As more people become part of the digital financial economy, users need to become financially literate and aware about ecosystem. Furthermore, as the population accessing digital financial products rises, respect for privacy and ethical use of data needs to be institutionalised. These were the two important points that a panel at The Indian Express Thinc agreed upon on Thursday.
The panel included S Gopalakrishnan, joint secretary at the Ministry of Electronics and Information Technology; N Hariharan, chief general manager at Sebi; Leena Datwani of the Consultative Group to Assist the Poorest (CGAP) with the World Bank; and Srinivas Peddada, chief information officer at Bharat Financial Inclusion (formerly known as SKS Microfinance).
Panelists discussed financial inclusion in the digital economy. Gopalakrishnan, starting the discussion, mentioned that though India has seen an exponential growth in the number of digital transactions, the main challenge to bringing more people into the digital financial economy remains the behaviour. “Why would people change the way they make payments?” Gopalakrishnan asked. He said less cash is often misconstrued as cashless. Currently, about 5% of the economy is cashless, and if it reaches 10%, it will be a “fantastic achievement” for the country.
Comparing the digital economies of the US and China, Gopalakrishnan said while the US is more card-based, China has moved to quick response (QR) codes and mobile payments. He said as mobile penetration, including feature phones, reaches a near 100% in India, the country should look towards QR as a more acceptable option for payments.
Agreeing with Gopalakrishnan on the behavioural change, Datwani said, “Behaviour is very difficult to change and often a lot of hand holding is required. There is a lot of assisted digitisation happening.” She said a lot of fintech companies are now looking to solve problems of those who were not included in the formal financial economy earlier.
A recent Crisil report has pointed out that the trinity of Jan Dhan accounts, Aadhaar and mobile has improved financial inclusion in the country, Hariharan said. He said, “Financial education, financial inclusion and financial consumer protection are important ingredients of financial empowerment of individuals.” Financial education is necessary, he emphasised. The Sebi official added that people also need to be responsible and self-aware while accessing financial products. People who will start accessing digital financial products for the first time “need to be educated on how to use” them prudently, he said. “All these are part of digital financial inclusion.”
Peddada said the government was moving in the right direction with its policies for digital finance. The country needs “strong client protection”. Calling the JAM trinity “brilliant”, he said it had helped provide financial services to the previously excluded in the remote parts of the country. Peddada said the regulations around Aadhaar were changing too quickly.
The panel agreed that it is important that the digital financial products are safe, and government and regulators, along with private organisations must ensure that the platforms are secure, as one bad experience can turn off potential users.
Gopalakrishnan said things in the digital economy were changing at a very fast pace, and keeping privacy in mind there is a need for a supportive environment for the fintech industry.