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India’s Approach to Open Banking: Some Implications for Financial Inclusion

Summary:
Yan Carriere-Swallow, Vikram Haksar and Manasa Patnam in this IMF paper: We examine how the development of the digital infrastructure known as the “India Stack”—including an interoperable payments system, a universal digital ID, and other features—is delivering on the government’s objective to expand the provision of financial services. While each individual component of the India Stack is important, we argue that its key overarching feature is a foundational approach of providing extensive public infrastructures and standards that generates important synergies across the layers of the Stack. Until recently, a large share of India’s population lacked access to formal banking services and was largely reliant on cash for financial transactions. The expansion of mobile-based financial

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Yan Carriere-Swallow, Vikram Haksar and Manasa Patnam in this IMF paper:

We examine how the development of the digital infrastructure known as the “India Stack”—including an interoperable payments system, a universal digital ID, and other features—is delivering on the government’s objective to expand the provision of financial services. While each individual component of the India Stack is important, we argue that its key overarching feature is a foundational approach of providing extensive public infrastructures and standards that generates important synergies across the layers of the Stack.

Until recently, a large share of India’s population lacked access to formal banking services and was largely reliant on cash for financial transactions. The expansion of mobile-based financial services that enable simple and convenient ways to save and conduct financial transactions has provided a novel alternative for expanding the financial net.

The Stack’s improved digital infrastructures have already allowed for a rapid increase in the use of digital payments and the entry of a range of competitors including fintech and bigtech firms.

How India became a leader in this digital payments space is quite a story.

 
Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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