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digital-finance

We will have to sign off 2016 with a cultural baggage of a new vocabulary which elderly  and illiterate  Indians   may not be comfortable with , but have to embrace it    in order to honour the government since  the new rules of democracy leave them with little choice. . Most of the conversations in the new year we   will have much to do with the   phrase “digital finance that  has suddenly acquired a magical nuance. Amazingly even the laity has started tapping into the buzz of digital finance. Specialist phrases like “cashless economy” and “plastic money” are now being   freely tossed   in everyday conversations.

Digital financial inclusion(DFI) has emerged as the new wave in the hope that it will reach the last mile consumer in the most convenient and affordable manner. Digital financial inclusion is defined as digital access to and use of formal financial services by excluded and underserved populations. But for digital finance to be the transformative tool   , consumers must have greater confidence in the markets and   services should be suited to the customers’ needs and delivered responsibly, at a cost both affordable to customers and sustainable for providers. The painful reality is that providers too often focus on short-term incentives at the expense of long-term consumer trust and loyalty

Although we must continue to make the case that responsible digital finance is good business, we know that isn’t enough. Independent and well-resourced regulators, consumer groups, and other organizations are critical to ensuring 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. And customers continue to experience trust-eroding problems in accessing their money.

With new technology-enabled channels through widespread use of mobile and smart phones, an unprecedented number of traditionally excluded or underserved people are accessing financial services for the first time. While this presents an amazing opportunity for providers, regulators, and consumers alike – clients must remain first in this newly digital world in order for these benefits to be attained.

The aversion of the Other India to digital finance has more to do with their aversion to   everything that has to do with technology. And this stems from their lack of trust in it. Although we must continue to make the case that responsible digital finance is good business, we know that isn’t enough. Independent and well-resourced regulators, consumer groups, and other organizations are critical to ensuring 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. And customers continue to experience trust-eroding problems in accessing their money.  .

For digital finance to be the transformative tool  , consumers must have greater confidence in the markets and   services should be suited to the customers’ needs and delivered responsibly, at a cost both affordable to customers and sustainable for providers. The painful reality is that providers too often focus on short-term incentives at the expense of long-term consumer trust and loyalty.

India remains one of the most cash-dependent countries in the world. Just over half of the nation’s adults have bank accounts, a precursor to using digital payments.  The overall snapshot of the ecospace for digital financial inclusion in India, when seen in the statistical indicators, may not appear very grim even though it is bad by standards of peer developing countries. But a high resolution picture will tell how pathetic the reality is.

The financial and technological infrastructure in rural area is also bad. Just 22 percent of Indians use the Internet “at least occasionally” compared to the global median of 67% and only 17 percent have a smartphone, according to a Pew Research Center report. India’s has 1,035.12 million mobile phone users.

There are 1,060million wireless and wire line connections (TRAI; September 30, 2016) for a population of  1,334, million (United nations; December 30, 2016). But, the number of internet subscriptions is only a third of the total number of mobile phone users. Many urban people have multiple connections (as evident by the   fact the number of urban mobile phone subscribers is 37% more than the total urban population).Thus the non users in village may be much more than what we are guessing. Similarly, there are approximately 950 million citizens without access to the internet, according to an   Assocham-Deloitte joint study. Rural India is expected to account for the bulk among them.

India’s financial digitalization has actually gone into overdrive purely on account of demonetization. While some of the boom in additional usage of digital payment systems won’t last as cash is restored to India’s economy — and people go back to paying with cash and start storing gluts of cash   as they’ve always had — a reasonable portion of this transition may stick in the form of new long-term users. Most people are using these as a temporary measure and an alternative to overcome an abnormal situation they are likely to revert to cash because of the same reasons for which they had not signed up or used these until now — primarily, charges and fear of surveillance and disclosure of actual transactions.

There are also marked class issues which are built into India’s cashless transition. India is a country that has one foot in the future and the other in the Stone Age — almost literally. India had the most vibrant and innovative high-tech ecosystems in the world; but alongside it, exists a planet of hundreds of millions of people living in villages who are happy with this technology that’s hardly more sophisticated than a bullock cart and a plow. Only 17% of the India’s population currently has access to a smartphone.

Thus, moving to a digital and cashless way of life involves a shift in cultural pattern, and such patterns are often hard to break. But once they are broken and new ways emerge, new patterns become solidified as societies update the way they function.

Awareness has to be built in the minds of the people of the net gains of digitization for the country. Digitalizing a wider swath of the economy is meant to be a fix for many segments of India’s society that the government plans to reform.   It creates a way for all purchases to be tracked and recorded, which can limit the   growth of the black market as well as stemming the flow of capital to   terrorist activities.

Seeing the digital landscape of other developing countries, we can be certain that in setting a huge goalpost for digital finance, we are not pursuing a chimerical dream .But the pace of this journey will have to be determined by the ability of our citizens to cope with it .We should not take to a highway that leaves millions of it citizens below.

What we need for any revolution to succeed is   humility. When we design solutions that recognize everyone as equal partners, we have a real chance to achieve our national goals. This logic comes from the power of empathy—not a form of empathy that comes from superiority, but one born from a profound humility.

 Moin Qazi is the author of the bestselling book, Village Diary of a Heretic Banker .He has worked in the development finance sector for almost four decade .He can be reached at moinqazi123@gmail.com

 

  • Excellent article…..More than technology, there is a need for hand-holding, for sharing knowledge, helping in making a few transactions, for identifying possible risks, for communicating the advantages and disadvantages…..Financial Literacy should become a massive movement in the country…..

  • K SHESHU BABU

    Digitalisation will be ‘ humane’ only when it is not in the hands of private players and profiteering corporates. The government must provide access without any incidental service charges to the poor and downtrodden. Besides, other facilities like internet, continued electricity for the functioning of Wi-Fi , smart phones,etc must be provided free of cost. Then only, it may benefit users