UPI has paved the way for easier payments like recharges, rail tickets and online shopping by allowing you to link your bank accounts on a single app. It also eliminates the need to have multiple digital wallets.
The Reserve Bank of India is planning to extend UPI to feature phones as part of its efforts to bolster financial inclusion. This will catalyze high volume, low cost payments to billers and merchants and bring a wider audience to digital-payments.
1. Financial Inclusion
Financial inclusion is the ability for people and businesses to access financial services, such as savings, payments, credit, insurance and investments. It is essential for economic growth, poverty alleviation and resilience in times of crisis.
In order to achieve financial inclusion, there are many factors that need to be addressed. These include poverty, income inequality, physical connectivity, electronic connectivity, information availability and the soundness of the banking sector.
There are many organizations and groups that work to help expand financial inclusion globally. Among these are Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs).
2. Digital Access
Digital access is essential for people to connect with others around the world, work remotely, and get healthcare. It’s also vital for businesses in rural areas to reach a larger audience and expand their customer base.
Digital payment platforms like UPI are a key part of India’s digital transformation and should be a means of financial inclusion for those who are not yet digitally connected. The country has seen exponential growth in digital payments over the last six years and the UPI network is now used by over 150 million people, with a number of global giants using it as well.
The government, banks and private companies are working together to bring digital financial services to a large number of users at affordable costs. When this happens, the country will become financially inclusive.
3. Digital Payments
Across industries and governments, digital payments are becoming a core part of financial services. They make transactions faster, easier, and more secure than cash.
Moreover, they are more convenient and less expensive than cash for both senders and receivers. They also increase the number of payments made and improve record keeping by leaving behind an easily traceable electronic trail.
Aside from remittances, digitisation can also facilitate other financial services, such as microfinance and credit-to-loan applications. Access to these services can improve economic opportunities for a variety of low-income individuals and families.
For digital financial inclusion to work, it must be able to reach and serve the financially excluded. This means that the four key elements of a digital financial inclusion model need to be in place: (i) a range of formal financial services; (ii) a cost affordable to customers and sustainable for providers; (iii) a regulatory framework; and (iv) consumer protections.
4. Financial Education
Financial inclusion is a crucial component of economic development and an essential part of the Sustainable Development Goals (SDGs). It means that all people have access to affordable, responsible financial services such as payments, savings, credit, insurance and more.
However, billions of adults worldwide are still unbanked and underserved in their financial needs. This includes poor people in rural areas who are excluded from financial institutions, have limited access to information and belong to vulnerable or marginalized groups.
A key factor preventing financial inclusion is the lack of basic financial education. Those without adequate knowledge and skills lose money saved for years, default on loans and are cheated by life insurance agents who recommend financial products that are not suitable for them or hide relevant information.
Financial literacy is a critical part of financial inclusion and should be taught in schools from early on. It helps children gain confidence, understanding and practical skills around managing their finances.