The Covid-19 pandemic fuelled the proliferation of digital modes of payments, the Reserve Bank of India noted in its Annual Report 2020-21. The prospects for FinTech in India’s financial system in 2021-22 will depend upon the degree of entrenchment of digital usage, it further said.
“The Covid-19 pandemic has fast-tracked digital transformation of the payments ecosystem in India. Besides augmenting the broad-based use of technology, the pandemic has fuelled the proliferation of digital modes of payment, propelling the country towards ‘less-cash’ alternatives,” the report said.
Overall, the total digital transaction volume in 2020-21 stood at 4,371 crore, as against 3,412 crore in 2019-20, attesting to the resilience of the digital payment system in the face of the pandemic.
Future of fintech
The report noted that the prospects for FinTech in India’s financial system in 2021-22 will depend upon the degree of entrenchment of digital usage, which is, in turn, contingent upon the resilience of the underlying acceptance infrastructure, financial literacy and awareness of the users and strengthening of the customer protection and cyber security protocols in place.
Also read: Demand for cash surged in 2020-21 due to Covid-19 pandemic: RBI Annual Report
“All these factors will help in cementing the trust of users in digital modes,” it said.
The RBI’s initiative to set up a pan-India new Umbrella Entity will intensify competition in the digital space and bring out the best for end users and other participants in terms of efficiency gains and convenience, the report further said.
“Collaborations between card issuing banks, FinTech players and other stakeholders of the payments ecosystem are likely to give rise to a new hybrid model of finance that will help address credit gaps and ramp up last mile outreach by leveraging on the geographical footprint of banks and technological know-how of FinTech companies,” it noted.
In the area of digital payments, various initiatives such as an innovation hub, a regulatory sandbox and offline payment solutions are underway to ensure that in the digital ecosystem, India maintains its position as a leader.
The RBI is also in the process of extending the geo-tagging framework put in place to capture location of bank branches, ATMs and BCs to cover payment system touch points, enabling accurate capture of their location across the country. Further, the possibility of leveraging India’s domestic payment systems to facilitate cross-border transactions is being explored, and corridors and charges for inward remittances will be reviewed.