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Digital Banking in India: A Review of Trends, Opportunities and Challenges

The banking sector has been the backbone of every economy whether developed or emerging. It plans and implements the economic reforms. Any change in this sector through the adoption of technology will have an extensive impact on an economy " s growth. Nowadays, banks are seeking unconventional ways to provide and differentiate amongst their diverse services. Both corporate as well as retail customers are no longer willing to queue in banks, or wait on the phone, for the basic banking services. They require and expect a facility to conduct their banking activities at any time and place. Plastic money (Credit Cards, Debit Cards and Smart Cards); internet banking including electronic payment services, online investments, online trading accounts, electronic fund transfer and clearing services, branch networking; telephone banking; mobile applications and wallet are some of the recent products and services acting as the drivers to the growth of banking sector. Towards this, the paper aims to examine the recent digital banking trends in India along with identifying the challenges faced by banks in incorporating these digital banking trends. The study is analytical and based on secondary data. The concept of digital banking is still evolving in the Indian banking sector and is likely to bring numerous opportunities as well as unprecedented risks to the fundamental nature of banking in India. Thus, this paper also aims to present the opportunities and challenges of going digital in the Indian banking sector alongwith some recommendations to overcome these challenges. The paper concludes that in future, digital banking will not only be acceptable but the most demanded mode of conducting transactions. It will be useful to the academicians, banking and insurance personnel, financial advisors, professionals, students and researchers.

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• Published: 07 July 2023

Unlocking the full potential of digital transformation in banking: a bibliometric review and emerging trend

• Lambert Kofi Osei   ORCID: orcid.org/0000-0001-7461-4839 1 ,
• Yuliya Cherkasova 2 &
• Kofi Mintah Oware 1  

Future Business Journal volume  9 , Article number:  30 ( 2023 ) Cite this article

9660 Accesses

5 Citations

Metrics details

Every aspect of life has been affected by digitization, and the use of digital technologies to deliver banking services has increased significantly. The purpose of this study was to give a thorough review and pinpoint the intellectual framework of the field of research of the digital banking transformation (DBT).

Methodology

This study employed bibliometric and network analysis to map a network in a single study, and a total of 268 publications published between 1989 and 2022 were used.

Our findings demonstrate that the UK, USA, Germany, and China are the countries that have conducted most of the studies on the digital banking transformation. Only China and India are considered emerging economies; everyone else is looking at it from a developed economy perspective. Additional research reveals that papers rated with A* and A grades frequently publish studies on digital banking transformation. Once more, the analysis identifies key theoretical underpinnings, new trends and research directions. The current research trend points toward FinTech, block chain, mobile financial services apps, artificial intelligence, mobile banking service platforms and sustainable business models. The importance of emphasizing the need for additional research in these fields of study cannot be stressed, given the expanding popularity of blockchain technology and digital currency in the literature.

Originality

It appears that this is the first study that examines the theoretical studies of digital banking transformation using bibliometric analysis. The second element of originality is about the multiple dimensions of the impact of technology in the banking sector, which includes customer, company, bank, regulation authority and society.

Introduction

The advent of information communication technology (ICT) is believed to have caused a paradigm shift in all aspects of human life. Technology has therefore become a necessary, unavoidable demand for society and the business environment, from work automation to service digitalization, from cloud computing to data analytics, from virtual collaboration to smart homes. Almost every industry is undergoing constant transformation because to technology. In the past 20 years, digitalization has had an impact on a variety of sectors, presenting fresh business prospects and encouraging new systems of innovation [ 1 ].

The finance sector is actively experimenting and inventing with the power of technology's digitization. It is also one of the industries that have successfully embraced digitization. One of the most laudable digital developments of the finance sector is the widespread adoption of digital banking over traditional banking methods. Recently, potentially disruptive technological breakthroughs and Internet-based solutions appear to have been introduced to the banking industry, one of the most established and conservative sectors of the economy. Digital transformation in banking is essential to enhance how banks and other financial organizations learn about, communicate with and satisfy the needs of customers. An effective digital transformation starts with understanding digital client behavior, preferences, choices, likes, dislikes, and stated and unstated expectations, to be more precise. Many academics are interested in how information and communications technology is advancing and how it can affect the banking industry [ 2 ]. However, the bibliometric analysis conducted by academics utilizing VOS viewer is assumed to be the first to look at the digital banking transformation (DBT) studies from a performance analysis and science mapping perspective.

Large data sets from databases like Web of Science, Scopus index or Dimension are permitted for bibliometric study. The bibliometric analysis moves the banks' digital transformation survey from single to multi-dimensional outcomes. A quick search of DBT studies shows that the first journal was published in 1989, despite the earliest forms of digital banking being traced back to the advent of ATMs and cards in the 1960s. The quantum of increase after 2014, amounting to 203 articles, representing 76% of all published articles on the topic, compels this study to focus on this field of DBT studies. We contend that establishing the area's intellectual framework is more crucial than ever. As a result, we make a contribution by offering a relevant, distinctive and significant intellectual map of the literature on digital banking studies through quantitative and bibliometric analysis. In mapping the intellectual structure of DBT, our study sets out to address the following critical research questions:

Who are the predominant contributors (publication by year, journals, publishers, authors, publication, journal quality, country, and universities) to the DBT theory?

What are the country's collaboration and citation analysis of the impact of digitalization on banks?

What is digital banking theory's intellectual foundation (co-citation)?

What are emerging research themes/trends and future direction (bibliography coupling

and keywords analysis) to digital banking theory?

In response to the above four questions, this study has at least four significant additions to the literature on digital banking. First, we extend and build upon prior assessments of digital banking by offering a factual, quantitative perspective on the theory's historical development across time. Of course, this study considers notable contributors, the intellectual framework and theoretical groundwork of the discipline, the degree to which individuals are connected, and thematic subdomains. We show how digital banking has advanced by evaluating the significant offshoots from the original work by [ 3 ]. Second, we objectively assess how faithfully emerging subtopic literature streams acknowledge and build upon Burk and Pfitzmann’s seminal works. As a result, our paper is uniquely suited to detect significant gaps that might exist in subtopic areas, and we offer suggestions for improving literature unification. Thirdly, we show how scholars of digital banking have historically changed their study goals over time in response to gaps between theory and practice in order to determine how faithfully they have addressed these gaps. Finally, we contribute to the digital banking literature by identifying emerging digital banking research and study trends. Overall, we think that our research exposes chances to grow more effectively and collaboratively in the future by highlighting well-traveled roads that previous researchers have taken, identifying potential cracks that may leave the literature in a state of disarray, and so forth [ 4 ].

This study used bibliometric and network analysis to map a network that comprises authors, co-authors, keyword occurrences, journal citations and author names in a single study. The approach can give a thorough overview and pinpoint the field's intellectual hierarchy [ 5 ]. Furthermore, according to [ 6 ], bibliometric approaches are suitable for mapping the academic structure of a certain area because doing so enables researchers to recognize "'what,' 'where' and 'by whom' founded the field. We carry out a thorough bibliometric evaluation to meet the research objectives by carefully extracting the sample literature using the proper inclusion and exclusion criteria and selecting the search string. The first stage involved a descriptive analysis, while the second stage involved a comprehensive bibliometric analysis. Utilizing VOSviewer and Rstudio assistance, citation and co-citation analyses were carried out to determine the intellectual structure of the study on digital banking studies. Weighted citation measures were used to identify the lead publications from the clusters.

The format of our paper is as follows: A brief theoretical overview of the DBT literature, including its core principles, significant developments and limits, is given in section " Theoretical background ." Section " Methods " describes the research approach in depth, and section " Results " shows the results of our investigation. The limitations of our study and their consequences for theory and practice are discussed in section " Discussions and future research agenda ." Finally, we provide our final observations in section " Conclusion ."

Theoretical background

Society, economics, banks and banking are changing as a result of technological advancement. Banks are an unneeded remnant whose purpose is best provided by alternate arrangements, even though we still need banking. The value chain of traditional banking has been disintermediated by technology, and its business model has been severely altered. As a result, Fin-Tech adoption and digital technology collaboration are widespread, constant and profoundly changing company structures [ 7 ]. Nearly 90% of banks fear losing business to Fin-Tech, which has replaced traditional value chains with shorter multi-modal and multi-directional nodes, according to KPMG's 2017 annual reports. Digitalization permeates the contemporary world, and the banking industry is no different. Our lives seemed to have grown so ingrained with digital technology that we would feel empty without it. Banks of all sizes are investing a lot in digital initiatives to maintain their uniqueness and meet as many of their customers' needs as possible. Digitalization leads to more customization and closer to customers. It is called digital banking when a bank renders its services online, and customers can make transactions and other activities online. Since over 73% of consumers use products from numerous platforms, Lee and Shin [ 8 ] highlight that bank model disruption and ascribe this to ongoing innovation followed by disruptive challenges, with the possibility of losing market share to Fin-Techs omnipresent.Mobile technologies and social media digitize bank value chains simultaneously addressing and influencing client demands and expectations.

However, according to our knowledge, not much research has been done on the banking sector. Nevertheless, it is well known that the banking sector, which is frequently IT-intensive, requires special consideration due to its significance for the whole economy. Berger [ 2 ] emphasizes that the benefits of technology adoption may not convert into improved production, which is consistent with the literature mentioned above. According to Berger, rather than the organization itself, the advantages of technology might be passed on to consumers and other production-related elements. Sharing data allow banks to process information more efficiently while also achieving huge economies of scale in the processing of payments. For instance, banks have reportedly employed information processing to handle deposit and loan client information as well as to more accurately assess risks, according to Berger and Mester. Additionally, they have employed telecommunications technologies to expeditiously process payments and disseminate this data while consuming fewer resources (2003, p. 58). This would imply that cost productivity increased in the 1990s.

Digital transformation has an impact on business processes and alters how banks conduct operations. A contributing aspect to the traditional relationship between customers and banks is digital transformation. Customers in particular have the right to use a variety of communication channels to engage in active and convenient engagement with banks and other customers via online customer support services. Most importantly, digital transformation enables banks to service a variety of consumers simultaneously, enhancing the bank's operational efficiency. In addition, the employee's job procedures are digitalized, reducing time and resources for both human resources and transaction execution. Thus, the bank will benefit from digital transformation by increasing output (raising the number of clients) and decreasing input expenses (reducing the number of employees and the time to make transactions).

