Waves of change periodically sweep India, altering landscapes forever. They are formed by many small ripples that come together at the same time, each one seemingly inconsequential in itself, but collectively creating a very powerful force of change. India is in the midst of such a wave — a digital wave that is washing over the rich and the poor.
In India, we have learned that “poor” does not mean backwards and that modest-income people love and embrace technology because technology democratizes. People often say they prefer the ATM to the teller because the machine doesn’t care how you are dressed, whether you speak English or if you are withdrawing 200 or 2,000 rupees.
In the past, the dealer of LPG gas used for cooking could discriminate based on demographics, particularly in times of shortage. Today, everyone can book delivery via an automated phone system and get status-blind service, whether you own a luxury bungalow or live in a chawl. With more and more services going online, we can say goodbye to black market train tickets and bribing ticket collectors and goodbye to unscrupulous clerks who claim they don’t have your land records and therefore must do a “distressed sale”.
Photo and voice-to-text features are enabling even the illiterate to enjoy the full power of mobile communication. My housekeeper, who cannot read or write, has had her son put photos against phone numbers, so she knows who to call and who has called. With e-commerce deals abounding, modest income consumers have learnt how to surf, comparison shop and figure out their wishlist. This beats window shopping, is more time efficient and no one in the shop is shooing you away because you look like you can’t afford to buy. By linking your bank account and your LPG connection to your Aadhaar identity number, you can now get subsidy money directly to your account with little effort.
So lower income Indians most definitely want to live in the digital world. To those who say that marginally educated people cannot manage the complexity of this digital wave, it is worth reminding them that almost all of India has learned to use a mobile phone in less than a decade.
The digital wave currently underway in India is transforming commerce – particularly in terms of payments and banking. It includes seven ripples that are driving a shift toward digital money:
1. A slew of innovative payment products. Some of these innovations are hailed as ahead of the rest of the world and the rest are state-of-the-art. They lower costs for small transactions, for example through a unified payment interface (UPI), Bharat interface for money (BHIM), BharatQR, Aadhaar-enabled payments, a plethora of wallets and Google’s new Tez. It is unclear which of them is ready to bear the cost of speedy scale up or even how they will perform as volumes build. However, they are here to stay.
2. Government will and determination to push digital. Never before has a government in India thrown its might behind digital payments with as much zeal. The Prime Minister’s Jan Dhan programme to open zero balance bank accounts has reached more than 90% of households. The government will continue to push digital payments, improve tax compliance and to help formalize the economy and connect the fragmented small suppliers and small consumers into a powerful ecosystem.
3. Demonetization. The costly initiative to eliminate certain banknotes ended with a huge cash crunch and long lines at ATMs. It also forced people to adopt digital payments — the kind of forced trial that no company would have had the deep pockets to fund.
4. A quantum leap in connectivity. Thanks to new launches and the lowest data rates in the world, India has more regular internet users today than the US, although overall penetration levels are still low. Lacking direct access will no longer be an impediment as more service providers, like banking agents and payment collection points, become internet enabled.
5. Declining smartphone prices. Even just three years ago, conventional wisdom had it that smartphone penetration would be the big bottleneck to digital inclusion. Today, it doesn’t seem like such a deal breaker. Smartphone prices have crashed thanks to Chinese brands and China-made Indian brands, and payment products that work with a feature phone and USSD are also available.
6. Supplier push. Rapidly emerging fintech start-ups are being feverishly partnered by financial institutions and bigger payment service providers to better serve once excluded, “small ticket” consumers. Banks, too, are pushing consumers to go digital as a way to improve their margins on zero-balance accounts and small ticket users.
7. The rising cost of cash. Cash has been cheap in India for consumers. However, the cost of cash is rising, from growing charges for ATM withdrawals to penalties on cash transactions.
All things considered, the problem of digital inclusion is now not about the lack of products or ideas or models, or even customer willingness or ability. It is about doing the hard work of enrolling millions of small merchants, and having helplines to hold the hands of hundreds of millions of small, not very tech-savvy but hugely tech-aspiring, high-aptitude consumers. Most of all, it will mean having dispute settlement systems and security measures in place. The aircraft has taken off, but it now needs navigational aids to ensure it flies safely.