Making Digital Financial Inclusion a Reality

Technology has had a disruptive effect on the delivery of fi nancial services, and adoption of digital solutions could help accelerate fi nancial inclusion. This article creates a road map for digital fi nancial inclusion in India using the framework based on the eight high-level principles of G-20 nations. While evaluating the progress under each one of these principles, the article concludes with policy recommendations both on supply and demand sides to achieve the coveted digital fi nancial inclusion.

Digital financial inclusion is defined as digital access to and the use of formal financial services by the unserved and underserved population at an affordable cost (Lauer and Lyman 2015). Notwithstanding numerous policy initiatives undertaken by the Government of India (GoI) to reach the last mile, financial inclusion continues to remain elusive for the common man. While policy initiatives coupled with reforms such as demonetisation (2016) and goods and services tax (GST; 2018) helped to increase the use of digital solutions, the COVID-19 pandemic has accelerated the adoption of digital financial solutions cutting across social segments. Digital technologies have boosted growth, expanded opportunities, and improved service delivery, yet their aggregate effect has fallen short and is unevenly distributed (World Bank 2016). To address this, the Group of Twenty (G-20) nations and the World Bank advocated eight high-level principles to achieve digital financial inclusion (GPFI 2016).

The GoI has been making concerted efforts to expand its digital infrastructure and enable access to financial services through the Unique Identity-Aadhaar and the Digital India programme (to deliver public services through digital channels and to connect rural areas with high-speed internet). Another far-reaching move towards digitisation is the shift towards government-to-person (G2P) payments or direct benefit transfers (DBTs) (GPFI 2017). In this article, we have constructed a framework based on the eight high-level principles of G-20 nations, as illustrated in Figure 1 (p 15), that could hasten digital financial inclusion in India.