It is important that we move towards a more granular understanding of programmes such as Jan Dhan and Aadhaar in their utility to India’s transformation. Getting any intervention to scale, without reinforcing efficiency, can jeopardise its future. JAM brings together three fundamentally different interventions — Jan Dhan, Aadhaar, and Mobile (JAM) — to deliver value to the citizens of the country, especially the poor. Potentially, JAM can also serve as the basis for continuous engagement of the beneficiary household with the bank, and even consequently with the government. However, translating that potential requires attention to the underlying comparative advantages of each of the interventions that constitute JAM.

Wide scope

The specifics of each of the triumvirate of programmes are staggering. Under the Jan Dhan programme, by December 2016, some 200 million accounts had been opened, with some ₹28,000 crore ($4.5 billion) spread over 65 per cent of the accounts. Aadhaar, which is the unique number for all residents, has covered 900 million residents and counting. Some 80 million Jan-Dhan accounts have been seeded with Aadhaar numbers, and more are in the process. Mobile phones, too, have become fairly ubiquitous; estimates point to 900 million connections and 500 million subscribers, of which 250 million have some form of internet connection.

Clearly, the potential of this combination of instruments is vast and will be limited only by the failure to build significant bridges that enable their orchestration. While public policy has clearly recognised their potential, the challenge really lies in addressing the complexity that arises from the integration of these very large interventions.

Starting with Jan Dhan, the focus of the programme should be on standardisation of the behaviour of agents, primarily through training and better communication of product and service attributes. Clear norms for customer protection overseen by appropriate organisations need to be matched with innovative supervision that complements a broad regulatory framework that does not drive the cost of compliance high for these transactions.

Demand-side issues

While these assumptions can be fleshed out on the supply side, the more embedded and difficult to appreciate transition is on the demand side. This is because the same financial services affect clients differently because of the following three factors:

1. Their experience of having lost money because of complex procedures, principal agent problems, or fraud.

2. Skill level and understanding of the service and its different components by customers vary given India’s great diversity.

3. Finally, resources that different firms can capture and its allocation to enhancing service could affect competition in this field. Getting a level playing field for all customers will go a long way in building customer confidence leading to greater engagement with banks.

For Aadhaar to become a widespread idiom of usage, more attention will have to be paid to the customer side. Should we want Aadhaar to succeed we will need to ensure increasing utility, without the fear of misuse by the state. Before we go on to examine its contribution even to transfer of benefits, we need to begin by studying customer experience in relation to recourse mechanisms that are Aadhaar-related.

More specifically, we will need an examination of how many of those receiving benefits have been able to make corrections or have made corrections, should they require a change. A measure of this will be the flexibility that Aadhaar will provide in customers choosing how to receive their benefits. Examples would include the flexibility that customers using Aadhaar and Jan Dhan should get in being able to change their agents, their bank accounts or the way they want to receive benefits.

Finally, getting the mobile to be the channel of use will require much more than robust technology. With nearly 900 million connections and 500 million subscribers, the mobile does offer a unique channel to reach individuals. Most programmes or interventions are focussed on getting information to people for a range of purposes; the most significant of these have been the second-factor authentication in transactions and the bank balance updates that follow transactions taking place within a bank account or a card. While these have been useful to engage with the citizen/client, the question is, will it become the channel also of full-fledged financial transactions and service delivery?

Much of the current debate rests on the optimistic rate of growth of smartphones and its users — at present, some 177 million of them and growing at 20 per cent annually. However, the migration to using the mobile for financial transactions or mobile banking has been much slower and that is what perhaps needs attention. There are two components attending to this debate. First is the technology option and second is the customer protection issue.

Upping the techo side

On the technology side, much more can be done to use the existing SIM-based mobile phone to undertake and assist transactions. The way content is transferred manually on to these phones to enjoy “proxy” internet experience is an existing example. Similarly, efforts to enable transactions have to be made. Individual components of financial transactions already exist — pass books in SMS form for example. Putting these components together is what is required and government has to be more decisive in leading this, rather than leaving it to the market. Secondly, much more effort needs to go into using a range of organisations to spread awareness and undertake supervision of transactions and agents than exist at present. Clearly the banks have limited capability to deliver on awareness and supervision of agents. This is a very wide field that requires government intervention if we have to in any way expect financial deepening of these services.

The disruptive potential of the JAM integration is huge. The question is, are we adopting the right approaches in making the cumulative benefit available to citizens, especially the poor? These are overall execution disciplines and not issues of technology. JAM’s success will depend on the right approach.

The writer is with The Market and EcoSystem Advisory