The banking and FinTech industries will expand further in joint ventures, mergers and acquisitions toward convergence among banks, FinTech and technology organizations, and social media network providers as the new decade gets underway [ 9 ]. Digital technologies including blockchain, artificial intelligence (AI), data platforms, cybersecurity regulation technology and strategic collaborations will be well positioned to be retained in the banking business in a completely digitally changed financial environment [ 10 ]. Up until the advent of digital banking and the branch-based banking model in the early 1990s, traditional banking remained unaltered and unopposed. In the USA, Stanford Federal Credit Union opened the first online bank in 1994. The number of local bank branches has substantially decreased globally with the advent of online banking. Globally, the number of digital banks has been steadily rising at the same time. The first digital disruptor was ING Direct, which launched as an entirely online bank in 1996 and over the course of a little more than a decade attracted more than 20 million customers in nine countries without having to make any investments in physical infrastructure. In 2013, the FinTech bank "N26" received initial approval for a banking license. Amazon introduced an e-commerce-based checking account feature in 2021, while Facebook developed a social network-based banking service in 2020. By 2020, banking clients have been accustomed to using mobile banking apps, direct deposit to P2P payments and cloud-based banking platforms with AI.

To address our research issues in the present study, we employed two bibliometric analytic techniques. Since bibliometric analysis is quantitative, systematic, transparent and repeatable, it is strongly recommended for mapping the intellectual architecture of a literature stream [ 11 ]. The specifics of our research methodology and key conclusions are shown in Fig.  1 .

Flow chart of searching strategy and data collection process

To achieve its goals, this study suggests using publications and citations to analyze the performance of authors, institutions, countries and journals. Another unique approach used in this study is known as scientific mapping. Co-authorship analysis, clustering, citation analysis and keywords analysis are the approach factors [ 5 ]. Bibliometric approaches have been applied in recent investigations [ 12 , 13 ]. Then, we employ it to start the process of developing a bibliometric investigation [ 5 ]. The following actions are a part of the four-step process: data gathering and analysis, selecting the limiting criteria, data analysis, discussions and conclusions.

Defining the search terms

We started by conducting a methodical keyword search of the current literature on digital banking [ 14 ]. We extracted data from the Scopus index database. According to [ 15 ], Scopus has a larger journal than any other service that conducts data mining. As a result, this study made use of this database to mine data for its bibliometric analysis. To identify digital banking impact articles, we used the keyword methodology outlined by scholars who have recently conducted reviews of DBT. By concentrating primarily on work that has undergone thorough peer review, we aimed to maintain the academic integrity of our sample. Conference transcripts and book chapters were taken out of the analysis. Additionally, we excluded any non-English-language publications; 298 articles make up our final sample, which is deemed adequate for bibliometric study. These articles were published between 1989 and 2022. The keys words are: digital, bank, banking, business model, company, finance, economics and social sciences.

Keyword protocol applied in Scopus for extracting articles.

Data search and collection

As a result of several authors using the Scopus database for bibliometric analysis, it was chosen as the database from which the study's data were extracted [ 12 , 13 ]. In comparison with Web of Science and Dimension, the Scopus database has many indexed journals. The first stage of data extraction involved 295 publications with the titles "effect of digitalization on banks" and "digital transformation of banks" in June 2022. The following stage of the data processing was restricted to 268 English-language journals. The research is restricted to publications in the fields of banking, business management, accounting, economics, econometrics and finance. The last research search turned up 268 papers that were written between 1985 and 2022. Our literature review and bibliometric analysis are built on the foundation of the sample size of 268 articles. The method of data extraction is displayed in Table 1 .

This study raises different research questions covering contributors to DBT or impacts of digitalization on banks and banking, average journals and journal quality citation, digital banking intellectual foundations (co-citation), emerging research themes/trends and future direction (bibliography coupling and keywords analysis) in institutional theory.

Who are the predominant contributors to digital banking theory

This study responds to the first research question by addressing the dominant contributors to the DBT theory by using the following criteria: publication by year, journals, publishers, authors, publication, journal quality, country, and universities.

Publication by year

Figure  2 illustrates the number of DBT publications between 1989 and early 2022, recording 268 scientific publications. DBT received little attention from the scientific community in the early years from 1989 to 2005, recording as little as seven publications. The available data further show that publication increased slightly to sixty-seven (67) over a twenty (20) year period from 2006 to 2016. However, there was a dramatic change in this trend afterwards. Approximately 72 percent of these scientific publications, representing one hundred ninety-four (194) articles, occurred in the last six years. The figure further revealed that the years 2020 and 2021 alone accounted for 43 percent of all scientific publications in the field of DBT. Perhaps the havoc of Covid–19 and the strategic role of banks in successfully influencing the payment system architecture in particular resonated well with researchers to pay much attention to the field around this later period. While the quantity of publications has increased, publications within elite journals continue to grow. As recently as 2017, more over 40% of DBT research was published in prestigious publications. In fact, since 2017, the average annual proportion of publications in the top tier to all publications is 62 percent. As a result, our findings imply that the standard of published research has generally kept up with the volume of publications.

Trends in digital banking publication since 1989

Publication activity by country

Our findings also show that DBT research has a truly global reach, as shown by the participation of authors from 65 different countries. Figure  3 gives a graphic representation of the top countries publishing DBT research. For better clarity, the study limited Fig.  3 to cover countries with more than five publications. Although the publication of digital banking is international, it is interesting to notice that a significant portion of the work originates from a limited group of wealthy nations. More specifically, more than 46% of all published DBT studies come from the USA, UK, India, China, Germany, Netherlands, Hon Kong, Romania, Finland, Poland, Ukraine, Italy and Spain. Only China and India are from emerging economies. Figure  3 illustrates publication activities by country.

Top publishing countries on DBT

Publishing activity by journal

Two hundred thirteen different journals published the 268 articles in our sample. Table 1 lists the top publishing Journals. Based on publication count, we found that the leading journals for DBT include Financial Innovation, Journal of Cleaner Production, Journal of Economics and Business, International Journal of Information Management, Journal of Information Technology and Sustainability Journal. Our observation revealed that even though the Journal of Financial Innovation had only two publications, it claimed the top spot with two hundred and twelve citations total citation, given an average citation of one hundred and six. This study also used Australian Business School Council (ABDC) rating & ranking. Journal quality is rated and ranked by ABDC, with A* being the highest-quality journal, followed by A and B as the second- and third-best journals, respectively. According to the ABDC ranking, journal C is the lowest ranked. The data available to us have shown that the high-quality journals in class A and A* are publishing works on digital transformation. Three of the top five journals in our data are in the A class.

Publishing activity by author and organization

According to [ 16 ], bibliometric methodologies can be used to evaluate the intellectual influence of universities and their research personnel. To determine the sources of digital transformation in banking, we assessed the research output of individual academics and institutions. We found 598 distinct writers from 224 organizations publishing on the subject of banking digital transformation inside our dataset. The top publishing scholars and institutions are listed in Tables 2 and 3 . The descriptive statistics also show that [ 17 , 18 , 19 , 20 ] are the authors with the highest citation. In addition, the Financial University under the government of the Russian Federation, Comsats University—Islamabad, National Chiao Tung University—China and the State University of Management—Russia are the top four.

Country collaboration and citation analysis

Country collaborations of co-authors analysis.

The UK is the most productive nation in terms of publishing changes in digital banking. Australia, Canada, Indonesia and the Russian Federation have the lowest populations. Figure  4 demonstrates that, with seven linkages and 18 times as many co-authorships, the UK has the highest level of collaboration. Countries like China, Hong Kong and the Netherlands, each with six links, tie for second place. The inflow of overseas students completing second and third degrees in the UK and the US may be one reason there are more significant connections between the two countries [ 21 ]. Additionally, the UK and China are two other significant technology superpowers laying the groundwork for digitization. This might have inspired and drawn academics to carry out studies in the area.

Country collaboration of co-authors analysis

Citation analysis

The most read articles in the field of research on DBT were found through citation analysis. Citation analysis examines the connections between publications and finds the most significant publications in a given study area [ 5 ]. Similar studies that used citation analysis based on the Scopus database have also been looked at research [ 21 ]. The authors' and the study's primary focus are analyzed based on their citations in Table 4 . The Financial Innovation Journal and Journal of Cleaner Production publish the most-cited article. Liu et al. [ 22 ] and Yip et al. are the authors of these articles [ 23 ]. Even though publications on the evolution of digital banking began in 1989, the most highly cited papers are in 2016 and 2018, respectively.

Cluster analysis (results of reference co-citation analysis with reference map)

By conducting the co-citation analysis of references as previously described and grouping the references cited by papers on DBT into clusters, we next looked at the intellectual foundation and structure of the DBT to answer the third research question. The 268 papers in our sample used 8720 different references in total. Our examination of co-citations revealed five interconnected clusters with a total of 67 articles. At least 20 of the 268 papers in our sample, which contained all 67 of these reference articles, collectively cited them. In other words, these 67 publications are the quantitatively most significant references in the literature on the shift of banking into the digital age. Similarly, we used the weighted citation count provided by VOS viewer to ensure high-quality articles in cluster analysis. We looked at the top 5 articles in each cluster as presented in Table 5 , to find a common topic, and we labeled each theme accordingly, following [ 24 ]. We summarize the findings of the five most influential studies in each cluster. In the following sections, we give a quick overview of these reference clusters and how they integrate into the larger framework for digital banking (Fig. 5 ).

