"Telecom connectivity and coverage are improving across the globe; in most places they are sufficient to do the various transactions and exchanges;
"Smartphone users are on the rise everywhere and smartphone features are enabled to facilitate most transactions and exchanges and their cost are being constantly driven down in order to increase reach and affordability;
"Government services are also increasingly becoming now digitally enabled; and finally,
"The financial services industry is in the forefront in digitally enabling their services, thereby, increasing the significance of digital in consumers' lives.
Now, why is this so important?
Face-to-face transactions, which were always valued when it came to anything involving money, are now being done over the internet - simply put, digital has taken over. This has changed not only the way institutions work but has also increased customer expectations from the institutions catering to its needs, be it in the private or public sector.
One of the most significant drivers that is accelerating this transformation is the need to bridge the digital divide across the globe. It has numerous benefits to offer in terms of:-
1.Reach - Governments would like to have the maximum reach for their services; this could be for any exchange- enquiries, clarifications, status and generic information or even fulfillment- transfer of funds to wallet be it the subsidy, grant or other transfers;
2.Inclusion - The marginal and the group generally considered as non-bankable to be included in financial as well as access to government services
3.Adoption - All segments of the population have shown an adaptability to digital; it could be slower among certain segments when compared to certain others, but in general all segments are progressing well in their adoption.
But there is yet another driver that has institutions all over the world scampering to turn digital - the coming to age of the millennial generation. They represent the largest working population all over the world and are the first mobile-first generation in the world when compared to their parents to whom the computer/mobile is still only a convenience or a sign of economic progress. By 2020, when the millennials (Gen Y) and the still in their teens Gen Z take over the reins, analog would most likely have died a quick death. The race is on to integrate digital technology to all aspects of their business and companies are undertaking this transformation irrespective of whether their businesses are ready to handle the change or not, in order to increase revenue, win over customer loyalty and of course, the ever-elusive mind share of the said customer. And hence, to the financial services sector, digital is the next revolution that offers:-
1.Certainty - It has proved to be the surest way to ensure that the intended recipient receives the desired benefits; establishing the identity as well as confirmation of the receipt of services are made possible through the relevant technology tools.
2.Low cost of delivery - This channel is the lowest cost delivery channel for many a service; it, therefore, makes sense that maximum services are delivered through it.
What is the outlook for India?
The future is in the hands of the millennial generation. They are digital friendly and perhaps need many more services to be digitally-led. There is very little difference between personal and work-led digital ambitions for them.
Given that this is the direction in which the world is moving, where does India stand on the Digital Transformation curve? There is no doubt about it, the intent is indeed there. Enabling participation in the digital & financial space even features in the present government's ambitious Digital India programme.
In the past five years, smartphone internet usage in India has increased tremendously. According to Ericsson's Changing Mobile Broadband Landscape, usage of internet by those in the 31-40 age group has tripled and quadrupled for those above 50 years of age. According to the Internet in India 2015 Report by the IAMAI and IMRB International, mobile internet users in India are likely to increase by 20 per cent within 6 months - from an estimated 306 million in December 2015 to 371 million by June 2016.
These figures prove that India is well set to explore the digital road, and to understand our progress better, it is important we take a look at the 3 important players that are influencing this transformation with one leading the other:-
Digital currency- Bitcoin may be going through a chequered life span. Most central banks are considering moving in that direction in a cautious manner. However, India is ranked 4th globally in the most-likely-to-adopt-Bitcoins-for-payments list. With the ability to fill the gaps left by banks and other online payment platforms, Bitcoin companies such as Unocoin, Zebpay, etc. are seeing nearly 100 per cent monthly growth and move is on to bring regulatory laws governing the use of bitcoins to ensure greater security.
Wallets- This mode can serve both paper as well as digital currency. Already ATMs are being designed to dispense credit to wallet or other modes of holding credit of currency. According to a RBI report, in terms of volume, mobile wallets have surpassed mobile banking. M-wallet transactions stood at 255 million transactions for the year 2014-15 and this number nearly doubled to over 550 million for the period between April 2015 & February 2016, and has an expected CAGR of 30 per cent by 2019. However, it is to be noted that this volume represents only 8 per cent of online buyers, with 45 per cent still preferring COD option and 37 per cent using credit & debit cards. The potential for growth is high and m-wallets are yet to reach their peak.
Fintechs- P2P payments and lending, distributed ledgers that makes smart contracting easier, efficient, secure and contactless mobile payments, to name a few, are already taking centre stage. They straddle both the personal B2C and commercial B2B spaces. And the increasing mobile usage is aiding Fintech penetration in India. The Statista Fintech Report puts India's fintech transaction value at $33,012 million. Fintechs with their greater flexibility and removal of all intermediaries, are also a leading reason for banks losing their hitherto unchallenged. With a lot of funding entering this sector, it is receiving a lot of attention and is bound to disrupt existing orders.
Though there is a constant increase in digital consumption by the Indian population and the adoption of digital by the financial sector bodes well for the country's digital transformation, important questions on the country's investment climate, affordable tablets and smart phones, as well as good connectivity at all times and all regions, ability to produce contextual, homegrown digital solutions, need to be answered in order to outline a realistic picture of India's digital journey.
The writer is Director - Platforms & Solutions, Maveric Systems