As more people become part of the digital financial economy, the 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 institutionalized in the country. These were the two important points that a panel at The Indian Express Thinc agreed upon. The panel included S Gopalakrishnan, Joint Secretary in the Ministry of Electronics and Information Technology; N Hariharan, Chief General Manager at Securities and Exchange Board of India (Sebi); Leena Datwani of the Consultative Group to Assist the Poorest (CGAP) with the World Bank; and Srinivas Peddada, the Chief Information Officer at Bharat Financial Inclusion (formerly known as SKS Microfinance). The four 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 per cent of the economy is cashless, and if it reaches 10 per cent, it will be a “fantastic achievement” for the country.
Comparing the digital economies of the United States and China, Gopalakrishnan stressed that while US is more card-based, China has moved to Quick Response (QR) codes and mobile payments. He said in India, as mobile penetration, including feature phones, reaches a near 100 per cent, the country should look towards QR as a more acceptable option for payments. “Just because we are educated doesn’t mean we are financially literate,” he added. Agreeing with Gopalakrishnan on the behavioral change, Datwani added that “behavior is very difficult to change and often a lot of handholding is required. There is a lot of assisted digitization happening.” She said that a lot of financial technological companies are now looking to solve problems of those who were not included in the formal financial economy earlier.
She said that with new data available, “there’s already a lot of credit opening up to people who have never had credit before”. A recent Crisil Report has pointed out that the trinity of Jan Dhan Accounts, Aadhaar and Mobile have improved financial inclusion in the country, Hariharan said. He added that “financial education, financial inclusion and financial consumer protection are important ingredients of financial empowerment of individuals.” Financial education is necessary, he emphasized. 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, he said, “they need to be educated on how to use” them prudently. “All these are part of digital financial inclusion.”
Peddada said that 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 organizations must ensure that the platforms are secure, as one bad experience can turn off potential users. Gopalakrishnan said that 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. Datwani added to that, saying there is a need to institute ä culture of using the data responsibly and ethically”. When asked about the targets for digital transactions, Gopalakrishnan said that in 2016- 2017 India witnessed close to 2,000 crore transactions made digitally, though the target was 2,500 crore. For the next year, a target of 3,000 crore will be a conservative estimate.”Everyday somebody is losing money, every day somebody is cheating someone. Digital transactions won’t change that. Let us be ready for that,” the MEitY bureaucrat said. Hariharan said that cyber security will be a big challenge for all stakeholders involved as more transactions happen digitally.