Financial inclusion in digital economy
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.