Co-citation network of the reference map

Cluster 1: Digital banking innovation

A cluster that established its boundaries improved its theoretical relevance and defined it as the first and most noticeable cluster to arise. Therefore, it makes sense that [ 25 ] are the most important tenet of this fundamental research stream. In 2022, digital transformation will continue to be a crucial trend in banking. The financial services sector is slowly changing as a result of technology, just like how it has affected other economic sectors. Physical bank branches have historically served as the primary point of contact for facilitating customer and retail banking transactions, according to [ 25 ]. Customers are continuing to transition from in-person to digital transactions as technology advances because of a complementary influence brought about by more access to digital banking services and an improved experience of new digital access, goods, services and functionality. They have developed a novel mapping technique for FinTech developments that assesses the extent of changes and transformations in four subfields of financial services: operations management, technological advancements, multiple innovations, and blockchain and other FinTech innovations. According to [ 26 ], the current wave of mergers and acquisitions in the financial services sector, combined with the broad availability of sophisticated technology, has increased competitiveness in the sector. Also, Henseler et al. [ 27 ] used discriminant validity assessment analysis to establish relationships between latent variables in business transformation. The digital banking revolution cannot go without challenges. All innovations encounter client resistance, claims [ 28 ] tested hypotheses using binary logit models comparing mobile banking adopters versus non-adopters, mobile banking postponers versus rejecters and Internet banking postponers versus rejecters using data from two comprehensive national surveys conducted in Finland ( n  = 1736 consumers). The value barrier is the main obstacle to the adoption of online and mobile banking, according to the study's findings. He also discovered that age and gender strongly influence decisions to adopt or reject. When [ 29 ] looked at the effect of cognitive age in explaining older people's resistance to mobile banking, they discovered that traditional and image barriers had an impact on usage, value and risk. All impediments, in turn, have an impact on resistance behavior. Furthermore, cognitive age was found to moderate these relationships. In order words, younger elders have limited or no resistance to DBT as opposed to elderly ones. All writers in this cluster agree that technology and evolving customer demands dramatically affect how banks operate in the twenty-first century. Indeed, the coronavirus outbreak has made it clear that banking institutions need to speed up their digital transitions. But the banking sector needs to modify its business models for front-facing and back-office operations to keep up with the changes and avoid potential upheavals. True digital banking and a complete transformation are built on implementing the most recent technology, such as blockchain cloud computing and Internet of Things (IoT).

Cluster 2: FinTech and RegTech in Banking

Scholars in this cluster preoccupied themselves with the concept of FinTech (Financial Technology) and RegTech (Regulatory Technology) thus the application of emerging technology to improve the way businesses manage regulatory compliance). They provided a range of viewpoints to make the disruptive potential of FinTech and its consequences for a more thorough financial ecosystem application in the banking and financial ecosystem easier to understand. Despite the widespread agreement that FinTech will have a big impact on the financial services industry, little academic literature has examined this topic, according to [ 30 ], citing [ 8 ]. Kindly assist with the changes.. Additionally, no accepted definition of FinTech has yet been established. On the other hand, according to Google, the query what is FinTech is presently ranked seventh among the most popular FinTech-related questions (Google, 2016b). He gave the most up-to-date definition of FinTech, which is a new financial business that uses technology to enhance financial activity. Contrarily, RegTech, or regulatory technology, uses cutting-edge tools and methods to assist financial institutions in enhancing their regulatory governance, reporting, compliance and risk management. According to [ 31 ] research, many desirable results might certainly be attained if regulators were willing to implement cultural change and integrate technical improvements with regulation. Such outcomes can include stabilizing the financial system, fostering systemic stability. The disruptive invention by [ 31 ] has the potential to improve consumer welfare, regulatory and supervisory outcomes, and the financial services industry's reputation. According to [ 10 ], the traditional business models of retail banks are seriously threatened by the emergence of digital innovators in the financial services industry. Lee and Shin [ 8 ] who contend that FinTech ushers in a new paradigm in which information technology drives innovation in the financial industry endorse this point of view. FinTech is hailed as a paradigm-shifting, disruptive innovation that has the power to upend established financial markets. The corporate world is quickly digitizing, shattering borders between industries, providing new opportunities and eliminating long-successful business models, according to [ 22 ], who added to the literature. They added that, on the plus side, growing digitalization presents opportunities, including the chance to take advantage of a solid customer connection and boost cross-selling. The dangers are typically precise and immediate, which is a drawback.

Cluster 3: The new digital business model of banks and other financial service providers

The papers in this cluster delved into the business model concept and, to a more significant extent, the new banking business model, which is technology-led. According to [ 32 ], business strategists and academics are paying more attention to business models as they try to understand how businesses create value and function well in order to gain a competitive advantage. Additionally, they argued that the digital economy had given businesses the chance to test out novel systems for networked value creation, where value is collaboratively produced by a firm and a big number of partners for a large number of users. The researchers came to the conclusion that four key themes are emerging, largely centered on the idea of the business model: as a new analytical unit, providing a systemic perspective on how to "do business," encompassing boundary-spanning activities (performed by a focal firm or others), and focusing on both value creation and value capture. These ideas are related and reinforce one another. Chesbrough [ 33 ] says that businesses must use their business models to commercialize novel concepts and technology. While businesses may make significant investments and have elaborate systems for investigating novel concepts and technologies, they frequently lack the ability to develop the business models that would be used to implement these inputs. He proposed that organizations should build the capacity to innovate their business models in order to make sound business decisions. Durkin et al. [ 34 ] did an excellent job investigating social media's role in a bank’s new digitally oriented business model. They suggested that social media had the power to profoundly alter customer-bank relationships and improve how the two sides communicate in the future. Their research shows that a wide range of clients regularly use transactional e-banking services. Loebbecke and Picot [ 35 ] presented a position paper that considers the factors driving how digitization and big data analytics drive the change of business and society. There is also discussion of the potential effects of digitalization and big data analytics on banking or employment, particularly in terms of cognitive work. Although several authors have recently proposed definitions of "business model," Shafer et al. [ 36 ] claim that none of them seem to be broadly recognized. This lack of agreement could be ascribed to the concept's interest from a variety of fields, all of which have connected it to something. To develop business models in the age of digital transformation, there must be an exponential shift in corporate culture and leadership concentration. The authors concur that banking is evolving as a result of a new wave of digital-only firms who are fragmenting the industry, componentizing products, and upending established business models. They claimed that switching from the previous business model to the new one is not the only way to succeed in this adaptable, fluid world. Instead, it will shift away from relying on a single, vertically integrated business model and toward a variety of non-linear models and value chain roles. In actuality, the Covid-19 epidemic has accelerated the development of business ecosystems for digital banking. Opportunities to develop, deliver and realize the value in new ways are made possible by digital technologies. The pipeline concept, the foundation of the classic universal bank, allows it to independently manufacture, sell and distribute products using its internal resources. This vertically integrated pipeline business model is disintegrating, making room for value chains that are becoming more fragmented and chances for new business models. A network of diverse business players from backgrounds including banking, insurance, pension, communications, real estate, education, healthcare service providers and IT are part of the new business model that the researchers have found. They work together to benefit each other through coexisting. The result of these developments and transformation is that financial services will continue to function in innovative and distinctive ways from those previously observed.

Cluster 4: Role of IT in banking

The fourth cluster concentrated on the crucial part information technology (IT) plays in the supply of financial services. According to [ 37 ], several banks have used information technology (IT) to provide consumers with a variety of more effective services. They think that in order to gain clients and boost profits in a cutthroat business environment, bank management must simultaneously use a variety of service channels. The majority of earlier research on IT investment in the banking sector has been on implementing cutting-edge IT-based service channels, including Internet banking, from the perspectives of clients [ 37 ]. From the standpoint of the bank, Barkhordari et al. [ 37 ] demonstrate that IT has a beneficial effect on performance by taking into account both the conventional physical and alternative IT-based service channels at once. They came to the conclusion that the purpose of using IT-related tools in banking is to forward a strategic, transformative objective. Due to the advancement of modern IT, the relationship between banks and their customers has changed substantially over the past few decades. They claimed that some of the examples include well-known innovations such as automated teller machines (ATMs), online banking (e-banking), and straight-through processing (STP), as well as others that have not (yet) gained widespread adoption, such as electronic cash (e-cash), or electronic bill presentment and payment (EBPP). At least the first has changed how people and businesses manage their finances and had an impact on the entire sector. They outlined how the aforementioned advances needed structures that took trends into account and might broaden the scope of current bank architectures to include horizontal and vertical integration dimensions. According to [ 38 ], enterprise architecture is typically represented by the following layers and design objects:

Product/services, market segments, corporate strategy goals, strategic plans/projects and interactions with customers and suppliers are all included in the strategic layer.

Organizational layer: Information flows, organizational units, roles/responsibilities, sales channels and business processes.

Applications, application domains, business services, IS functionalities, information objects, and interfaces make up the integration layer.

Software layer: programs, data structures, etc.

Hardware components, network components, and software platforms make up the IT infrastructure layer.

When it comes to transformations, architectures are really useful, because they integrate many layers. Creating new businesses or reorganizing old ones is transformation.

According to [ 32 ], organizations that are successful over the long term have basic principles and purposes that never change while continuously adapting their business strategies and operations to the external environment. IT's penetration of the banking industry falls under this category of business change. Liu et al. [ 22 ] contributed to the conversation by asserting that technological advancements like high-frequency trading systems (HFT) and algorithmic trading systems had altered the financial markets. The point is that information technology (IT) makes it possible to design complex products, improve market infrastructure, apply adequate risk management strategies and aid financial intermediaries in reaching geographically remote and diverse markets. The Internet has considerably impacted the delivery methods used by banks. The Internet has become an essential medium for distributing banking services and goods.

