Fi­nan­cial in­clu­sion in dig­i­tal econ­omy

Governance Now - - CONFERENCE REPORT -

Mayank K Me­hta, ex­ec­u­tive Direc­tor, Bank of Bar­oda

When we talk about the dig­i­tal part of fi­nan­cial in­clu­sion, we need to coin a new term called dig­i­tal in­clu­sion. We have done a lot in fi­nan­cial in­clu­sion and reached mean­ing­ful fi­nan­cial in­clu­sion, which is not con­fined only to the open­ing of bank ac­counts but also ex­tended to mi­cro-credit and in­sur­ance prod­ucts as well as re­mit­tance prod­ucts. So that has al­ready ma­tured and now what is re­quired to be done is digi­ti­sa­tion. For that, we will have to run a new pro­ject called dig­i­tal in­clu­sion. Thanks to ser­vice and tech­nol­ogy providers which are giv­ing com­fort and con­fi­dence to the banks, the lat­ter will have to im­ple­ment some new prod­ucts. For lit­er­acy part, it is like you pro­vide mobile phone to some­one and he does not know how to op­er­ate it. So, that has to be taken care of, and if that is done, then I think we have achieved both fi­nan­cial and dig­i­tal in­clu­sion.

In­dra Mallo, Vicechair­man & Man­ag­ing Direc­tor, Mahila Arthik Vikas Ma­haman­dal

I come from a women’s eco­nomic de­vel­op­ment or­gan­i­sa­tion, and we deal with self-help groups (SHGS). There is a big move­ment of self-help groups all across the coun­try, in­clud­ing Ma­ha­rash­tra. When you talk about fi­nan­cial lit­er­acy, these women in self-help groups are al­ready ori­ented to it. They are taught book keep­ing. These women have opened ac­counts, be­com­ing fa­mil­iar with bank­ing and credit, and are go­ing be­yond fi­nan­cial lit­er­acy kind of mod­ule to shape their in­vest­ment. Re­cently, Mahila Arthik Vikas Ma­haman­dal was in talks with CRISIL foun­da­tion for rolling out fi­nan­cial lit­er­acy in a few districts of Ma­ha­rash­tra. We will hope­fully do this. But, re­gard­ing ba­sic bank link­age, a lot of ground­work has al­ready been done. An­other thing which comes to my mind which may or may not be rel­e­vant are the NPS; it has in-built eq­uity dis­trib­uted mu­tual fund kind of op­tions for those who are in the in­come tax net.

Sak­shi Varma, se­nior fi­nan­cial sec­tor spe­cial­ist, World Bank group

When we talk about fi­nan­cial in­clu­sion, it is about mul­ti­ple prod­ucts like pay­ment, in­sur­ance and in­vest­ment. So, digi­ti­sa­tion has af­fected dif­fer­ent peo­ple dif­fer­ently. For peo­ple like us, pay­ment is some­thing that has re­ally picked up. But, there are other peo­ple who have benefitted with the dig­it­sa­tion in ser­vices like credit, sav­ings, re­mit­tances, etc. If prod­ucts like in­sur­ance or mu­tual fund are still not ma­ture, then dig­it­sa­tion is go­ing to take some time. Right now, we are ed­u­cat­ing peo­ple about these prod­ucts. But, prod­ucts like IMPS or BHIM app are ben­e­fi­cial for re­mit­tances for those who work in Delhi and whose village is in some far off place.

Fin­techs are com­ing quickly in mul­ti­ple forms, lend­ing plat­form, crowd funding and var­i­ous tools. But, we need to keep pace with reg­u­la­tions. For ex­am­ple, the RBI has some draft guide­lines on on­line lend­ing, so re­gard­ing reg­u­la­tion, we need to move as fast as tech­nol­ogy is evolv­ing. There are mul­ti­ple types of lend­ing plat­forms that are com­ing up like peer-to-peer lend­ing, lend­ing to a busi­ness set of B2B, crowd funding from in­di­vid­ual to a busi­ness. A lot of in­no­va­tion, ex­per­i­men­ta­tion, and in­vest­ment is hap­pen­ing on that front.

Ser­vices that are avail­able to the low-in­come group are loans and sav­ings, and Fin­techs are mak­ing lots of dif­fer­ence there. For in­stance, now you have many BCS help­ing fi­nan­cially ex­cluded peo­ple to open sav­ings ac­count and even re­mit­tances to some ex­tent. Loans are now avail­able through some of these on­line plat­forms. But, when we talk about prod­ucts like in­sur­ance and mu­tual funds, one can’t ex­pect Fin­techs to play a big­ger role here. An­other thing is se­cu­rity and aware­ness, es­pe­cially when peo­ple are fi­nan­cially ex­cluded, one has to work hard on cre­at­ing aware­ness about us­ing these plat­forms ap­pro­pri­ately and safely, par­tic­u­larly in a coun­try like India where peo­ple do

not un­der­stand the ba­sics of it. In fact, it is com­mon for peo­ple in India to go to the ATM and ask some­one else to with­draw money, which should never hap­pen.

