access to banking services to nearly 47 percent of the reportedly unbanked population in India has the potential to unfold huge growth opportunities for financial services players. In this context, digital platforms are likely to deliver financial services to both the unbanked and the underbanked population, especially in rural / remote regions, at a low cost, and subsequently increase digital financial access to provide high quality, affordable financial services. By using digital channels, transaction costs could be lower than those incurred through traditional channels by as much as 90 percent, thereby bringing down break-even costs.

Though digital banking is in its nascent stage, demand side drivers indicate that suppliers of financial services are lagging in creating digital value propositions. Digital banking is likely to provide huge impetus to financial inclusion.

Mobile phones affect the lives of billions of people around the globe, including the poor. The changing mobile technology has revealed opportunities and allowed nearly three billion people without bank accounts to access financial services.

Source:The IndianBanker