Cluster 5: Response to DBT

This fifth and final cluster considered the attitude of staff and clients toward DBT. If computer systems are not utilized, they cannot increase organizational performance. Unfortunately, managers' and professionals' opposition to end-user technology is a common issue. We need to comprehend why people accept or reject computers in order to better forecast, explain and promote user acceptance. The findings point to the potential for straightforward yet effective models of user acceptance factors, with practical utility for assessing systems and directing managerial actions aimed at addressing the issue of underutilized computer technology. Agarwal and Prasad [ 39 ] assert that a recent lack of user adoption of information technology breakthroughs is to blame for the frequently paradoxical link between investments in information technology and increases in productivity. They continued by saying that the academic and professional sectors had grown concerned about this paradoxical connection between spending on information technology and increases in productivity. The axiom that systems that are not used generate little value is an often proposed explanation for this relationship. Therefore, in order to achieve the expected productivity advantage, it is not enough to simply have the technology available; it must also be accepted and used effectively by its target user group [ 39 ]. The work of DeLone and McLean threw more light on technology acceptance. When [ 32 ] created a thorough taxonomy, they provided a more comprehensive picture of the concept of information system success. Six main characteristics or categories of the success of information systems are proposed by this taxonomy: system quality, information quality, utilization, user satisfaction, individual impact and organizational impact. Meanwhile, further discussions in this cluster have given more insights into customer acceptance or otherwise of IT in banking. Perceived utility, perceived ease of use, trust and perceived enjoyment are discovered to be immediate direct drivers of customers' views toward utilizing Internet banking, according to [ 40 , 41 ] research. This finding is consistent with some of the findings of other studies. The clients' behavioral intentions to utilize Internet banking are determined by attitude, perceived risk, fun, and confidence. Although the perceived website design has a direct impact only on perceived usability, its indirect effects on perceived usefulness, attitude and behavioral intentions are considerable. Perceived enjoyment only has a short-term impact on perceived ease of use, but both a direct and indirect influence on perceived usefulness. Customer experience is at the heart of the digital banking transition. Therefore, banks must continuously innovate products, integrate cutting-edge technology and add value for their clients.

Keywords analysis

The trends in the keywords displayed in multiple studies can be used to determine the main study direction for upcoming investigations [ 42 ]. The VOSviewer r software, which has previously been utilized by other writers, is employed in this study to extract the author's keywords [ 12 , 21 , 43 ]. A co-occurrences network is produced by the VOS viewer program as a dimensional map [ 12 ]. We used bibliographical author keyword analysis to examine our sample and determine whether there was any increasing or declining themes of interest per research question four. We discovered that writers of the 268 publications in our sample employed 829 keywords to indicate their scientific work, meeting the studies' threshold. Only 26 words, or around 3% of the total, were used at least four times. Our findings imply that the literature on DBT is incredibly heterogeneous. Indeed, according to the results of most recent articles, 80 percent of the authors' specified keywords were utilized precisely once. However, there are several keywords that authors frequently utilize to describe their works (Fig.  6 ). FinTech is the most often used keyword, with 25 occurrences and 29 links to other keywords, followed by digitalization, with 18 and 20 links. Reporting on Digital Transformation contains 13 instances and 18 links. The bibliometric map of author keywords is shown in Fig.  6 .

Bibliometric map of author keywords co-occurrence with five minimum occurrences and overlay visualization mode

The theme areas contemporary academics focus on can be seen by closely examining the map. The use of bibliographic coupling is based on the subject the authors are investigating. The digital transformation of financial service delivery was investigated by [ 43 ] from the perspective of Nigeria about chatbot adoption. A moderated mediated model was used by [ 44 ] to examine how blockchain technology was adopted in the financial sector during the fourth industrial revolution. Additionally, Karjaluoto et al. [ 19 ] looked at how users' perceptions of value influence their use of mobile financial services apps. Similarly, Podsakoff et al. [ 16 ] focused on enhancing the value co-creation process: artificial intelligence and mobile banking service platforms. Taking the discussion to a different dimension, Teng and Khong [ 45 ] worked on Examining actual consumer usage of E-wallets: A case study of big data analytics. David-West et al. [ 46 ] examined sustainable business models to create mobile financial services in Nigeria. Yip and Bocken [ 23 ] deepened the discussion and, in turn, looked at Sustainable business model archetypes for the banking industry. Finally, Niemand et al. [ 20 ] highlighted digitalization in the financial sector: a backup plan with a strategic focus on digitalization and an entrepreneurial attitude. Future research on financial services provided via e-wallets and mobile banking is the main emphasis of the second cluster. Authors are still studying entrepreneurship and digitalization in the supply of financial services. Future research is required in these areas of study because blockchain technology and digital currency are also gaining traction in the literature. The most popular search terms and the number of times they were used are displayed in Table 6 .

Discussions and future research agenda

The first paper on DBT was published by [ 3 ], and since then, both its audience and popularity have grown. Yet, the rapid rise in total publications across a wide range of specialist areas, notably during the last five years, has made it increasingly difficult for academics to ascertain the intellectual structure of the field. Existing qualitative assessments, which usually only address a small fraction of Digital Transformation in Banking while failing to accurately capture the entire body of work, have in some ways made the problem of theoretical specificity worse. It is rather tricky for a qualitative evaluation to describe more than 260 works over three decades. Thus, our research fills a critical vacuum in the literature by thoroughly (and quantitatively) mapping the digital banking domain, documenting its conceptual structure and suggesting its most likely future orientations. The theoretical underpinnings from which they have been developed, the subtopics and subthemes they have written about, and the notable historical contributors to DBT study (such as scholars, schools, and journals) are all identified in our work over time. Overall, our findings imply a considerable worldwide impact of digitization on banking, making it a truly global study paradigm. Additionally, the high number of citations for recent works shows that there is a great need for more research utilizing the DBT theoretical framework, suggesting that the field of study will continue to advance for a very long period. The study's structure is based on a wide range of goals and inquiries.

The initial research question aimed to characterize the increase in publication (document by year and county) and productivity of journals in terms of citations, top authors and institutions of studies on DBT. According to the data that are currently available, 174 papers, or 72% of all scientific publications, were published in the last six years, from 2016 to 2022. Also, prestigious journals carried out more than 40% of the publications. Therefore, our data imply that the quantity and quality of published research have typically stayed up. Our data also show that the research on the DBT is genuinely global in scope, as seen by the contributions of authors from 65 different countries. China and the UK are split equally, with India coming in second. It is essential to add that the BRIC (Brazil, Russia, India and China) countries perform well with publications. African countries like Ghana and Nigeria are equally showing promising signs of publications in this light. Regarding journal productivity, the study has revealed that articles on the banking industry's digital transformation are published in high-caliber journals in the A and A* classes. In our statistics, three top-five journals fall into the A category. These are the International Journal of Information Management (A*), Journal of Information Technology (A*), and Journal of Cleaner Production (A). We found 598 distinct writers from 224 organizations publishing on the subject of DBT inside our dataset. The descriptive statistics also reveal that Ranti et al. (2020) have the most citations, while the Financial University of the Government of the Russian Federation is the most productive institution in terms of the DBT, with seven publications.

The second research topic analyzes the co-authorship analysis and citation analysis by nation of authorship. Figure  3 shows that the UK has the maximum amount of collaboration, with 16 links and 18 co-authorships. China, Hong Kong and the Netherlands tie for second place with six linkages each. The increase in foreign students seeking second and third degrees in the UK and China may be one factor fostering closer ties between the two countries [ 21 ]. The UK and China are two other critical technological superpowers establishing the foundation for digitization. This might have attracted scholars and prompted them to conduct studies in the area. Future research might study the effects of digitization on banking on enforcing public and private sector regulations in emerging nations like Africa.

The third research question assesses the intellectual structure of the knowledge of DBT. This result was attained through citation analysis. Finding the most important publications in a specific field of study through citation analysis involves looking at the relationships between publications [ 5 ]. The primary point of contact for enabling retail banking and consumer transactions in the past has been actual bank branches. Customers are still transitioning from in-person to digital transactions as technology develops thanks to a complimentary effect brought on by increased access to digital banking services as well as an improved user experience of new digital access products, services and an improved user interface. Further research revealed that the banking sector's transition to digitization had increased competitiveness among service providers. The citation analysis highlighted the impact of FinTech on financial services innovations. According to [ 8 ], FinTech ushers in a new paradigm where information technology drives innovation in the financial sector. FinTech is hailed as a paradigm-shifting, disruptive innovation that has the power to upend established financial markets. We discovered that the corporate world is rapidly digitizing, removing industry barriers, opening up new opportunities, and dismantling long-established business structures. The concept of a business model and, to a greater extent, the new banking business model was also included in the analysis. The authors proposed that businesses build the capacity to innovate their business models since it makes good business sense. For instance, it has been seen that social media is significantly influencing the business models of some digitally focused banks. Social media, according to some, has the power to radically alter customer–bank interactions and improve how the two sides communicate in the future. If banks are to have an impact, they must transition from relying on a single, vertically integrated business model to multiple non-linear models and roles in the value chain. As a result of these developments and transformations, financial services will continue to operate in novel and unique ways from those previously observed. The study has proven beneficial for the use of IT in banking. IT-related tools are used in banking to advance a strategic transformational goal. The connection between banks and their customers has altered significantly over the past few decades with the development of contemporary IT. The most prevalent enterprise architecture layers and design items, according to [ 38 ], are the strategic, organizational, integration, software and IT infrastructure. It has been established that information technology (IT) enables the development of complicated products, enhances market infrastructure, implements efficient risk management techniques and enables financial intermediaries to access diverse and geographically dispersed markets. Despite the enormous advantages of digital banking, opinions on the systems are widely divided. Agarwal and Prasad [ 39 ] claim that a recent lack of user acceptance of information technology breakthroughs is to blame for the frequently paradoxical link between investments in information technology and productivity increases. They said that the counterintuitive connection between productivity increases and information technology investments had alarmed academic and professional groups. According to theories advanced by academics, digital technology, in general, and information systems, in particular, must fall under one of the following taxonomies to be accepted and used: system effectiveness, accuracy of the data, usability, user happiness, personal effect and organizational effect. The fourth research question looked at the future directions and emerging research themes and trends in studies of the digital banking transition. Future scholars are still interested in business models, FinTech, and DBT or banking. Additionally, the focus of the conversation is rapidly shifting to emerging and developing economies. Nevertheless, contemporary research areas include blockchain [ 44 ], mobile financial services apps [ 19 ], artificial intelligence and mobile banking service platforms [ 47 ], and sustainable business models [ 46 ]. The importance of highlighting the need for additional research in these fields of study cannot be overstated, given the growing popularity of blockchain technology and digital currency in literature.

Implications for theory

At least four substantial contributions to the body of DBT research, in our opinion, have been made by this study. We contribute primarily by expanding on current DBT reviews. While other reviewers have used qualitative methodologies, we may supplement and expand on such assessments by utilizing a thorough bibliometric study, allowing us to be more explicit about DBT's intellectual progress and structure. This is significant because it gives us a unique opportunity to highlight notable contributors and pinpoint the present and past origins of DBT research. Second, our quantitative analysis of bibliographic data demonstrates how DBT research has developed into its paradigm, which is supported by the original article by Bürk and Pfitzmann [ 3 ]. Third, we make a contribution by detecting rising and negative trends in subtopic areas, so identifying the subjects that are most likely to be studied in the future by academics. Fourth, by conducting a comprehensive assessment of DBT, we pinpoint areas where theory and practice diverge and evaluate the ways in which researchers have aided practitioners by modernizing DBT to comprehend and foresee the difficulties of "real-world" business.

