By Moin Qazi?
India has reason to proudly celebrate Digital India Day this April 14th. It is now one of the biggest hotspots of the digital community. The country?s policy wonks are seeing digital medium as the most potent tool for cutting the divide between the wealthy elite and the have-nots. India?s earlier attempts for a cashless economy have floundered for several reasons. But now, time appears to be ripe for such an enterprise. Moreover, it is resonating well in the new technologically and financially empowered milieu. Digital finance has suddenly acquired a magical nuance. Amazingly, even the laity has started tapping into the digital finance buzz.
A new revolution
There are several challenges particular to India that may constrain a full-scale digital transition in the foreseeable future. On the surface, this transition may not appear to be profoundly deep. But as it plays out, this truly tectonic shift will have much wider implications, and policy executioners will have to contend with a range of exponential societal changes. The race to go digital cannot be turned into a marathon sprint. India culturally believes in cash and a paradigm shift in thinking will need time and resources. It will further involve a full migration to new social and cultural patterns and habits. In a way, it is a new cultural-economic revolution.
Challenges to change
There are marked class issues which are built into India?s cashless transition. The ‘tech’ class has poor exposure to critical social theory and will have to get a better grasp of the impact on the ground.? The new revolution will have better chances of success if it is driven less by financial punditry and more by empathetic governance. People take to new technologies when they see clear benefits. They have greater confidence in the markets and services, find it convenient, and can afford it. The painful reality is that providers too often focus on short-term incentives at the expense of long-term consumer trust and loyalty.
India also has to contend with a geographical and cultural divide of great magnitude. The aversion of the ‘other India’ to digital finance has more to do with their aversion to everything that has to do with technology. This stems from their lack of trust in it as well as a lack of comfort with such technology and the literacy needed to take full advantage of it. Women often face additional barriers: less access to mobile phone, lower literacy levels, less confidence in using technology, and restrictions on travel or social interaction.
?The importance of trust in the system
Increasing financial and digital literacy alone will not be enough. Some things are better addressed through regulation. If there are things that are clearly negative for consumers, then they don?t need to exist. But changing the financial framework is also not enough. Consumers will have to walk that extra mile if they want to reap the harvest of these new financial tools.
Although India must continue to make the case that responsible digital finance is good business, we know this isn?t sufficient. Independent and well-resourced regulators, consumer groups, and other organisations are critical to ensuring that the consumer protections afforded by law and regulation are actually followed and enforced. The Helix Institute of Digital Finance?s latest survey of agent networks in Uganda highlighted just how commonplace fraud and robbery is for agents, not just in Uganda, but worldwide. Customers continue to experience trust-eroding problems in their dealings.
Using regulation to incentivise
In India, the RBI (Reserve Bank of India) has been instrumental in enabling the development of the fintech sector. RBI has espoused a cautious approach in addressing concerns around consumer protection and law enforcement. The key objective of the regulator has been around creating an environment for unhindered innovations by fintech, expanding the reach of banking services for the unbanked population, regulating an efficient electronic payment, and providing alternative options to the consumers.
India?s business correspondent (BC) model remains relatively underdeveloped. The sticking point is that the commissions of Banking Correspondents – who are an important piece in this ecosystem and key touchpoint – are low. Yet, the government is not willing to consider this issue. Recent?research?by the Helix Institute of Digital Finance revealed that in the BC model Indian agents earn a median income of only $52 per month. This is compared to agents in the analogous agent network model in Kenya who earn $192 per month.
Empathetic revolution as a solution
India is too large a country too diverse in its perceptions, behaviours, and idiosyncrasies to have a one-size-fits-all strategy for a post-cash world. The right way to drive a revolution of this type is through empathy. Not a form of empathy that comes from superiority, but rather one born from a profound humility. It is an offering of respect, a moment of listening to stand in the shoes of another. The most successful leaders are those who recognise it and invoke it in developmental interventions they shepherd.
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Featured Image Source: Indiawest?
