Gajraj, a farmer from Madhya Pradesh, has started using digital payment platforms. Nearly 75 per cent of his financial transactions are done either through online bank transactions or via applications such as Google Pay and Paytm. The only time he uses cash is to pay the daily wage labourers working on his farm. “Most of these daily labourers working for me are illiterate or do not have access to smartphones, that is why they are much more comfortable receiving and spending money in cash,” he says.

Daya Ram, a farmer from a village near Bhopal, Madhya Pradesh, says he doesn’t use digital payment apps or other online services because “I don’t know how to read too well….and, therefore, I am hesitant”.

Ram and labourers working for Gajraj are two examples of the challenges being faced when it comes to the financial inclusion of India’s rural population.

Obstacles faced

Recently, global social-policy data analytics firm IDinsight, set out to explore the obstacles faced by migrant communities, particularly women workers in the apparel manufacturing industry, in using digital payment services for sending remittances. The women were trained in using the BHIM app to send remittances via mobile phones. However, there were obstacles to onboard these workers, including lack of access to smartphones, reliable internet, and phone-banking account linkages, among others. Sonakshi Sharma a Senior Manager at IDinsight, says: “Our findings illustrate that the migrant workers we studied are particularly vulnerable to these issues. However, it would be hard for us to extrapolate this to other populations.”

A number of policy initiatives have been taken over the last six years to drive financial inclusion through digital platforms. Pawan Bakhshi, India Lead of Financial Services for the Poor, at Bill and Melinda Gates Foundation, says: “India’s journey towards the accelerated induction of members of poor and marginalised communities into formal financial inclusion began with Aadhaar…..With the coming of Aadhaar, E-KYC has driven down the cost by almost 99 per cent, therefore, technology and the digital age have reduced the costs of entry into the system.”

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A recent report facilitated by USAID titled, ‘India Digital Financial Inclusion’, found that since 2014, key events have occurred in the Digital Financial Services ecosysem in India to further drive digital financial inclusion. This includes the PMJDY drive and onboarding over 330 million new bank account holders into the formal system; Jan Dhan, Aadhaar, and the induction of UPI and mobile wallets into the ecosystem have contributed in creating financial infrastructure. However, the report also emphasises that despite the establishment of infrastructure, payment services also face the ‘last-mile problem’, where certain obstacles unique to certain sections of the population still exist.

For instance, migrant worker Arun Sharma – who hails from Bihar and works in construction sites in the Delhi NCR region – lost his proof of identity years ago. Now, he is unable to use digital payment services or set up a bank accountto transfer remittances to his family. Instead, he prefers to take cash with him when he visits his family every two years or transfer money to his brother-in-law’s bank account using an over-the-counter agent. “Someone told me I need the sarpanch’s signature to get my Aadhaar made again, and also that since I am not from here, I can’t make it here in Delhi..I am not too sure, I haven’t looked into it too deeply,” says Sharma.

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IDinsight provides training for organisations working with migrant workers to support the members of these communities to onboard them onto digital payment systems. Kiran, a migrant worker, says: “My employers (Shahi Exports) helped me create my account a year ago when I joined; since then I have been doing most of my digital transactions using Phonepe and send digital remittances using my phone as well.”

USAID also partnered with organisations such as Intellecap to conduct pilot activities in rural and urban settings. Intellecap implemented pilot activities in Maharashtra, Odisha, and Jharkhand, where the adoption of digital payment services across three value chains – dairy, food and beverages and poultry – was studied. One of the biggest concerns cited by these entrepreneurs is access to cash. Vikas Bali, CEO of Intellecap, says: “The immediate feeling for the participants was that once they had money in their mobile phones, how can they convert this money back into cash? Establishing trust within these communities, making them believe that they can convert mobile money to cash whenever they want through the BC network or Kirana stores, is critical.

For Daya Ram, the hesitancy to use digital payment services is not just related to his illiteracy; he is also afraid about the safety of his money on these applications. “I have not used these services ever before, I don’t know what I will do if I lose my money on these applications..Who will I go to?”

Security and trust

Industry leaders in this ecosystem also recognise security and trust to be a probem. Karthik Raghupathy, V-P, Strategy and Business Development, PhonePe, says the biggest challenge in the adoption of digital payments has been the lack of awareness and trust. First-time users often think that digital payments are complicated and are also worried about the safety of transactions. PhonePe has undertaken a massive user awareness exercise to highlight the safety of digital payments as well as the ease of using digital payments for everyday use cases. Vikas further adds: “While the digital ecosystem is progressively creating new alternatives and solutions to make these financial products more inclusive and easily adaptable for all sections of the population, a new challenge that can emerge is what will happen in a scenario when transactions fail – especially in case of new users. If transactions fail for a multitude of reasons, such as net connectivity, mistakes in using an app etc, we need to understand how that pushes back the progress that we have made so far. If people lose confidence in digital transactions because of such issues, it will be much harder for us to convince them to adopt these payment systems again.”

(The writer is interning with BusinessLine’s Mumbai bureau)

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