Blog

The Evolution of Digital Payments: Implications for Financial Inclusion and Risk Management

Book Title: Multidisciplinary Research Nexus: Ideas for the Modern World

Chief Editors:  Mr. Irshadullah Asim Mohammed, Dr. Yogesh Mohan Gosavi, and Prof. (Dr.) Vineeta Kaur Saluja

Associate Editor: Mrs. Sruthi S

Co-Editors: Dr. S. Rajeswari, Dr. Nikhil Saini, and Ms. Atreyee Banerjee

ISBN:  978-81-985805-1-1

Chapter: 6

DOI: https://doi.org/10.59646/mrnc6/321

Author: Arun Adwani

Abstract

The evolution of digital payments has transformed financial ecosystems, influencing financial inclusion and risk management globally. This paper explores the progression of digital payment systems, from early electronic fund transfers to modern innovations such as mobile wallets, blockchain-based transactions, and central bank digital currencies (CBDCs). Digital payment technologies have played a crucial role in bridging financial gaps by enabling underbanked and unbanked populations to access financial services. However, this rapid transformation also introduces new risks, including cybersecurity threats, data privacy concerns, and financial fraud. Effective risk management strategies are essential to ensure security, trust, and stability in digital financial ecosystems. By analyzing key trends, regulatory responses, and technological advancements, this study highlights the balance between promoting financial inclusivity and mitigating emerging risks. The findings emphasize the need for collaborative efforts among financial institutions, technology providers, and policymakers to foster a secure and inclusive digital payment landscape.

References

  1. Arner, D. W., Barberis, J., & Buckley, R. P. (2015). The evolution of fintech: A new post-crisis paradigm? Georgetown Journal of International Law, 47(4), 1271–1319.
  2. Asongu, S. (2019). Mobile banking and financial inclusion: The moderating role of governance. Journal of African Business, 20(3), 361–384.
  3. Bazarbash, (2020). Fintech in financial inclusion: Machine learning applications. International Monetary Fund Working Paper, WP/20/81.
  4. Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality, and the poor. Journal of Economic Growth, 12(1), 27–49.
  5. Bhattacharyya, S., & Nanda, R. (2021). Digital payments and economic growth: A study of developing economies. Journal of Financial Stability, 54, 100872.
  6. Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, technology, and governance. Journal of Economic Perspectives, 29(2), 213–238.
  7. Carstens, A. (2019). The future of money and payments. Bank for International Settlements Quarterly Review, March, 1–12.
  8. Chakraborty, S., & Joseph, J. (2020). Digital payment systems and the unbanked population: Challenges and opportunities. Economic and Political Weekly, 55(42), 67–74.
  9. Chen, S., & Nordhaus, W. D. (2011). The role of fintech in modern financial ecosystems. Brookings Papers on Economic Activity, 42(1), 145–178.
  10. Claessens, S., Frost, J., Turner, G., & Zhu, F. (2018). Fintech credit markets around the world: Size, drivers, and policy issues. Bank for International Settlements Quarterly Review, September, 29–49.
  11. Demirgüç-Kunt, A., Klapper, L., Singer, D., & Van Oudheusden, P. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution. World Bank Report.
  12. Fung, B., & Halaburda, H. (2016). Central bank digital currencies: A framework for assessing why and how. Bank of Canada Staff Discussion Paper, 2016-22.
  13. Gomber, P., & Siering, M. (2017). Digital finance and fintech: Current research and future research. Journal of Business Economics, 87(5), 537–580.
  14. Hasan, I., He, Q., Liu, L., & Lu, H. (2020). The impact of digital payment adoption on financial inclusion: Evidence from China. Pacific-Basin Finance Journal, 62, 101385.