Implications for practice

The banking sector, like other sectors, aspires to embrace contemporary practices and incorporate digital technologies into its operational procedures. This complicated collection of measures necessitates a methodical and considered approach, particularly in financial services where substantial sums of money and severe risks are at stake. DBT in this sense refers to several adjustments made to the banking sector to integrate different FinTech technologies to automate, optimize, and digitize procedures and improve data security. The processes and technologies employed in the financial industry will alter due to several small and significant changes implied by this process. The fundamental tendency of digital transformation, regardless of industry, is the integration of computer technologies, and Statista's analysis indicates that this trend will continue to expand. The challenges posed by introducing new digital innovations must be understood by stakeholders, who must also articulate solutions. Again, embracing digital technologies will involve taking on several tremendous risks; for this reason, bank executives must simultaneously establish and implement a strategy for managing those risks. If regulators utilizing technology to oversee and control the industry want to ensure solid financial stability in the economy, they must constantly be ahead of innovation risk with appropriate countermeasures. Digital banking involves the collection and processing of vast volumes of customer data. This raises the issue of data protection following regulations and international best practices. The DBT's third useful outcome is that it prompts organizational leaders to consider how their personal biases—which are the products of their histories, characteristics and experiences—might influence opinions and, ultimately, bank performance.

Limitations

We know that no study is faultless, and ours has its setbacks. While we made every effort to minimize problems, we nevertheless expect to offer insightful suggestions for future bibliometric and DBT studies. First, we used the Scopus database, a popular database used in bibliometric research, to gather our bibliometric data [ 48 ]. Even though Scopus contains the most data sources, it does not include all research databases on the transformation of digital banking. Furthermore, because this database has so many uses, using Scopus for data collection could likely lead to mistakes that show up when performing bibliometric analysis. To put it another way, errors might have happened if articles were mislabeled, and it is possible that the database completely missed publications important to our study [ 49 ]. To address this potential issue, we followed the best bibliometric analysis methods. For instance, we thoroughly purged duplicates and other forms of incorrect items from our data. Additionally, this research is restricted to English-language publications, and the subject only includes business, management, finance, economics, FinTech and banking digitalization. The data search will be enhanced, and the search restriction will be reduced using several databases.

This article assesses the intellectual landscape and future potential of the field of DBT research, as well as the influence of that research. The approach for this study is based on descriptive analysis, performance analysis and science mapping analysis, and it employs bibliometric analysis. The set was created based on 268 documents from the Scopus database that span the years 1989 to 2022. We demonstrate that DBT has continued to be a hot topic for academic research approximately three decades after its conception. Our findings also indicate that the UK, USA, Germany and China are the countries that have conducted most of the studies on the DBT. Only China and India are considered emerging economies; everyone else is looking at it from a developed economy perspective. We further categorize the body of research on DBT into five main clusters, including (1) Digital Banking Innovation, (2) FinTech and RegTech in Banking, (3) The New Digital Business Model of Banks and Other Financial Service Providers, (4) The role of IT in banking, (5) Response to DBT. Due to a significant influx of international students, the UK, China and Hong Kong continue to be the most collaborative countries. Additional research reveals that papers rated with A* and A grades frequently publish studies on DBT. Once more, the analysis identifies key theoretical underpinnings, new trends and research directions. FinTech, block chain mobile financial services apps, artificial intelligence, mobile banking service platforms and sustainable business models are currently researched. Given the rising popularity of block chain technology and digital money in the literature, highlighting the need for more research in these areas of study cannot be overstated. This study builds on previous reviews by objectively charting the inception and intellectual growth of the digital banking area and evaluating its future possibilities. In essence, this bibliometric study offers a distinct and original viewpoint on the evolution of DBT by carefully and objectively assessing prior material and concurrently offering a clear road map for future work.

Availability of data and materials

The datasets generated and/or analyzed during the current study are not publicly available but are available from the corresponding author upon request.

Abbreviations

Digital banking transformation

Financial technology

Regulatory technology

Internet of things

Automatic teller machine

Artificial intelligence

Information technology

Information communication technology

Straight through processing

Electronic banking

Electronic cash

Electronic bill presentment and payment

High-frequency trading system

Electronic wallets

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Acknowledgements

The authors would like to graciously thank the Editor-in-Chief and the editorial team, and the two anonymous reviewers for their feedback in developing this paper. The writers also acknowledge Prof. Alfred Owusu, Dean of KsTU's Business School, for his guidance, inspiration and support. We appreciate his inventiveness and how it enabled us to clearly define the goal and possibilities of this effort. The authors also appreciate the helpful advice provided by Dr. Thomas Adomah Worae and Prof. Abdul-Aziz Iddrisu as we worked on the first versions of the manuscript. Finally, we would like to thank Riya Sureka, a research scholar at the Malaviya National Institute of Technology in Jaipur, India, for his advice on how to analyze bibliometric data using the ‘R’ and VOS viewer software.

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All authors contributed significantly to the development of this article; LK generated the title, wrote the introduction, collection and analysis of the data, interpreted the co-citation analysis and put the manuscript together. YC reviewed the existing to conceptualize the study, reviewed the study and expanded the analysis. KM involved data generation from Scopus data base, software running, data analysis and review of the work. All authors read and approved the final manuscript.

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Lambert Kofi Osei holds a masters of business administration (finance option) degree from the Kwame Nkrumah University of Science and Technology. He is currently a PhD finance and banking student of Siberia Federal University, Russia. He is currently a lecturer at the Department of Banking Technology and Finance—Kumasi Technical University—in Ghana. He also holds an associated charted membership with the Chartered Institute of Securities and Investment—UK. Osei is certified expert in microfinance (CEMF) from the Frankfurt School of Finance—Germany. Osei has had considerable level of industry experience, with over 12 years managerial experience in the banking industry in Ghana including been the chief executive officer of Eman Capital. Prior to joining Kumasi Technical University, he was the National Chairman of Ghana Association of Microfinance Companies (GAMC)—an umbrella body of all microfinance companies in Ghana. Despite joining academia recently, Osei has made two publications of his work and a lot more articles are under completion stage to be sent for review. It is the goal of him to be an authority in the field of digital banking to impact businesses and societies.

Yuliya Cherkasova holds Ph.D. in economics and is a associate professor, School of Economics, Finance and Public Administration, Siberian Federal University. She is the chair of Digital Financial Technologies of Sberbank of Russia. Her research interests include banking prudential regulation of banks, digital economy and public finance. As a researcher, she has published more than 70 articles, 10 textbooks on topics, related finance and banking aria.

Kofi Mintah Oware has a Ph.D. in business administration (sustainability finance and management) from Mangalore University, India, and an MBA degree from Aberdeen Business School (Robert Gordon University—UK). He is currently a senior lecturer in the department of banking technology and finance. He is also a chartered accountant with membership from the Institute of Chartered Accountants (ICA), Ghana, and Institute of Cost Executive & Accountants (ICEA)—UK. Before joining academia, he worked in blue-chip companies for 12 years in various capacities, including chief accountant, head of finance and general manager for finance & administration in Ghana and research consultant to Aberdeen Businesswomen network in the UK. Among his key roles during industry experience include representing management in union negotiations and presenting the firm's financial reports in the corporate board meeting. In academia, he has 34 publications in various journal, including two "A" s under ABDC (Meditari Accountancy Research), three "B" s under ABDC (Social Responsibility Journal & Society and Business Review) and one C (South Asian Journal of Business Studies) all with Emerald publications. Also, he has 10 academic papers in various journals under review.

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Osei, L.K., Cherkasova, Y. & Oware, K.M. Unlocking the full potential of digital transformation in banking: a bibliometric review and emerging trend. Futur Bus J 9 , 30 (2023). https://doi.org/10.1186/s43093-023-00207-2

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Digital financial inclusion: next frontiers—challenges and opportunities

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India’s Financial Inclusion journey has been phenomenal in the last decade and expressly promoted by the Government of India through their Digital India Movement & Pradhan Mantri Jan Dhan Yojana. Reduction of poverty and addressing the challenges of ensuring sustainable income could become a key factor to achieve an inclusive society. Information and Communication Technology are providing access to unbanked population progressively and helping to bring them into the banking segment. Digital Technologies are driving usage and making a positive impact on livelihood of citizens. In this paper we are discussing on what is achieved in Financial Inclusion so far and what next and how do we leverage and harness digital technologies to achieve an inclusive society. This paper enlists various challenges that continue to prevail in achieving an inclusive society. We have put forth recommendations on addressing the key challenges and qualified the importance of collaboration and transparency between all the key stakeholders to achieve an inclusive ecosystem.

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1 Hypotheses Development

How do we enhance the process of Digital Financial Inclusion? How can Information and Communication Technology help in providing the citizens with a sustainable livelihood and inclusive growth? How can we safeguard the people who are included in the FI Framework and guarantee that they will not be excluded again?

To achieve a financially inclusive society that is sustainable and promotes inclusive growth for all, we need to provide the citizens of the country with access to education, basic financial services, affordable healthcare & suitable way for upskilling and improving their talent. They should be brought inside the legal framework where they can sustain and thrive.

The high amount of disparity and digital divide between Urban & Rural areas in India must be eliminated and people must be educated financially and included socially. There must be a cohesive ecosystem where Financial, Social & Health Inclusion that can work in tandem to accomplish a sustainable inclusive society. India’s digital payment and rural infrastructure must be improved to ensure zero disruption and continual access to telecom networks. Access to line of credit must be provided with adequate last mile services to ensure service delivery.

2 Deployment Approach and Methodology

This research study used quantitative and qualitative data from various official sources such as websites of Reserve Bank of India, Niti Aayog, Direct Benefit Transfer, PM Jan Dhan Yojana and other information published officially by the Govt. of India and Ministry of Finance. The data points and facts visibly showcase the impact of Financial Inclusion so far in India and helps us understand the gaps that must be filled to improve growth and ensure sustainability.