pc pan­i­grahi, gen­eral Man­ager (fi), union Bank of india

Fi­nan­cial In­clu­sion is dig­i­tally ex­pand­ing its reach, scale and scope. The coun­try is in­vest­ing a lot in tech­nol­ogy, hard­ware and soft­ware. But, fur­ther in­vest­ment in peo­ple is nec­es­sary. There are three things - first is the ser­vice, an­other is the user and the last one is the provider. The provider may be strong, there may be many ser­vices. But, what is re­quired to un­der­stand is who all are the users and what is their ob­jec­tive and how it can be ful­filled. So, the coun­try needs to invest in peo­ple and tech­nol­ogy.

pk gupta, gen­eral Man­ager (fi), cen­tral Bank of india

Busi­ness op­por­tu­ni­ties in­crease with in­crease in num­ber of play­ers in the mar­ket. More the pay­ment and small banks, more will be the busi­ness. When pri­vate banks came into ex­is­tence many years back, PSU banks were con­cerned that their busi­ness will go away or be im­pacted, but noth­ing like that hap­pened. Both of us are grow­ing at the same pace and thriv­ing. So, there is no scope of in­se­cu­ri­ties from pay­ment banks and small banks. We look for­ward to do­ing busi­ness with them and ty­ing up with them. They are a chal­lenge for us, but I do not see them as a threat.

sameer shah, Vice pres­i­dent, in­dusind Bank ltd

The cus­tomers will move to dig­i­tal. To be­gin with, we need to have the com­bi­na­tion of phys­i­cal and dig­i­tal. Hence, to let cus­tomer adopt the dig­i­tal ini­tia­tives, we need to adopt the as­sisted model in which they can un­der­stand, ap­pre­ci­ate and adopt. In the near fu­ture, we will move from phy­gi­tal (an amal­ga­ma­tion of phys­i­cal and dig­i­tal bank­ing model) to en­tirely dig­i­tal. The sec­ond point is the TAT (turn around time) will im­prove with dig­i­tal ini­tia­tives. With the RBI re­lax­ing and al­low­ing OTP based open­ing of ac­counts, now we can open ac­counts in min­utes. With bio­met­ric based E-KYC, things have im­proved dras­ti­cally in terms of turn­around time, which are now re­duced to a few min­utes from 24-48 hours ear­lier. Also, Aad­haar Enabled Pay­ment Sys­tem (AEPS) has also im­proved mat­ters. The gov­ern­ment ini­tia­tive mak­ing Aad­haar manda­tory for all new ac­counts and ex­ist­ing ac­counts by Jan­uary, 2018 is a sig­nif­i­cant step in this di­rec­tion. That is go­ing to help the banks and cus­tomers in a big way.

ravi gopalakr­ish­nan, head-eq­ui­ties, ca­nara robeco

It is about how one trans­forms the en­tire habit of sav­ings and moves around risk re­ward curve be­tween de­posits on one side and eq­ui­ties on the other. One has to strike that bal­ance. We or­gan­ise sem­i­nars to cre­ate that lit­er­acy. Now, com­ing to the tech­nol­ogy part. For­tu­nately, the reg­u­la­tor here is ex­tremely ahead re­gard­ing giv­ing that con­fi­dence and mu­tual funds are per­haps the most reg­u­lated sec­tor. It in­stills a lot of con­fi­dence in the in­vestors. In the US, it is com­pul­sory sav­ing where part of your salary will go to the ar­eas where you want to invest. It could be fixed in­come within mu­tual funds, eq­ui­ties, bal­anced funds, or bank de­posit. There is a com­bi­na­tion of all of that. We need to move into that di­rec­tion whereby there must be some com­pul­sory sav­ings dis­trib­uted across all the prod­ucts.

Vikrant ponkshe, Ad­vi­sor re­tail Bank­ing, svc co-op­er­a­tive Bank ltd

Over­all feed­back from cus­tomers on digi­ti­sa­tion is ex­em­plary. It is a con­ve­nience the cus­tomers are look­ing for. How­ever, in the en­tire chain what they still want is a bit of hand hold­ing. Why do we have pri­or­ity bank­ing? We have per­sonal bankers even in the ICICI, HDFC banks for the rea­son that if you need to invest in a mu­tual fund, you need a per­sonal nod from a per­son to en­sure that I am tak­ing the right de­ci­sion. Hu­man psy­chol­ogy is not en­tirely geared up with tech­nol­ogy to take that plunge. That is the role co-op­er­a­tive banks are play­ing.

