Digitalisation can expose consumers to impulsive spending and data breaches: RBI report

“While improving accessibility and convenience of financial services for customers, digitalisation raises concerns related to impulsive spending, herd behaviour and data security,” the report said.

In India, the average cost of data breaches was pegged at $2.18 million in 2023, a 28 per cent increase since 2020 albeit less than the global average cost of data breaches. The most common attacks in India are phishing (22 per cent), followed by stolen or compromised credentials (16 per cent), the report said.

The report said that digitalisation can impact inflation and output dynamics, and monetary policy transmission in diverse manners and the overall impact could vary over time given the fast pace of developments. “In this environment, central banks would need to incorporate digitalisation aspects comprehensively into their models for the continued efficacy of monetary policy and the achievement of their price and financial stability goals,” the report said.

The RBI has been undertaking proactive policy measures to harness the benefits of digitalisation while mitigating the emerging risks of digitisation in the financial sector. The report, however, said that the digital age provides immense opportunities for India to accelerate its transition from an emerging market economy to an advanced economy.

Digitalisation can provide a strong boost to India’s external trade in goods and services, given the country’s relative comparative advantage in modern services exports, which are not conditional upon the geographical proximity of the trading partners. Digitalisation in international payment systems has the potential to reduce the cost of receiving remittances, thereby leading to higher remittances and income or savings for the recipients.

Earlier this month, the RBI joined Project Nexus, a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic Fast Payments System (FPS). As part of the project, the country’s Unified Payments Interface (UPI) and FPSs of Malaysia, Philippines, Singapore and Thailand will be interlinked through Nexus.

Last year, the country’s real-time retail payment system, the UPI, and its equivalent network in Singapore PayNow got integrated, to enable faster remittances between the two countries at a competitive rate. The RBI and the Central Bank of UAE (CBUAE) had also signed a memorandum of understanding (MoU) for cooperation for interlinking UPI of India with Instant Payment Platform (IPP) of UAE.

The RBI’s latest report also said that cross-border digital trade policies would play a crucial role in harnessing new opportunities, building trust, and facilitating coordination on regulatory aspects like data security and cybersecurity. The internationalisation of the rupee is also progressing backed by a comprehensive and integrated policy approach, it said.