Comprehensive secondary research from published journal articles and expert committee opinions were considered to understand Digital Financial Inclusion initiatives and details of the best practices followed in various geographies. By leveraging this information, we have identified the key problems preventing us to realize an inclusive society and we have provided with qualified recommendations to tackle this.

Inclusive society is well-defined in terms of Financial Inclusion, Social Inclusion & Health Inclusion. Consistent with this approach, we define our key dependent variables ‘finance’ —as the access to a line of credit, availability and usage of basic financial services, ‘social’ —access to education and literacy, improvement of skills, & ‘health’— Personal & Societal Wellness. From this, we can understand that we are deploying a self-reporting measure to evaluate our research findings and we have substantiated our recommendations with real world examples from other studies conducted in similar functions. Prior research also acknowledges the subjectivity of these self-reported measures of FI [ 24 ].

3 Introduction

Financial Inclusion (FI) means delivering basic financial services to the marginalised and excluded members of society. It is the process in which we ensure adequate line of credit accessible by the weaker section of the society at a reasonable cost. Financial inclusion helps in developing a culture of savings among semi urban and rural population by bringing low income groups within the formal framework of banking and insurance sector which is significant for national economic development. It came into prominence around 2008 when it became clear to the government that it needs to be the key driver for economic growth of the country. Vision for Financial Inclusion in India is to induce inclusive financial growth by including the unbanked and unsupported individuals and MSMEs by formal financial institutions by providing them convenient access to basic financial products including bank accounts, remittances, bill payments, government supported insurance, pension products and formal credit at reasonable costs. There has been a growing evidence on how financial inclusion has a multiplier effect in boosting overall economic output, reducing poverty and income inequality at the national level.

With the advent of “ Digital India Movement ” and telecom penetration to deep rural areas, sincere efforts are made to bring widespread formal banking channels and innovative financial technology together to create a viable and vibrant ecosystem to drive accessibility of formal financial products to unbanked and deprived segments of Indian society. We at TCS, started this journey very early for some of our partner banks, with the services related to opening of no-frills accounts, delivering smart cards containing balance and biometric information to registered on the card. There was no active network connectivity during initial stages of FI. Last mile agents used to visit the bank, withdraw money & beneficiary list, go to each beneficiary, authenticate with biometrics, and deliver the services. Post which, they go back to the bank to reconcile. Out of 650,000 villages in India, around 150,000 was identified by the govt. initially to service through BC Model [ 15 ].

Fast-forward now, there is far more online connectivity in the remotest areas, smart card is replaced by real time Aadhaar based authentication, beneficiary enrolment & transactions can be done in real-time in field. Last mile channels like micro ATMs, Kiosks, PoS machines, Tablets, Mobile Phones are utilised for service delivery. Basic requirement of UPI based FI transaction is that the beneficiary account should be opened through PM JDY scheme and it is linked to the customer’s mobile number. Banks started channelling UPI based transactions on opened bank accounts. As of 2019, little over 470 Mn (~ 34.47%) is urban population of India. However, more than 65% are in semi urban and rural areas where access to digital services is lesser than major cities [ 13 ].

There is a great need for inclusive growth. By leveraging digital technologies, this is a great opportunity for Govts. and market leaders to improve digital penetration, ease of use of digital products, contextualised and personalised offerings to citizens increase availability, drive down costs, enhance security and trust. There is a need for sustainable cooperation between govts., businesses and unbanked population [ 15 ].

National leadership and policy making institutions like RBI and Niti Aayog have brought in some strong initiatives for inclusive growth which culminated in National Mission for Financial Inclusion namely Pradhan Mantri Jan Dhan Yojana PM JDY leveraging banking network and technology innovations. It enabled access to financial services and coverage of banking to excluded population.

Till date over 344.3 Mn plus new accounts have been opened and a bunch of social and financial security products are offered to the account holders like entrepreneurial credit, financial advice, mortgage, loans and insurance, overdraft of ₹10,000, Accidental Death cum Disability Insurance (PMSBY), Term Life Cover under PMJJBY, Old Age Pension (APY scheme), PM Kisan, Educational Scholarships to students etc. [ 6 ].

With over 95% of Indian population having Unique Identification through Aadhaar, India achieved 80% of adult population having bank account by 2017. 77% Indian Women have bank accounts. In the outbreak of Covid-19 pandemic, this back bone of bank account has been instrumental to provide help of ₹500 per month for 3 months to over 200 Mn woman beneficiaries, transfer of ₹6000/- in 3 instalments per year (currently citizens are receiving their 8th instalment) of PM Kisan Samman Nidhi Yojana to farmers through direct benefit transfer schemes [ 10 ]. Under PM JDY, 423.7 Mn total no of Beneficiaries of which 279.5 Mn Semi Urban/ Rural Beneficiaries [ 24 ]. Rapid digital penetration along with enhancing the financial literacy of people has started. We are moving from assisted to self-service model for multiple services.

For almost all the public and private sector banks, TCS has provided its Financial Inclusion Solution Suite enabling end to end integration with their core banking systems (CBS) through its Branchless Banking Solution. With a wide range of services catalogue, TCS is delivering last mil services to over 150 + thousand locations. TCS has been the technology service provider (TSP) to DBT for various stake holders in which we are running a Heterogenous Technology System for money transfer. TCS is co-ordinating with multiple stakeholders in the DBT value chain such as Central & State Govts., banks & financial institutions in the country, RBI. DBT has proven to be critical in arresting leakage of govt. funds (~ ₹1700 Bn), eliminate involvement of middlemen in transactions, has capacity to cover a variety of areas, increase the number of beneficiaries (~ 770 Mn) and transactions and lower the distribution cost per transaction (Over 6 Mn Trnxs/day) [ 11 ].

Multiple technological solutions such as FI Platform, Beneficiary Registration Application, TCS BaNCS Enterprise Payments Hub, APBS (Aadhaar Payment Bridge System) Adaptor, TCS BaNCS CBS, Aadhaar Data Vault Solution were implemented by TCS and leveraged for end-end service delivery. RBI has played the guiding role which helped banks in achieving various objectives such as the introduction of MICR based cheque processing, Implementation of the electronic payment system such as RTGS (Real Time Gross Settlement), Electronic Clearing Service (ECS), Electronic Funds Transfer (NEFT), Cheque Truncation System (CTS), Mobile Banking System etc. [ 8 ].

Further to that, under the Digital India Movement, various digital payment methods—UPI, BBPS, IMPS, NETC, AePS, etc. were launched by NPCI, in coordination with RBI, some of which was run by TCS on behalf of RBI & NPCI. RBI’s working group reviewed the BC Model and suggested that BC agents or BF agents (Business Facilitator) can deliver last mile services in semi urban & rural areas. Individuals working as PCO Operators, Retired Teachers, Petrol Pump Owners, Grocery, Chemist & Fir Price Shop owners, NGOs, MFIs, SHGs linked to banked were authorised to act as last mile agents and provided a commission based on amount of services rendered [ 9 ].

There is a huge market for several financial institutions & other ecosystem players in the bottom of the pyramid by creating right products & services and ensures it reaches the intended customer [ 15 ]. TCS has been chosen as primary service provider for kiosk banking solution for many of the Customer Service points established by various Public Sector Banks (PSBs).

4 Current Challenges and Observations

People included in the Financial inclusive ecosystem end up getting excluded and are not able to sustain within the framework due to various reasons general or health related causes [ 1 ].

There is a clear demarcation of digital divide among—some are tech savvy people and delivering the services and making them understand is not difficult, where as some in semi-urban and majority of people in rural areas find difficult to understand and utilise technology efficiently [ 16 ].

Lack of financial literacy and awareness on financial cybercrimes has resulted in general mistrust among rural population which leads to reduced digital penetration [ 27 ].

There is a burden on running sustainable last mile delivery model, particularly in rural areas & last mile level service delivery. Multiple Govt. & Business agencies are trying to reach the same location for various reasons related to FI, Social or Healthcare inclusion and these are disjoint efforts and driving higher costs.

Different data elements available with govt. such as healthcare schemes data, social inclusion data, COVID data, vaccination data, etc. are not leveraged to full extent as there is clear lack of coherence between these data elements.

Last mile technological systems and artefacts are vulnerable to exposure and exploitations. It is loosely handled by BC or BF agents as adequate security measures to control it are not put in place. This has resulted in lot of frauds happening on the ground. About 22% BC agents faced fraud in 2017, a noteworthy increase from 2% in 2015 [ 17 ]. Business model of Last mile & BC Agent network must be looked at again from privacy security & safety angle.

Data Privacy is still a major concern as a lot of captured data is easily available to various stakeholders as PII norms are not completely followed. KYC Data & mobile numbers are available everywhere.

Biometric data is captured duplicitously by some BC Agents in clay who will replicate it later for fraudulent reasons.

Another way is when they give a manual receipt instead of computerised one during transactions.

SMS messages for transactions in an account are not reaching the customer due to lack of mobile device (More than 310 Mn people still do not possess a basic feature phone or a smart phone) or financial institutions are not sending these messages for low value transactions. This has led to increased dependency on local agents.

Access to credit is still a concern as small time lenders charging high rate of interest are prevalent in rural areas. Govt. schemes have not penetrated fully and need more rural outreach to enhance credit access [ 15 ]. Lack of avenues for digital lending and online loans from credible financial institutions is missing.

Recommendations for individuals based on their requirement is not provided and leveraging the personalised data of the person, by performing analytics using AI & ML, banks can offer loans, insurance and other services based on analytics & credit score [ 15 ].

5 National Strategy for Financial Inclusion

In the year 2020, RBI came up with national strategy for Financial Inclusion with focus on creating an outreach of financial services outlets to provide banking access to every household within 5KM radius. All eligible adults must have access to basic financial services such as Bank Account, line of credit, both life and other insurance, pension scheme and suitable investment product. Now, the next paradigm for financial inclusion program (2020–2024) is focused addressing inherent behavioural and practical aspects [ 22 ].

A strong financial transaction grievance redressal system to address concerns of arguably less technology savvy citizens.

