The financial sector is witnessing rapid evolution across the globe. The COVID-19 epidemic has accelerated the transformation of banking practices like lending, payments, insurance, and lending that is being wrought by digital technologies. Digital innovations around the world have led to various developments in financial technology in the form of roboadvice, peer-to-peer (P2P) or marketplace lending, mobile money, insurtech, and crypto-assets. Fintech has already increased the convenience and accessibility of financial services for retail users during the past few years. Furthermore, technologies like distributed ledger technology (DLT), cloud services, and artificial intelligence (AI) are revolutionising wholesale markets in industries as diverse as financial market trading and regulatory and supervisory technology.
Role of digital identity in Fintech
Growth in digital activity has outpaced the overall increase in the economy, and the affordability of communications services has continued to improve. The growth of digital identities has enabled fintech companies to come up with fast and easy onboarding processes by making use of new e-KYC solutions, artificial intelligence, video-KYC, and AML, thus increasing the frequency of digital transactions. In the Indian context, the usage of e-KYC has promoted the growth of the digital economy as the e-KYC transactions have risen from 1,249.23 crores in July to 1,272.68 crores at the end of August 2022.
The market for digital solution providers in India has also grown significantly in recent years. According to the forecast for 2022–2028, the global SaaS market will reach $720.44 billion by 2028 and grow at a compound annual growth rate of 25.89%.
Digital identity driving economical growth in India
The Indian digital economy and the global digital economy have witnessed exponential growth. The innovations in artificial intelligence (AI), quantum computing, 5G, and the Internet of Things (IoT) and the emergence of fintech players have provided firms across many industries with considerable growth potential. The push towards the growth of the digital economy in the country can be attributed to the Digital India programme, which was launched by the Indian government in 2015 to encourage digital inclusion in the nation. The programme focuses on demand-driven governance and services, digital citizen empowerment, and digital infrastructure as a fundamental human right. The programme aims to guarantee the accessibility of real-time services from online and mobile platforms, make financial transactions cashless and electronic, guarantee digital literacy, and make digital resources widely available throughout the nation. It also aims to provide every citizen with a mobile phone and a bank account. The digital initiative of the government also presents the growth of the digital economy to a US$1 trillion market by 2025.
Another reason for the growth of digital identity in India can be attributed to the rollout of the Aadhaar by the Indian government, which has caused significant disruption in the financial services industry. The Aadhaar identity system is connected to 1.21 billion people, making it the largest biometric identity system in the world. The Aadhaar-enabled e-know-your-customer (e-KYC) facility has enabled the fintech platforms to onboard customers quickly and at a fraction of the cost of using physical documents, thus promoting digital inclusion and a rise in the number of digital transactions.
A wide range of innovative and more effective services, both public and private, are made possible by digital ID systems. For instance, they may make it easier for more people to register businesses, create bank accounts, and make payments. This encourages financial inclusion by formalising previously unregistered financial exchanges resulting in positive effects on people and communities as well as for the country to increase the digitally based services and transactions.
India’s economy and society have undergone a paradigm shift as a result of the digital revolution, and the digital economy of India is one of the fastest-growing thanks to public-private partnerships, favourable government policies, creative reforms, a demographic advantage, rising incomes, and the expansion of the startup culture in the country. The Indian economy has already benefited from the digital revolution by being more adaptable to the times. Future projections indicate that India’s digital economy will help the country reach its $5 trillion GDP target by increasing digital transactional activities.
This article has been authored and contributed by Mr Siddharth Kukatlapalli, Cofounder and CBO at Syntizen Technologies.