Moin Qazi
The year 2017 is an important milestone for India and would mark the transition from a cash economy to a less cash and a digital economy. But the buzzwords like “less cash”,” cashless” and “digital” do not really convey the range and diversity of this societal change. It is actually a migration to a new social and cultural pattern.
The tech class has poor exposure to critical social theory and should try to understand the impact on the ground. There is a huge empathy deficit. 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, trust the providers, find it convenient and can afford it.
Migrating from a cash economy to a digital economy requires a big cultural and social shift, and a recast of the whole mindset. Making gadgets available to the society will not help unless we bring about a change in the overall outlook and mindset. It will require thinking very hard about the motivators that will pull the consumers into this new space. The issue is lot more nuanced than what we are seeing today. Nuances change from culture to culture and consumer segment to consumer segment.
The consumers will come into the digital platform believing that if they change their behavior and exert the effort to get into the new world then certain specific pains will disappear. We have thus to address real pains, not just offer benefits. “You have to look really hard and ask, ‘What problems are being solved?'” says Nick Hughes, who shepherded the team that turned M-Pesa into a revolutionary financial tool. “Unless problems aren’t being solved, it becomes a bit of hype.”
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 organisations 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.
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.
Talk of “cashless societies” might be overblown, but societies in which digital transactions can be made seamlessly by all are by no means fiction. The biggest success story is Kenya. The Kenyans discovered that with the right technology, exchanging money between physical and electronic forms can be done securely, and as naturally as exchanging notes for coins. A mobile phone operator Safaricom has developed M-Pesa (M for mobile; Pesa is payment in Swahili), a transformative mobile phone based platform for money transfer and financial services m-pesa comes as an app loaded on your cell phone, so everybody with a mobile phone can use.
You can withdraw cash at tens of thousands of agents around the country. People are using it as substitute banking. There’s no infrastructure needed, so it’s really cheap from a banking point of view. And relative to paying a bank fees, it’s way cheaper. There is a huge network of 45-000 stores through which its customers can cash in and out of their M-Pesa mobile wallet accounts. It offers services including money transfers, loans, money deposit and withdrawal, bill payment and microcredit provision.
To understand why financial inclusion is important you need to go beyond the numbers. A woman in Tanzania, working on a local market, told me how the m-pesa system for mobile financial services has transformed her life. Before it, she had to walk for one-and-a-half hours through rough terrain with her cash in her pocket to get to the lake and buy fish. When she arrived, the fishermen often said that the catch had been unusually low and that prices unfortunately were very high. With no alternative, she had to pay up.
Today she can call the fishermen and haggle over prices, transfer payments via her mobile and send a boy for the fish. No longer does she have to walk alone for one-and-a-half hours. Her money is safe online and she can pay securely; she can spend it, as women so often do, on the health and education of her children.
Digital platforms have the potential to change financial services in three ways. First, they may reduce financial institutions’ costs. Second, they can increase the reach of financial products, as traditional brick and mortar channels make it difficult to deliver financial products to people in remote areas. And third, digital platforms can facilitate innovation in product and service design.
Cashless is now the big buzzword in India. 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. There will be challenges in shifting consumer behavior.
In Kenya, agents were incredibly important to educating customers and assisting them with their first transactions, building awareness and a comfort level with the technology that eventually led to habitual usage.
The right way to drive a revolution is through empathy -not a form of empathy that comes from superiority, but 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 were those who recognised it and invoked it in developmental interventions they shepherded.
When we design solutions that recognise all as equal partners, we have a real chance of making to goalpost. Each society is at different stages of digital financial inclusion and the necessary solutions and interventions must be appropriate for the cultural and economic context. By respecting the cultural outlook of the people and embracing their concerns we enlist their buy in, and that is what paves the way for lasting and sustainable success. —INFA
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