Increasing digital penetration as still the smartphone usage for financial transactions are limited to urban and semi urban population predominantly.

Bank account opening for the remaining population of the country as still the PMJDY penetration is about 80% of the population.

Ensuring the privacy of data and information of citizens and prevention of fraudulent transactions and demographic data.

Easy and affordable digital payment options to suit the needs of small businesses and unstructured sector workers.

Providing access to basic and most essential financial products such as transactional accounts, digital payments, basic term insurance, basic medical insurance, and pension options to the population specially in the agricultural and unorganized MSME sector workers.

Acc. to a World Bank report, globally achieving Universal Financial Access by 2020 [ 3 ] has been one of the key developmental agenda of the World Bank which aims to provide adults who currently aren’t part of the formal financial system, with access to a transaction account to store money, send and receive payments to manage their financial lives. Our National Strategy is also aligned to these broad virtues suggested by World Bank. On key parameters, India is quite ahead and continuously progressing:

Leadership in India is having singular focus on technology enabled financial inclusion. It is evident through steps like DBT, PM Kisan, financial assistance to woman and poor during the recent Covid-19 pandemic etc.

Target based approach for specific sectors & regions including “National Mission for Capacity Building” by bankers for MSME sector, Certified Credit Counsellor Scheme for MSME to join them with the formal Financial Channels and informed financial credit decisions.

Regulatory Framework in Banking to protect customers, promote fair business processes and prevent unhealthy practices by market players. Initiatives like exclusive “Financial Inclusion Fund” (with initial corpus Rs.2000 Crore), issuances of differentiated banking license—Small Finance Banks, Payments Banks etc., launch of BC Registry with Indian Banks Association (IBA) etc. are steps towards the same.

Market Development initiatives like Branch Authorization Guidelines (2017) etc. to ensure accurate targeting of the beneficiaries, de-duplication and reduction of fraud and leakage have been taken. Linking all financial assistance schemes to DBT is a strong footprint in this direction

Strengthening Payments Structure through digital retail payments systems like AEPS, NACH, UPI, CTS, IMPS etc. operated by NPCI are significant steps. Aadhaar linked direct benefit transfer has changed the scenario for public funds distribution in India.

Last mile delivery to bridge the gap for remote connectivity and doorstep financial services is key to success. ICT based solution like business correspondents/ facilitators and IPPB are landmark steps in this area, launch of UPI on features phones will be a big game changer also enabling ecosystem for NFC based touch less payments.

Financial Literacy and Awareness is a primary bottleneck in progressive financial inclusion in India. Launch of financial literacy program in 2013 helped in addressing this to some extent.

6 Sustainability through Comprehensive Inclusion

An inclusive society helps sustain socioeconomic development and understanding the correlation between Financial Inclusion, Social Inclusion & Health inclusion helps sustainability. Having taken the right initiatives to ensure wider coverage of Financial Inclusion, it is now time to look at the rationalization of the inclusive society by leveraging iterative technology and other two key aspects—Social Inclusion (Education, Literacy, Skill), Health Inclusion (Personal & Societal Wellness).

FI implemented in a standalone ecosystem may not be enough to achieve. FI must be complemented by Social and Health Inclusion through improving skillset, education, physical and mental well-being to ensure a sustained livelihood [ 12 ]. Current model has a major short-coming. If there is a functionality lapse in any single inclusion, someone may fall out of the inclusive ecosystem.

We need to ensure that whoever is excluded financially is brought into the fold again and has all the necessary tools to sustain within the ecosystem.

To handle this, we need to focus on increasing the digital penetration and continue the account opening process for all citizens. FI Ecosystem must aim to work in tandem with Healthcare Inclusion & Education Inclusion ecosystem to ensure well-being of people and educate the citizens financially. The technological initiatives under ‘JAM Trinity’, that is, PM Jan Dhan Yojana, Aadhaar and increased Mobile Phone & internet usage had led to 355 Mn accounts opened in the last 5 years (Figs. 1 , 2 ).

Current State in India

Desired State in India

Technology should drive the recommendations to every individual to ensure social, health and fin. Inclusion. Cross Leveraging of existing and new citizen databases to provide strategic Analytics & insights to the deciding authorities.

Blockchain could prove to be a gamechanger in enhancing the value chain securely without any duplications of efforts [ 23 ]. There following measures could be taken to improve the living standard of citizens using ICT technology to deliver last mile services [ 19 ]. They are,

Fix technological breakdowns and connectivity issues and ensure wider coverage in remote areas

Facilitate a hassle-free digital experience for new users

Enhance digital security standards to improve the confidence of citizens to make digital transactions

Finetuning limits on daily transactions and commissions on low value withdrawals & deposits

Make changes to the minimum balance criteria in SB Accounts

Delivery services at BC points through Controlled devices for better safety and security for end users

People should be educated and learn to protect themselves against financial cybercrimes. Provide profile wise recommendations and better offers for people by leveraging Analytics, AI & ML using the data gathered from available official databases. For ex., through COVID Patient DB, recommendation for vaccination, availability of various health insurance schemes, access to medical loans could be provided. Building information sharing systems leveraging multiple public databases is crucial for success.

One such example may be leveraging the vaccination database to provide profile wise vaccination recommendations, information regarding availability of loan and credit lines, developing a ‘fraud repository’, and ensuring that online digital commerce platforms carry warnings to alert consumers to the risk of frauds etc. can play a game changer role in FI endeavours. RBI has guided banks to introduce a General-Purpose Credit Card (GCC) facility. It is revolving credit which entitles the card holder to make transactions of Rs 25,000 above the credit limit. This is completely based on customer's credit assessment and the limits are sanctioned without any security or collateral. Rate of Interest on revolving credit is deregulated. Under PM SVANidhi Scheme, micro lending amount of up to Rs 10,000 is provided to street vendors as working capital. Under PM MUDRA scheme, credit is provided to non-corporate, non-farm SMEs up to Rs 1 million. Microfinance institutions can help widen the coverage of reach by offering their services in remote areas using analytics & basic credit risk assessment [ 20 ].

7 Observations and Recommendations for accelerating Financial Inclusion

Innovations in the field of technology & communications strongly complements the FI ecosystem which results in inclusive socio-economic growth. This improves transparency and competitive efficiency, has the potential to reduce cost of service delivery and strengthens the back-end administrative processes [ 21 ].

The objective of providing a basic bouquet of financial services can be achieved through designing and developing customized financial products by banks and ensuring efficient delivery of the same through leveraging of FinTech and BC networks [ 18 ]. Some of the constructive recommendations are following-

Combining Financial inclusion with health inclusion and Social Inclusion to make the it more inclusive for citizens in the lower strata of the society. PM SBY, PM JJBY, RWBCIS, Ayushman Bharat (PM JAY) must be promoted. Till date, 158 Million + Ayushman Cards issued which requires expedite efforts to reach the full population of eligible citizens.

By analysing the impact of COVID-19, we can leverage FI and drive vaccination programs and other welfare schemes such as access to Medical Insurance & Loans for the needy. Comprehensive coverage of Health & Wellness through various initiatives to drive Health & Social Inclusion to achieve a sustainable growth [ 7 ].

Crucial aspect of FI is Financial Literacy [ 27 ]. Promote Financial Literacy and educate people on features such as Phone Banking, UPI & NFC enabled feature phones can be made available at low cost, enhance touchless payment (NFC & QR) framework. Common features such as Bill Payments, Ticket Booking are already interoperable through Bharat QR.

Strengthening the payment infrastructure to promote a level playing field for (NBFCs) and banks. Digitizing registration and compliance processes and diversifying credit sources to enable growth opportunities for MSMEs is an essential step for comprehensive inclusion [ 2 ].

Enabling agricultural NBFCs to access low-cost capital and deploy a ‘physical’ (physical + digital) model suggested by Niti Aayog for achieving better long-term digital outcomes is a crucial step. Digitizing land records will also provide a major boost to the sector.

Tech should aim to reduce cost per transaction and continue to drive the recommendation to every individual to ensure, social, health and financial inclusion and ensure that the money has been reaching the last mile beneficiary at low costs [ 26 ].

By combining digital education tools & digital financial tools, and slight changes to tax regulations, underbanked & unbanked people can break the chain of poverty and sustain successfully in a cash lite economy [ 5 ].

Geospatial technology could be used to analyse the population density of target service areas so that there is a clear understanding of required amount of work force for a particular area and can also be used to identify gaps in current services [ 25 ].

8 Summary of Key Problems we identified

Summary of problems identified & possible solutions in brief is displayed below in Table 1 .

In conclusion, we can say that a technological, multi-faceted & dynamic approach centred around enhancing financial literacy, social & education inclusion, improved cybersecurity & stricter laws, enhanced digital infrastructure is mandatory for wider coverage of next wave of financial inclusion in the country.

Data availability

All the data used in this paper for research purposes are properly cited with references to Source.

Abbreviations

Point of Sale

Micro, Small and Medium Enterprises

Reserve Bank of India

Pradhan Mantri Jan Dhan Yojana

Under PM Jeevan Jyoti Bima Yojana

Atal Pension Yojana

Pradhan Mantri Suraksha Bima Yojana

Aadhaar Payments Bridge System

Core banking system

PM Kisan Samman Nidhi Yojana

PM Street Vendors' Atmanirbhar Nidhi

Pradhan Mantri MUDRA

Bharat Interface for Money

Unified Payments Interface

National Automated Clearing House

Business correspondent network

Direct benefit transfer

Aadhaar enabled payments system

Cheque truncation system

National Payments Corporation of India

• Information and Communication Technology

Indian Post Payment Bank

PM Jan Arogya Yojana

Restructured Weather Based Crop Insurance Scheme

Near Field Communication

Non-Banking Financial Company

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Malladi, C.M., Soni, R.K. & Srinivasan, S. Digital financial inclusion: next frontiers—challenges and opportunities. CSIT 9 , 127–134 (2021). https://doi.org/10.1007/s40012-021-00328-5

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DOI : https://doi.org/10.1007/s40012-021-00328-5

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How Would a New BRICS Currency Affect the US Dollar? (Updated 2024)

May 09, 2024 — 05:00 pm EDT

Written by Melissa Pistilli for Investing News Network  ->

The BRICS nations, originally comprised of Brazil, Russia, India, China and South Africa, are looking to establish a new reserve currency backed by a basket of their respective currencies.

