Nowadays, consumers use credit, debit and prepaid cards through all kinds of devices ranging from mobiles, desktops, laptops to watches. According to Moody’s Analytics, with a 1% increase in cards, GDP increases by 0.04%. Card penetration is very high in a developed country which is almost 42% and it is 16% in developing countries like India. However, digital wallets are catalysts for easy conduct of financial transactions.
Higher Efficiency in the Financial System
In digital payments, many parties are present besides two main parties’ merchants and consumers. Those parties are like a third-party integrator, FinTech companies, Governments, regulatory bodies, developers, manufacturers, etc. Cost of currency will increase alongside. Even more, jobs are created in the digital payment system. Money gets circulated smoothly, impacting the cost of business on the lower side. The government also gets more tax revenues. In the last 5 years, digital payments added more than $600 billion in GDP in the world and boosting financial inclusion. Further, it reduces transfer/processing fees, increases processing/transaction time, offers multiple payment options and gives immediate notification on all transactions on customers’ account. In this way, digital payments make the financial system more efficient and convenient.
In 2018, digitization will change the way people deal with money and work. The digital wallet market in India is seen for huge growth amongst Indian users as they are witnessed giving in the way they are operating their finances. According to the latest Consumer Payments Insight Survey, Indian market is the topmost in terms of mobile wallet adoption covering about 55.4% of the people having a wallet and using it extensively. India is being followed by China and Denmark in line who also believes in digital transactions. While the IT & mobile revolutions march head-on, mobile digitation is also on the fore these days.
The absorption level of a digital wallet is much higher in our country compared to other developed or semi-developed countries, where cash is anyway not used so much. Mobile wallet transactions grew triple folds in the last 5 years, from Rs.24 billion in 2013 to Rs.955 billion in 2017, and will cross a huge 1 trillion mark or more towards the end of 2018.
How did the Government Encourage Financial Inclusion?
The rising high wallet market is triggered by the growth of government policies to promote digital payments, coupled with the rising in smartphone penetration and improved telecom and payment infrastructure.
The initiative of demonetization in November 2016 was a sure shot hit amongst people, it had resulted in a massive cash-crunch in the country with money getting dried up, directing people to switch to electronic modes per se. People are happy to experiment with mobile and digital channels for low value, day to day transactions. Infact, its way beyond that translatability.
The total value of digital wallet transactions grew up to 1.5 times between the last consecutive number of years. Not considered relevant, these e-commerce channels are now well-accepted to make instant payments at shops, departmental stores, street side vendors, fuel locations, cab drivers and many more stops for it.
Digital wallets have become too routine in the world of online payments. The share of physical payments is deteriorating significantly from 38% to 32% in the phase of digital payments. A recent survey reported that the mobile wallet share jumped from just 7% to 29% during the same period, again which is owing to the usage factor.
Digitisation is important in every area of work and is a widely used medium to reach a larger portion of people around. The digital world has helped the financial sector a lot in knowing their customers better and cater righteously. It is digitisation only that helps banks and NBFCs a lot in safe lending.
Each and every online transaction gets recorded somewhere and helps banks to identify the customer and his dealings. Transactions like online payments, credit card use, credit limit threshold, utility payments etc. Every bit of your online history builds your credibility. This also gauges your money credibility. Any loan provider critically analyses your past history before giving out any credits, here the online record does wonders. Your payment record authenticates your entire transactional journey. This is a huge step towards financial inclusion!