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As Demonetization Boosts, Digital Banking Raises New Challenges For IT Security & Networking

IT infrastructure providers have to keep up with the fast pace of digitization set by demonetisation

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India's move to demonetize high-value currency notes continues to get mixed response from the industry. While it may be difficult to accurately assess the long-term impact, the decision has surely triggered a digital revolution of sorts in the country. As the country move towards a less cash-dependent economy, IT infrastructure providers can play a big role in shaping India's digital future. In the new scheme of things, customers will have to increasingly use digital modes of payment, and these will have to be supported a robust network and security infrastructure.

In July 2015, the Indian government had initiated the Digital India campaign to promote digitization. Recently, NPCI launched the Unified Payment Interface (UPI), which is expected to make payments more efficient through UPI-based mobile apps. Apart from this, linking bank accounts with Aadhaar (biometric system) and opening millions of bank accounts through Jan Dhan Yojana in rural areas are the other among the other steps being taken towards the digital journey of the country. While these measures have been important for creating a foundation for digitization, the biggest push has been undoubtedly provided by demonetization.

With the penetration of smartphones and mobile-led internet already showing a steady increase, the demonetization decision has been revolutionary, especially in terms of digital payments. According to the latest reports released by Reserve Bank of India (RBI), the volume of mobile banking transactions from April-November reportedly soared to 53.086 crore as against 38.949 crore in the last financial year i.e. 1.36 times higher.

Digital Banking for Financial Inclusion
In 2014, the RBI's released a mandate that one-fourth of new branches must be opened in rural and semi-urban unbanked regions. There is a continuing need for opening more branches in under-banked districts. As smaller towns and rural areas become part of the organized banking sector, it will lead to larger financial inclusion of all in the India's digital growth story. With this digital linking, the banks will be able to cater to the increasing customer base not only in metropolitan cities but in tier II and tier III cities as well.

Digital banking will reduce branch-level transactions and eventually ease customer service pressures, thereby reducing the operating costs for banks. Statistics show that there has been a 27% increase in bank accounts in FY15 and 20% of the population has internet access, but only 13% of the total banked population used digital banking. However, with the concerted efforts from the government and banking industry, this figure is expected to rise dramatically now. Network infrastructure providers will have to keep pace with the demands of the new economic order.

Addressing New Challenges
With all these advantages associated with cashless transactions, there is a huge concern over the security of the data being tapped by hackers or unscrupulous people for their own mean ends. The excessive use of debit/credit cards for transactions put an extra load on the financial institutions. The banking system in the country is going through the period of upgradation to cater to the increase in number of customers and transactions. This will further result in increases in web traffic and load on the servers.

There is a big role networking companies can play to counter this problem and to help secure payment gateways and ensure protection of highly confidential customer data. As customers learn about the benefits of internet banking, they should also be made aware of the security concerns while opting for digital banking.

Networking companies have set up the infrastructure and services in such a manner that will be helpful for the digitalisation of banking services. It is also a big challenge for both the networking and banking sector to move together in bringing the new era in the annals of the country's development. Now that the demonetization and digitalisation are coupled together in bringing the country's economy in the fast mode and in the longer run, we can look forward to a bright new economic development of the country.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Shibu Paul

The author is Regional Director - India, GCC & SEA at Array Networks

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