India Launches Government-Backed Digital Wallet To Promote Financial Inclusion

December 7, 2021
As part of the Digital India initiative, India has announced the launch of CSCPay, a new digital application to support the inclusion of the rural population into digital payments.

As part of the Digital India initiative, India has announced the launch of CSCPay, a new digital application to support the inclusion of the rural population into digital payments.

A government-developed application, CSCPay enables users to request and send payments, pay with QR codes, and manage all their bank accounts within one app.

The new service builds on the country’s instant payments service called Unified Payments Interface (UPI) is expected to add 400,000 rural merchants, or Village Level Entrepreneurs (VLEs), to the UPI framework.

Common Service Centers (CSCs) are responsible for delivery of important projects as part of the Indian government's digitalization efforts. Announced in 2015, the Digital India initiative has three key elements: the development of secure and stable digital infrastructure, the provision of digital government services, including digital financial transactions, and universal digital literacy.

Announcing the new service, Rajendra Kumar, additional secretary of the Ministry of Electronics and Information Technology (MeitY) said: “Through the CSC movement, we want to make a new India digitally empowered, financially enabled and actively participate in nation building. Digital India is for all caste, creed and colour, thus promoting Social Inclusion.”

Although digital payments have grown significantly in India in recent years, there is significant room for further adoption.

Launched in 2016, UPI has been a major contributor to digital payments growth in the country. In the first ten months of 2021, UPI recorded 30bn transactions, up from 13bn in the full year of 2019. This makes UPI the largest instant payments service globally in absolute terms, according to VIXIO research.

However, despite this growth, UPI appears to have only scratched the surface of the market’s potential. For example, 30bn transactions is equivalent to just 22 transactions per capita, which is well below the usage in many other leading markets.

A key part of growing the penetration of digital payments in India is to expand them to wider sections of the population, particularly those underserved by many mainstream payments apps and services. Growing digital payments among India’s vast rural population could help significantly grow non-cash payments, which could not only promote financial inclusion but also support better transparency of payments.

Other CSC projects

To promote the digital infrastructure, the government has also announced cooperation between CSCs and government-owned RailTel. RailTel was founded in 2000 with the aim to modernise India’s telecom system at railway stations and now provides broadband internet service in more than 5,000 communities in the country.

The partnership is intended to increase digital inclusion and lower the digital divide in the country, according to RailTel chairman Sh. Puneet Chawla.

To boost digital and financial literacy, which is the third cornerstone of the Digital India project, Dell, Vodafone, and the Learning Links Foundations will provide the CSC Academy with vans to raise awareness of the scheme among rural and semi-urban citizens.

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