I am work­ing on con­nect­ing the dots in fi­nan­cial in­clu­sion space. Co­op­er­a­tive banks have been ex­ist­ing for the last 100 years with­out profit as the mo­tive, yet ac­tive in this space. There was a time when BCS were ap­pointed for daily col­lec­tion by co­op­er­a­tive banks be­cause there were lots of fraud and dis­putes. But, adop­tion of tech­nol­ogy has brought in a level of trans­parency and se­cu­rity. Turn­around time has also im­proved con­sid­er­ably.

shashi ku­mar JV, Vice pres­i­dent-fin­tech, evo­lute group

Chal­lenges for in­no­va­tion in fi­nan­cial in­clu­sion are trans­ac­tion se­cu­rity and lack of in­ter­op­er­abil­ity. As an ex­am­ple, in a shop they keep 4-5 ma­chines for trans­ac­tions by dif­fer­ent cards. We pro­vide such a so­lu­tion that a sin­gle de­vice can be used for all cards. We are fo­cus­ing on Omni chan­nel and mak­ing more re­turn on in­vest­ment for small and mid-level mer­chants. Still, there are shops and re­tail­ers who do not keep ma­chines to avoid charges and com­plex­i­ties with pay­ment dis­burse­ment and poor user ex­pe­ri­ence. Bat­tery life of the de­vices pro­vided to them is also poor and they usu­ally last for 3-4 hours. Can these de­vices be used in the ru­ral seg­ment? Can BC (bank­ing cor­re­spon­dents) carry these de­vices? So we make de­vices, which last for 24-48 hours and some can last even for a week. These points are im­por­tant in reach­ing our fi­nan­cial in­clu­sion goals.

For trans­ac­tion se­cu­rity, peo­ple have a lot of doubt about Aad­haar based pay­ments, so re­cently UIDAI an­nounced RD (Reg­is­tered De­vice) ser­vice for all de­vice man­u­fac­tur­ers in the coun­try. Ear­lier, any mer­chant could buy a de­vice and use it for Aad­haar based au­then­ti­ca­tion. On some com­plaints of dis­crep­an­cies in a few cases, UIDAI has made a pro­vi­sion of RD un­der which ev­ery de­vice man­u­fac­turer has to reg­is­ter the de­vice, which is get­ting used with Aad­haar in UIDAI server. Any trans­ac­tion that hap­pens on the de­vice will be recorded along with the man­u­fac­turer’s de­tails and so­lu­tion provider’s de­tails. In case of any mal­func­tion, first, the de­vice man­u­fac­tur­ers will be caught. From July-end, registration has be­come manda­tory, oth­er­wise the de­vice will stop work­ing. We will be the first POS ven­dor in India to be reg­is­tered. We are giv­ing banks in writ­ing that we will take the re­spon­si­bil­ity if any­thing goes wrong. What cloud play­ers could not give to the banks, we are giv­ing that as­sur­ance and tak­ing re­spon­si­bil­ity for any il­le­gal trans­ac­tion from our de­vices. We have 70,000-80,000 de­vices get­ting used in the ru­ral seg­ment.

Bhau­mik shah, na­tional Busi­ness head, capita World

We at Capita World are help­ing peo­ple, right from a tea ven­dor to a con­glom­er­ate, in dis­burs­ing the funds. We look into au­then­ti­ca­tion of data from var­i­ous gov­ern­ment sources. We get their en­tire data filled up in the form au­to­mat­i­cally. Even, if there is low lit­er­acy in the area, sub­stan­tial per­cent of the form is au­to­mat­i­cally filled up de­pend­ing on the prod­uct seg­ment. We have the con­cept of one form where in all the data re­quired by any banker, will be re­ceived by them in the for­mat that they are used to see­ing.

The sec­ond thing that we are fac­ing is that many banks pre­fer phys­i­cal pres­ence or ‘phy­gi­tal’. Now, the ques­tion that we need to ask our­selves is, are we head­ing to­wards elim­i­nat­ing the in­ter­me­di­aries of the fi­nan­cial mar­ket? Be­cause there are Di­rect Sales Agents (DSA) of each and ev­ery bank and as soon as dig­i­tal play­ers come into the pic­ture, this thing has to com­ple­ment the bank­ing sec­tor. When a banker goes for mar­ket­ing and gets the pro­posal, they at least in­cur 4-5 per­cent of the di­rect cost, DSA 3 per­cent and dig­i­tal play­ers 1.5 per­cent. Now, which plat­forms will the banker choose? But, as we are plan­ning to ex­pand be­yond western India, we are find­ing it dif­fi­cult to con­vince the banks at the lo­cal level even to come and see the pro­posal in dig­i­tal me­dia and sanc­tion it ac­cord­ingly. They still give pref­er­ence to orig­i­nally see and ver­i­fied (OSV) and per­sonal dis­cus­sion (PD) to dis­burse the funds.

Abizer Di­wanji, part­ner & na­tional leader-fi­nan­cial ser­vices, ernst & young

If you see the prod­ucts where digi­ti­sa­tion has benefitted, pri­mar­ily it is pay­ments. Digi­ti­sa­tion is thriv­ing. Writ­ing cheque is some­thing we know and we have done for a long time so to move that to dig­i­tal for those ser­vices was easy, but to invest in a mu­tual fund is a tough de­ci­sion es­pe­cially on dig­i­tal. For a ru­ral guy to put money in a bank is a tough de­ci­sion and then util­is­ing that money through a dig­i­tal chan­nel is also chal­leng­ing. So first we need to pro­vide lit­er­acy to make dig­i­tal fi­nan­cial in­clu­sion more ef­fec­tive. I hope Bharat will move from phy­gi­tal to dig­i­tal quickly.

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