The suggestion comes from a World Bank report, ‘G20 policy recommendations for advancing financial inclusion and productivity gains through digital public infrastructure’. Released on Friday under the aegis of the G20 India Presidency, the report champions the voluntary uptake of digital public infrastructure (DPI) to spur financial inclusion. The finance ministry and the Reserve Bank of India (RBI) helped in crafting the report.

“The impact of DPI goes beyond inclusive finance—it can support health, education, and sustainability. Amid the Covid-19 pandemic, DPI enabled emergency support to be directly delivered to the digital wallets of those in need as well as helped facilitate swift vaccine distribution. The India Stack exemplifies this approach, combining digital ID, interoperable payments, a digital credentials ledger, and account aggregation,” the report said quoting United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA) and Honorary Patron of the GPFI Her Majesty Queen Máxima of the Netherlands.

In just six years, it has achieved a remarkable 80% financial inclusion rate, a feat that would have taken nearly five decades without a DPI approach, the report said. “Other nations, including Brazil, Estonia, Peru, and Singapore, have similarly embraced DPI models, yielding tangible results that underscore the efficacy of this approach,” said Queen Máxima.

The report recommended fostering responsible use of digital public infrastructure to accelerate financial inclusion. It highlighted the linkage of bank accounts, biometric identification and mobile numbers which helped in stepping up financial inclusion rate in India.

“India’s financial inclusion strategy relies on the JAM trinity of Jan-Dhan, Aadhaar, and mobile and integrates digital ID for more efficient account-opening and payment applications for access to financial services. …The India Stack has digitized and simplified KYC procedures, lowering costs; banks that use e-KYC lowered their cost of compliance from $0.12 to $0.06. The decrease in costs made lower-income clients more attractive to service and generated profits to develop new products,” the report said.

While DPIs’ role in this leapfrogging is undeniable, other policies that build on the availability of DPIs are critical, the report said. These included interventions to create a more enabling legal and regulatory framework, national policies to expand account ownership, and leveraging Aadhaar for identity verification.

A person informed about India’s DPI-related work said that the number of no-frills accounts opened in India tripled from 147.2 million in March 2015 to 462 million by June 2022 with women owning more than 260 million accounts.

The report recommended the development of well-designed DPIs and a broader enabling environment through a widely accepted set of good practices. A key consideration should be inter-operability.

All systems and processes should be capable of interoperating, both with each other, as well as with the systems of private and public entities that are connected to it through open and publicly accessible application programming interfaces to promote more inclusive use of DPIs, the report recommended. 

Updated: 08 Sep 2023, 01:02 PM IST