Financial Inclusion and Digital Payments

Financial Inclusion and Digital Payments


Internet service providers, How to become a digital payment agentoperators, technology providers, mobile network operators, banks, and retailers make up the majority of the main actors in the digital payment scenario. Banks are able to grow their customer base while incurring fewer costs and dangers thanks to the digital transaction system. Banks can employ cashless payment transactions to cut cash logistics by 10%, according to estimates by Booz Allen. Providers of telecom and internet services benefit from increased client retention rates, higher revenues from value-added services, etc. The benefits to retailers and service providers include quicker access to a bigger client base, improved payment collections, etc. To provide the consumer with the ultimate benefit, the synergy between the financial and digital worlds must be skillfully utilized. The context in which the digital payments business model operates is created by the government and regulators of the banking, telecommunications, payment systems, competition, and anti-money laundering.

Governments and regulators frequently exercise caution when it comes to approving innovations that can jeopardize the financial stability of the economy because the world of digital transactions is still relatively young and uncharted. As was emphasized in the previous sections of this paper, regulatory and supervisory concerns have stymied the growth of digital payments in many nations, including India. On the one hand, financial inclusion is the stated goal of governments, and new technology has been widely accepted as a tool for financial inclusion. It is crucial for the enabling environment to combine legal and regulatory openness and certainty in order for a new product market to emerge. Openness will foster innovation, while certainty will encourage investors. The situations that are moving toward greater transparency and greater confidence are those in which markets are developing most quickly. The most important thing in this situation is to make sure that the market is free and competitive so that business owners can adopt new business models. Various times in the parts before, the key traits have been highlighted and covered. Which are?


  1. Ensure entry by guaranteeing a high level of inclusivity in service provider kinds, guaranteeing an even playing field, and ensuring that both big and small players can enter the market.

Integrity: Entities from the banking and non-banking sectors ought to be enticed to join the market.

Financial regulators’ primary concerns include I preserving financial stability, (ii) increasing economic efficiency, (iii) expanding access to financial services, (iv) ensuring financial integrity, (v) ensuring consumer protection, and (vi) ensuring rapid accessibility of such services for the general public with a variety of needs.

It makes sense that financial regulators would have a focus on banks given their goal of How to become a digital payment agent. However, a financial stability disruption involves macro economically significant payment networks rather than small-scale retail payment systems. To prevent inhibiting innovation that has the potential to benefit the majority of the population of the country, it is important to understand the unique characteristics of retail and micro-amounts. As a result, it is unnecessary to restrict this sector to just banks.

One of the key goals of payment regulation, according to the Bank of International Settlements, is to remove those legal and regulatory obstacles to market growth and innovation. The RBI and other authorities must work toward this objective in order to fully utilize technology’s potential in achieving the objective of financial inclusion.

Comparable playing field The intimate ties between network service providers and customers shouldn’t give those businesses excessive benefits at the expense of other operators. For instance, the most effective tool for financial inclusion right now is thought to be the cell phone. Only a small number of carriers dominate the mobile market, both in India and internationally. If a level playing field is not established, a monopolistic digital transaction industry is likely to develop given the intimate ties between the consumer and the mobile service provider and the tie-in of the consumer to the service provider.

Within certain, agreed-upon timeframe, additional account holders should be able to use a digital payment platform that the service provider has established, and new entrants should be permitted to use the existing payment infrastructure. Regulation must make sure that alternative financial service providers can reach the customer, just as landline users can select from a variety of long distance providers.

Large companies shouldn’t unfairly benefit from regulatory requirements. This is crucial for a variety of reasons. Consider how microfinance programs can use the connections inside communities to minimize borrowing costs. It is not necessary to forbid MFIs, bank correspondents, private money lenders, NGOs, or other enterprises operating in small, distinct communities from offering their services to their users digitally.

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