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Meet Devi, a 35 year old woman who lives in sub-urban Mumbai with her two children and husband. Devi came to Mumbai to live with her husband upon getting married at the age of 18. Relocating to Mumbai was quite a cultural shock for her initially, but she is now used to the fast pace of the city, its busy lanes and small houses. Devi and her family live in a small room with an attached kitchen in a ‘chawl’ (a semi-temporary building complex). They share a common bathroom with 15 other families who are their neighbors. It is difficult for low income migrant families to make ends meet in a city like Mumbai. Therefore, Devi works as a house maid for three families in a nearby residential colony to contribute to her family’s budget. She aspires to send her children to an English medium school, in the hope that a good education will pave the way to high paying jobs. She also dreams of having her own ‘kholi’ (a small house in a chawl) someday. It will help her escape the pain of monthly rent.

We, as fellows of Bharat Inclusion Research Fellowship, have embarked on a journey to understand the perceptions of open banking among customers in the financial inclusion (FI) segment in India. Towards this, we carried out focus group discussions (FGDs) in order to deep dive into the lives of FI segment customers and understand their relationship with emerging banking services in the country.

Most people we met were migrants with a foot in each world — Mumbai and their home town/village. They hailed from very small towns and villages across India. They came to Mumbai as adults in search of job opportunities, and with the intention of putting down their roots in the city and making it their home. However, having migrated as adults, their world and worries continue to revolve around their family, village and community. We found that males who participated in the discussions have active contact with their roots and are concerned about the welfare of those they left behind. This makes it important for them to be seen as responsible sons and husbands. It emerged that common banking services like money transfer, cash deposit and cash withdrawal help such individuals live up to the desired image and hence, are necessary.

It has been commonly observed that customers in the FI segment primarily aspire to meet basic goals like good education for their children and home ownership. However, for men, additional requirements like providing for basic sustenance of the family and maintaining contingency savings are of great importance, as their ability to do so distinguishes them as responsible spouses and sons. During the discussions, it was clear that most participants had entered jobs that involve high levels of physical stress (e.g. as drivers, house helpers, office boys, pick-up boys, cleaners etc.) on account of poverty and poor educational backgrounds. Further, it was apparent that low incomes from such jobs led to unfulfilled aspirations, which in turn were a cause of emotional stress for the participants. Devi was one of the participants in the FGDs and her active participation enlightened us on several aspects of the financial lives and concerns of the FI customer segment in India.

We introduced open banking to Devi

We told her open banking is:

“… banking with the nearest ration shop, customer service centre (CSC), mobile recharge shop, garment store, courier shop, sweet shop etc. These are in your area, and you as a local resident know all these shopkeepers. Not only this, if you use Facebook, Google, WhatsApp etc., you can access banking services on your mobile or on any desktop. But, how will this happen, you ask?”

We took Devi through a simple work- flow:

“

• All these shopkeepers will become an agent of a private non-banking company. These non-banking companies will develop technology to provide all bank related information and services to customers through agents on behalf of your bank.
• A non-banking company is a trusted entity and banks themselves will share your data with them, but only with your consent.
• This non-banking company will act as a bank to you and will aggregate information on your multiple accounts at one place.
• For example, Facebook could be one non-banking company that could connect with your bank and let you access your multiple bank accounts through your Facebook account on your mobile device.

PS: All your money will be in your bank account only. It will be transferred to any other account only if you authorize a non-banking entity to do so.”

This introduction and the discussions that followed thereafter opened up insightful conundrums; and they form the basis of our research. Let us go through Devi’s concerns and reactions, as they emerged during our interaction with her.

Is my neighborhood store owner qualified enough?

Devi has been saving her money with a lady nearby who runs a chit fund for women. She is very comfortable dealing with her as the lady gives her information, grace period and is always available on call. When it comes to open banking services, however, Devi is highly skeptical of the competence of open banking operatives and doubts that they might mishandle her hard earned money. Additionally, a Devi needs to be assured that the selection or appointment processes of open banking operatives are stringent.

Can I get a valid acknowledgement?

Regular updation of bank pass-books and filing of counter slips for every banking transaction is a routine activity for Devi, and she is very meticulous about them. She updates her pass-book and files counter slips on every visit to the bank. She believes this will help in reconciliation and serve her in good stead in the event of an error. She has learnt this from her experiences with small cooperative banks, which rely on traditional methods of book keeping.

Now, when Devi considers open banking services, she questions the validity of acknowledgement receipts generated by open banking service providers of cash deposit or money transfer services. This in turn makes us wonder whether an endorsement from a trustworthy banker will help build Devi’s confidence in open banking kiosks?

Will it be controlled by foreign players?

Devi trusts state owned banking entities and is alarmed at the prospect of Google and Facebook integrating with her bank account. In conversations with her neighbours and through the grapevine, Devi has learnt of instances of data breach and has concluded that since such platforms are susceptible to hacker attacks, she could end up losing her money. In fact, she is worried about Paytm’s alignment with Chinese business giants.

Is my privacy intact?

Access to banking services at friendly neighborhood stores will bring Devi immense comfort, and will spare additional time for work or leisure. However, she is concerned because local shopkeepers are on good terms with her husband as well. The problem is that Devi saves a portion of her earnings stealthily, so that she can use them during an emergency. A local store-keeper might compromise her privacy if she were to access banking services from their store.

However, in this case, Devi managed to imagine a work-around by herself. She laughed sheepishly and said, “What if the store had a banking representative who is a stranger to everyone and minds his own business?”

Way forward

So, what have we learnt from our interaction with Devi?

Basis comprehensive focus group discussions with Devi and many others like her, we suggest the following directives to potential stakeholders in the open banking ecosystem in India. However, do keep in mind that these directives are subject to detailed research studies with respondents across India, for better understanding of the finer nuances of open banking.

• Regulation:
  • The quality of local agents in terms of education, experience, training to be a matter of serious consideration for service providers
  • The stature and choice of banking entity by open banking service provider to be Indian. This will enhance assurance parameters when customers select open banking service providers
  • The charges to be affordable
  • Laws to maintain confidentiality of data and customer profiles to enhance trust factor
• Authorization: Local agents/NBFCs to furnish proofs that they represent banks, in the form of IDs, licenses or agreements
• Documentation: Service providers to establish procedures and prepare documentation to serve as acknowledgement for banking transactions
• Customization: Service providers to design products and services that accommodate FI segment needs (who have fluctuating and meagre incomes) to counter the perception that banks only cater to the wealthy.
• Professional Attitude: Service providers to sensitize last mile agents towards the need for ‘professional conduct’ and ensure that customer privacy and confidentiality are respected at all times.

This research was developed as part of the Bharat Inclusion Research Fellowship.