The potential BRICS currency would allow these nations to assert their economic independence while competing with the existing international financial system. The current system is dominated by the US dollar , which accounts for about 90 percent of all currency trading . Until recently, nearly 100 percent of oil trading was conducted in US dollars; however, in 2023 one-fifth of oil trades were reportedly made using non-US dollar currencies.

Central to this ongoing situation is the US trade war with China, as well as US sanctions on China and Russia. Should the BRICS nations establish a new reserve currency, it would likely significantly impact the US dollar, potentially leading to a decline in demand, or what's known as de-dollarization . In turn, this would have implications for the US and global economies.

Let's look at the potential for a BRICS currency and its possible implications for investors.

​Why do the BRICS nations want to create a new currency?

The BRICS nations have a slew of reasons for wanting to set up a new currency. Recent global financial challenges and aggressive US foreign policies have prompted the BRICS countries to explore the possibility. They want to better serve their own economic interests while reducing global dependence on the US dollar and the euro.

When will a BRICS currency be released? There's no definitive launch date as of yet, but the countries' leaders have discussed the possibility at length. During the 14th BRICS Summit , held in mid-2022, Russian President Vladimir Putin said the BRICS countries plan to issue a "new global reserve currency," and are ready to work openly with all fair partners.

In April 2023, Brazilian President Luiz Inacio Lula da Silva showed support for a BRICS currency, commenting, “Why can’t an institution like the BRICS bank have a currency to finance trade relations between Brazil and China, between Brazil and all the other BRICS countries? Who decided that the dollar was the (trade) currency after the end of gold parity?”

Later last year in the lead up to the 2023 BRICS Summit in August, there was speculation that an announcement of such a currency could be on the table. This proved to be wishful thinking, however.

"The development of anything alternative is more a medium to long term ambition. There is no suggestion right now to creates a BRICS currency," Maasdorp told Bloomberg at the time.

South Africa's BRICS ambassador, Anil Sooklal, has said as many as 40 countries have expressed interest in joining BRICS. At the 2023 BRICS Summit , six countries were invited to become BRICS members : Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. All but Argentina officially joined the alliance in January 2024.

Some experts believe that a BRICS currency is a flawed idea, as it would unite countries with very different economies. There are also concerns that non-Chinese members might increase their dependence on China's yuan instead. That said, when Russia demanded in October 2023 that India pay for oil in yuan, India refused to use anything other than the US dollar or rupees. Russia is struggling to use its excess supply of rupees.

​Will BRICS have a digital currency?

BRICS nations do not as of yet have their own specific digital currency, but a BRICS blockchain-based payment system is in the works, according to Kremlin aide Yury Ushakov in March 2024. Known as the BRICS Bridge multisided payment platform, it would connect member countries' financial systems using payment gateways for settlements in central bank digital currencies.

The planned system would serve as an alternative to the current international cross-border payment platform, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, which is dominated by US dollars.

“We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain. The main thing is to make sure it is convenient for governments, common people and businesses, as well as cost-effective and free of politics,” Ushakov said in an interview with Russian news agency TASS.

​What would the advantages of a BRICS currency be?

A new currency could have several benefits for the BRICS countries, including more efficient cross-border transactions and increased financial inclusion. By leveraging blockchain technology, digital currencies and smart contracts, the currency could revolutionize the global financial system. Thanks to seamless cross-border payments, it could also promote trade and economic integration among the BRICS nations and beyond.

A new BRICS currency would also:

• Strengthen economic integration within the BRICS countries.
• Reduce the influence of the US on the global stage.
• Weaken the standing of the US dollar as a global reserve currency.
• Encourage other countries to form alliances to develop regional currencies.
• Mitigate risks associated with global volatility due to unilateral measures and the diminution of dollar dependence.

​How would a new BRICS currency affect the US dollar?

For decades, the US dollar has enjoyed unparalleled dominance as the world's leading reserve currency. According to the US Federal Reserve, between 1999 and 2019, the dollar was used in 96 percent of international trade invoicing in the Americas, 74 percent in the Asia-Pacific region and 79 percent in the rest of the world.

According to the Atlantic Council , the US dollar is used in approximately 88 percent of currency exchanges, and 59 percent of all foreign currency reserves held by central banks. Due to its status as the most widely used currency for conversion and its use as a benchmark in the forex market, almost all central banks worldwide hold dollars. Additionally, the dollar is used for the vast majority of oil trades .

Although the dollar's reserve currency share has decreased as the euro and yen have gained popularity, the dollar is still the most widely used reserve currency, followed by the euro, the yen, the pound and the yuan.

The potential impact of a new BRICS currency on the US dollar remains uncertain, with experts debating its potential to challenge the dollar's dominance. However, if a new BRICS currency was to stabilize against the dollar, it could weaken the power of US sanctions, leading to a further decline in the dollar's value. It could also cause an economic crisis affecting American households. Aside from that, this new currency could accelerate the trend toward de-dollarization.

Nations worldwide are seeking alternatives to the US dollar, with examples being China and Russia trading in their own currencies, and countries like India, Kenya and Malaysia advocating for de-dollarization or signing agreements with other nations to trade in local currencies or alternative benchmarks.

While it is unclear whether a new BRICS currency would inspire the creation of other US dollar alternatives, the possibility of challenging the dollar's dominance as a reserve currency remains. And as countries continue to diversify their reserve holdings, the US dollar could face increasing competition from emerging currencies, potentially altering the balance of power in global markets.

Ultimately, the impact of a new BRICS currency on the US dollar will depend on its adoption, its perceived stability and the extent to which it can offer a viable alternative to the dollar's longstanding hegemony.

​How would a BRICS currency impact the economy?

A potential shift toward a new BRICS currency could have significant implications for the North American economy and investors operating within it. Some of the most affected sectors and industries include:

• Oil and gas
• Banking and finance
• Commodities
• International trade
• Tourism and travel
• The foreign exchange market

A new BRICS currency would also introduce new trading pairs, alter currency correlations and affect market volatility, requiring investors to adapt their strategies accordingly.

​How can investors prepare for a new BRICS currency?

Adjusting a portfolio in response to emerging BRICS currency trends may be a challenge for investors. However, several strategies can be adopted to capitalize on these trends.

• Diversify currency exposure by investing in assets denominated in currencies other than the US dollar, such as bonds, mutual funds or exchange-traded funds (ETFs).
• Invest in commodities like gold and silver as a hedge against currency risk.
• Gain exposure to BRICS equity markets through stocks and ETFs that track BRICS market indexes.
• Consider alternative investments such as real estate or private equity in the BRICS countries.

Prudent investors will also weigh these strategies against their exposure to market, political and currency fluctuations.

In terms of investment vehicles, investors could consider ETFs such as the iShares MSCI BIC ETF (ARCA: BKF ) or the Pacer Emerging Markets Cash COW 100 ETF (NASDAQ: ECOW ). They could also invest in mutual funds such as the T. Rowe Price Emerging Markets Equity Fund, or in individual companies within the BRICS countries.

Simply put, preparing for a new BRICS currency or potential de-dollarization requires careful research and due diligence by investors. Diversifying currency exposure, and investing in commodities, equity markets or alternative investments are possible options to consider while being mindful of the associated risks.

​Investor takeaway

While it is not certain whether the creation of a BRICS reserve currency will come to pass, its emergence would pose significant implications for the global economy and potentially challenge the US dollar's dominance as the primary reserve currency. This development would present unique investment opportunities, while introducing risks to existing investments as the shifting landscape alters monetary policy and exacerbates geopolitical tensions.

For those reasons, investors should closely monitor the progress of a possible BRICS currency. And, if the bloc does eventually create one, it will be important watch the currency's impact on BRICS member economies and the broader global market Staying vigilant will help investors to capitalize on growth prospects and hedge against potential risks.

FAQs for a new BRICS currency

​is a brics currency possible.

Some financial analysts point to the creation of the euro in 1999 as proof that a BRICS currency may be possible. However, this would require years of preparation, the establishment of a new central bank and an agreement between the five nations to phase out their own sovereign currencies; it would most likely also need the support of the International Monetary Fund to be successful internationally.

The impact of its war on Ukraine will continue to weaken Russia's economy and the value of the ruble, and China is intent on raising the power of the yuan internationally. There is also a wide chasm of economic disparity between China and other BRICS nations. These are no small obstacles to overcome.

Would a new BRICS currency be backed by gold?

While Russian President Vladimir Putin has suggested hard assets such as gold or oil, a new BRICS currency would likely be backed by a basket of the bloc's currencies.

That said, speaking at this year's New Orleans Investment Conference, well-known author Jim Rickards gave a detailed talk on how a gold-backed BRICS currency could work . He suggested that if a BRICS currency unit is worth 1 ounce of gold and the gold price goes to US$3,000 per ounce, the BRICS currency unit would be worth US$3,000, while the dollar would lose value compared to the BRICS currency as measured by the weight of gold.

Importantly though, he doesn't see this as a new gold standard, or the end of the US dollar or the euro.

“(With) a real gold standard, you can take the currency and go to any one of the central banks and get some gold,” Rickards said at the event. “With BRICS they don’t have to own any gold, they don’t have to buy any gold, they don’t have to prop up the price. They can just rise on the dollar gold market

​How much gold do the BRICS nations have?

As of Q1 2024, the combined central bank gold holdings of the original BRICS nations plus the five new additions accounted for nearly 17 percent of all the gold held in the world's central banks. Russia, India and China rank in the top 10 for central bank gold holdings .

Russia controls 2,332.74 metric tons (MT) of the yellow metal, making it the fifth largest for central bank gold reserves. China follows in the sixth spot with 2,262.39 MT of gold and India places ninth with 822.58 MT. Brazil and South Africa's central bank gold holdings are much smaller, coming in at 129.65 MT and 125.44 MT, respectively. New BRICS members Egypt and UAE gold holdings are equally pauce, at 126.46 MT and 74.5 MT. Saudi Arabia's come in at 323.07 MT. The remaining two new member nations Ethiopia and Iran do not hold gold reserves.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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