Covid highlighted two contradictory and critical facts about digital payments and cash for meeting the needs of India’s vulnerable population. On the one hand, because we had a working digital payments backbone and had activated Jan Dhan accounts across the country, it meant that delivering Direct Benefit Transfers to BPL families’ banking accounts was easy, swift and leakage free. On the other hand, it also put a spotlight on the fact that there were significant last mile challenges in ensuring that the money deposited could actually reach intended beneficiaries and the fact that they needed “cash in hand” to be able to meet their subsistence and emergency needs.

A survey of around 50,000 BPL households revealed that close to 72 per cent would have either lost their jobs or seen their wages decrease. Governmental assistance was critical and close to 85 per cent of such vulnerable households received one of four governmental cash welfare schemes.

This was a good validation of the Government’s ability to respond to the distress faced by people using the Jan Dhan and Aadhaar architecture.

However, most of these recipients are unable to use digital money/debit cards and hence they need the money to be available to them in cash form. It is striking that less than 50 per cent of surveyed persons could actually withdraw money from their accounts.

Worries related to lockdown rules and potential infection stopped people from accessing cash.

There were other reasons that stymied cash access. One was the surge in traffic in biometric enabled cash withdrawal that resulted in an overload on bank servers and led to large number of failed transactions. The other was dormancy of inactive Jan Dhan accounts due to extant rules. The Government responded with a change in Prevention of Money Laundering norms so that inoperative accounts receiving such transfers could be considered active. Anecdotally, the pressure on servers also eased up post lockdown.

In spite of this, the percentage of households withdrawing cash remained less than 50 per cent. This seems like a conundrum. What is stopping access to cash at a time when it is needed most?

The value of balances in bank accounts opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY) has crossed the ₹1 lakh crore mark, as per updated data on the scheme’s website. A total of 39.39 crore beneficiaries held balances worth ₹1,34,733 crore as on June 17, 2020. This puts the average account balance of a Jan Dhan account at ₹3,454.

This raises a fundamental issue. Is about 50 per cent not being withdrawn on account of short-term issues like lockdown and health worries, or are there some significant structural issues that merit understanding and attention. Should the target be for Jan Dhan account balances to be as close to zero as possible?

Or, put in a different way, are there ways in which this welfare relief can reach targeted BPL families and enable spending by them on much needed essentials?

The amount in Jan Dhan balances is approximately 0.8 per cent of GDP and can unlock relief and consumption stimulus without further pressure on the government’s fiscal health with three key actions:

Financial deepening

Time is money for a large part of the BPL population. A day spent in going to a bank or ATM is essentially a day’s worth of labour foregone. It is important to have cash out point coverage across all areas.

An open source geo-spatial platform can help map existing points of presence for cash disbursement. It can particularly map areas of need and enable more informed build up of cash delivery points. This pictorial depiction can further highlight which of these points are active and functioning so that a trip to that location is not a wasted one.

The good news is that this basic infrastructure already exists and it is only a question of getting a collaborative of practitioners and infra providers together to make this work.

Transaction success

There are two significant requirements to improve access and reduce rejections in Jan Dhan accounts. First, biometric failure appears to be an important reason for rejections of transactions in cash withdrawals. Second is the fact that mobile numbers in this demographic change constantly. Data shows that 15 per cent of people have the wrong number linked to Aadhaar and 39 per cent have no number at all. Hence the ability to easily update mobile numbers and to resolve biometric issues could significantly improve the successful usage of these accounts.

Dalberg’s State of Aadhaar Report 2019 had stressed Aadhaar updation as a key challenge and the fact that 25 per cent of those who tried to update details had failed to do so. As much as 33 per cent of those who succeeded had found it difficult. A quick win would be to make all updating processes online. For things that cannot be updated online (mobile, biometrics), it is critical to have more points for updation.

Grievance redress

A digital system can be easily architected to have a continuous feedback loop so that ongoing issues can be swiftly picked up and resolved. Given the existence of a central payments backbone and a highly advanced digital financial ecosystem, this can be achieved in quick time. It will ensure that fixing problems and identifying opportunities for improvement become an ongoing exercise.

These three interventions can have a significant outcome of unlocking ₹1,34,733 crore of money to provide welfare relief, a 0.78 per cent of consumption stimulus at no extra cost to the exchequer and, most importantly, to strengthen the lives and help recovery of those who need it the most.

The writer is Investment Partner, Omidyar Network India

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