India's digital public infrastructure has brought about a profound transformation in the country, extending well beyond inclusive finance, according to a G20 Global Partnership for Financial Inclusion (GPFI) report prepared by the World Bank. The report, released on Friday, highlights that the JAM (Jan Dhan, Aadhaar, and Mobile) trinity has been instrumental in increasing the financial inclusion rate from 25 per cent in 2008 to over 80 per cent of adults in the past six years. This report was produced in collaboration with the finance ministry and the Reserve Bank of India (RBI) as part of GPFI's efforts.
GPFI serves as a forum for G20 nations, non-G20 countries, and relevant stakeholders to advance initiatives related to financial inclusion, including the execution of the Financial Inclusion Action Plan.
According to the paper, "While DPIs' role in this leapfrogging is undoubtedly, other ecosystem variables and policies that build on the availability of DPIs were critical. These included interventions to create a more enabling legal and regulatory framework, national policies to expand account ownership, and leveraging Aadhaar for identity verification."
The government-to-person (G2P) payment system has established one of the world's largest digital architectures, harnessing digital public infrastructure. The paper outlined that this approach has facilitated the direct transfer of approximately $361 billion to beneficiaries across 53 central government ministries and 312 critical schemes.
Notably, in May 2023 alone, more than 9.41 billion transactions were conducted, with a total value of approximately Rs 14.89 trillion. The report further noted that for the fiscal year 2022–23, the total value of UPI transactions reached nearly 50 per cent of India's nominal GDP.
The operationalization of the UPI-PayNow interlinking between India and Singapore in February aligns with the financial inclusion priorities of the G20. As stated in the document, it enables quicker, more cost-effective, and transparent cross-border payments. Additionally, India's digital public infrastructure has improved efficiency for private enterprises by simplifying processes, reducing costs, and expediting business operations.
The paper also highlighted that some Non-Banking Financial Companies (NBFCs) have achieved an 8 per cent increase in conversion rates for SME lending, a 65 per cent reduction in depreciation costs and a 66 per cent decrease in expenses related to fraud detection.
Moreover, the World Bank paper commended the reduced cost of compliance for banks regarding Know Your Customer (KYC) processes. India Stack has digitized and streamlined KYC procedures, reducing costs. Banks using e-KYC saw their compliance costs drop from $0.12 to $0.06. These cost reductions made it more feasible for banks to serve lower-income clients, generating profits and enabling the development of new products.
The paper also emphasized that India's Data Empowerment and Protection Architecture empower individuals to control their data, allowing them to share it with various service providers. This facilitates customized product and service access without requiring new market entrants to make substantial investments in establishing client relationships, fostering innovation and competition.