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3 step FinTech formulae that can help Indians save USD 10.4 billion.

India, Oct. 7 -- India has the opportunity to save 70,000 crores or USD 10.4 billion in the next five years by thanks to Fintech, as per research by VISA, a payment technology leader.

Cash costs India as much as 1.7% of its GDP, which can be reduced to 1.3%, saving 70,000 crores (USD 10.4 billion) in the next five years. And if India could sustain the reduced cost of cash of 1.3% of GDP until 2025, India could save up to an additional INR 4 lakh crores (USD 59.4 billion) by financial year 2024-25. Hence, saving INR 4.7 lakh crores (USD 70 billion) in total by 2025.

But how could this be done?

This amount worth lakhs of crores can be saved not by any hypothetic assumptions of being cashless but by making a little digital shit (that we are already riding on) and being less-cash.

As per the measures, suggested by VISA report, India can move from presently less than 5% of India's consumption expenditure is made using digital payments worth INR 75 lakh crores (USD 1,114.4 billion) could be increased to around 35% in the next five years.

The report highlights 3 major points where India can work to gain a minimum of 70,000 crores; namely - expand acceptance, energize innovation and bolster financial practices.

What about the finances?

As per VISA research this could be done by making a total investment of INR 59,300 crores (USD 8.8 billion); out of which INR 58,000 crores (USD 8.6 billion) would need to be incurred by the government of India by way of fiscal incentives provided to consumers and merchants, and lowering of import duties on point-of-sale (POS) terminals. The remaining investment would need to be made by banks to expand the acceptance network from the current 1.3 million POS terminals to 4 million over the next five years and bringing about 41 million households into the financial system.

The three point journey -

So, finally the three point journey India needs to take for saving worth thousand of crores are -

Expand Acceptance - As per the report, India should take reference from other countries and it narrowed down to four measures that India should consider -

Establish an acceptance development fund

Fiscal incentives

Introduce new regulations

Additional measures like to allow large global companies to participate independently and to develp a central repository to track the payment history etc.

Energize Innovation - Initiatives like UPI, Aashar, GST etc, can provde India with a unique opportunity to leapfrog and move quickly to a digitally enabled payment system. However, an evolving policy and regulatory framework to encourage innovation will be needed. As per the report there are three areas in which a framework would be helpful, namely -

Mass Transit - An open lop system while person-o-government transactions can enable use of bank issued contactless chip card for payments for public transport services. Such a system has been adopted by London, Jakarta, Singapore etc.

Government Payments - The adoption of digital procurement cards by the Government of India's nearly 70 departments could yield additional savings. Governments worldwide have benefitted significantly by adopting this approach.

New technologies, new form factors - India needs innovation that would help over come challenges associated with financial inclusion - last mile connectivity, infrastructure, and the high cost of doing business in remote areas. Also, steadfastly focusing on enhancing safety and security of digital payments while improving consumer experience would help accelerate the adoption of digital payments and efforts to increase customer awareness and robust customer grievance redressal would play an important role in building consumer confidence in innovative digital payment instruments

Bolster Financial Participation - As per RBI, 505 of Indian adults have bank accounts and rest who do not are aware about giving higher rates of interests thus there is all the more need to put efforts to improve financial literacy. As per the research, there are 5 areas where India needs to focus in this regard -

Facilitating inter-ministerial collaboration at the centre and engagement with states to leverage existing programs and platforms.

Designing programs tailored to meet the needs of various types of underserved segments such as women and farmers

Strengthening efforts to promote financial participation at the last mile, working in collaboration with existing microfinance institutions in different states

Crafting approaches to inculcate financial literacy programs at the school level and in higher education, and as part of public service education

Introducing certification standards and constructing innovative models for business correspondents

Published by HT Syndication with permission from The CTO Forum.

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Publication:The CTO Forum
Geographic Code:9INDI
Date:Oct 7, 2016
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