Instead of retail usage, the Central Bank Digital Currency or the CBDC will have more value and be more effective on the cross-border payments side, Chairman and Co-Founder of Infosys and the founding Chairman of UIDAI, Nandan Nilekani pointed out on Tuesday.
We should look at high corridors, and focus on building a multilateral system through CBDC, he said.
Answering a query raised by Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore, Nilekani explained that while connecting the payment systems at a global level will take time, India should look at it by looking at the major corridors of money movements.
For instance, he mentioned India and Singapore, India and UAE, India and Saudi, etc.
“We can rank the flow of remittances globally, on the basis of corridors and then move ahead as a multilateral thing instead of bilateral. As a hub, like we have India and Singapore connecting payments, if Thailand or Philippines joins in, it will become a hub,” he highlighted.
The world needs a class of international digital public infrastructure across countries that offers low cost payment rails. Then the magic will happen, he added.
Nilekani, speaking at the B20 Summit organised by CII last month praised India’s transformation, which according to him has been enabled by a new approach to solve society’s issues through the digital public infrastructure.
“India is going from an offline, informal, low productivity, multiple set of micro economies to a single online, formal, high productivity mega-economy. And this is the trend of the next 20 years and you get to see all this happening every year, year by year,” he said.
‘SMEs biggest beneficiary of DPI’
In a discussion at the Global SME Finance Forum 2023 in Mumbai, Nilekani said that SMEs are amongst the biggest beneficiaries of Digital Public Infrastructure.
“Small businesses want access to credit, access to market and capital to grow their businesses, and if we can create public rails for these enterprises which will provide this much needed access, it’ll benefit every company. DPI has a big role in the life of SMEs,” he said.
He highlighted that in most countries today there are a whole set of companies that are providing affordable accounting services. In India we too have Khatabook, Tally, Dugna and the technology here is much cheaper.
“Most people prefer to make digital payments now, and over 50 million merchants are working through UPI. There is a record of those payments. On the buying side, especially those who file GST returns, you have to file invoices so there is a record for that as well. Given this, small businesses today have so much more data that they can share with lenders. I feel that with a sea of data, be it sales data, purchase data, accounting or cash flow statements, all of this will make the process of getting a loan easier for SMEs,” Nilekani explained.
He also cautioned about the increasing data sensitivity and risks associated with it by pointing out that anybody can build technology, and it is not necessary to take from India. However, if there is a proven technology that has made its mark and there is an open source, then the software and data should remain in the country to avoid any threat or security concerns.
