The Bharat Inclusion Team and Research Fellows.

In his work, that has long become the material of common wisdom, the Austrian economist Joseph Schumpeter identified an entrepreneur as an agent of change. Schumpeter characterized the entrepreneur as the force required to drive economic progress, as the proactive carrier of transformation in economies that are static or structurally immobilized. Today, there scope is for India to count on this force of entrepreneurial intervention to contribute heavily to ensure financial access to all.

The United Nations defines inclusive financial sectors as those that ‘improve people’s lives, in particular those of the poor’ and which ensure that everyone who is eligible for financial services ‘should be able to choose them if desired’[1]. For too long, delivery of financial services to the underserved in India has been pushed back or has relied on tenuous public-private-philanthropic arrangements owing to constraints of imperfect markets. Serving the poor is expensive and risky, but then, so is being poor. How does one get past this fundamental quandary?

Well, with the voluminous take-off of the digital revolution in India, it appears that a bridge may be in sight, both a literal and a figurative one. As Dr. Neharika Vohra and Dr. Errol D’Souza of IIM Ahmedabad write, “With more than a billion users of the Jan Dhan-Aadhar-Mobile trinity and the increasing adoption of open access and inclusive technologies, we believe that the unseen majority of Bharat will join the economic mainstream, creating vast opportunities for innovative entrepreneurs”[2]. The enthusiasm is palpable, yet caution is essential. Technology is a seductive solution but may be laden with potentially troubling inner depths. However, the core agenda cannot be pushed to the back of the table-build informed products, deliver desirable services, and digitally empower the consumer by ensuring significant user command and control over relevant technologies.

Considering this core agenda, there are at least three major fronts that call for focussed deliberation when scoping the potential for success of technology-led entrepreneurial solutions to financial exclusion in India. The first is ‘where is the gap?’, the second — ‘if a gap exists, is there a robust business case around it?’ or in other words, ‘is there an opportunity?’, and finally ‘how does a technological solution to the gap interact with the segment I intend to service?’. These are simplistic, but loaded questions that can only be answered with rigorous research and building of evidence.

With these ideas simmering in the cauldron, on the bright sunny morning of June 21, 2018, CIIE’s Bharat Inclusion Initiative invited eminent academics, researchers, industry practitioners, domain specialists, and stakeholders to stir in their combined expertise. As expected, fascinating rounds of presentations, discussions, debates, and disagreements ensued, as is only to be expected from a cohort that is passionate and deliberate in equal measure.

As discussions progressed, it was clear that market for digital financial products in India is vibrant in patches. Enterprising start-ups as well as established banking and non-banking players extend a range of services for underserved segments- from digital payments to agri-finance, micro-credit, small ticket insurance, and savings products. Yet, product innovations are largely undifferentiated and are fraught with challenges of feasibility, usability, accessibility, adoption, and scaling of access.

Consider the case of digital agri-financial services for instance. BIRF[3] fellows Anisha Singh and Suraj Nair pointed out that diversity of product and design interfaces in mobile based applications targeting the farmer segment in India constrain cross-usability of applications in a consumer segment that finds it difficult to transfer their knowledge from one digital platform to another. In the absence of best principles for product design, the disjointed mesh of diversity retards the overall adoption of digital financial products across agri-value chains. Then, there is the parameter of gender, as BIRF fellow Renuka Sane added. Are digital agri-services sensitive and aligned to the needs and skill levels of female users?

Mr. Sanjay Jain, former Chief Product Manager of the Aadhaar Project of the GOI and Chief Innovation Officer at CIIE Initiatives, agreed and further observed that it is imperative to build and test digital solutions that are robust in the face of network connectivity lapses.

Let us take another example. The banking landscape is fast evolving in India and is finally looking forward to ceding space to non-traditional players like technology companies, retail players, telecom giants and tailored entities like payment banks and small finance banks. Such players can leverage open APIs and the whole gamut of digital platforms to extend financial services closely aligned to the needs of individual customers, P2P segments, and small businesses. Yet, there are obvious potential barriers to uptake of open banking products, inadequate trust in non-traditional service providers being the key deterrent. There are a several other associated challenges. Open banking products often involve complex backend linkages between multiple banking, technology, and non-banking partners, which are difficult to convey across literacy and awareness barriers. In this context, BIRF Fellows Renuka Sane and Saranya Gopinath echoed pertinent concerns. Who is liable for grievance redressal, who takes fiduciary responsibility?

In this milieu of voices, BIRF fellows Abhinav Guptha and Mayur Singhal proposed a sobering solution- Let us preface open banking product innovations with a thorough investigation of the perception of open banking products among FI segment customers and let us map consumer needs and expectations with proposed services.

As the discussion veered towards ethical promotion of product/service uptake, Saranya Gopinath, BIRF fellow and an independent legal expert, proposed that unconventional products/services ordain the need for unconventional approaches to contract communication to customer segments alienated by language and literacy barriers. Her enquiry — can traditional service contracts be replaced by intuitively communicable graphical contracts?

Weighing in on the proposition, Dr. Rakesh Basant, professor of Economics at IIM Ahmedabad, contested that graphical representations of terms may not have the carrying capacity of elaborate legal stipulations, but appreciated the need to explore possibilities. BIRF fellow Renuka Sane addressed the communication issue from the consumer end. What if, instead of pushing financial literacy campaigns and financial advisory models that have so far produced thin evidence of effectiveness, consumers were offered a mobile app based checklist of questions they could pose to financial intermediaries while evaluating a product? Financial illiteracy, point of sale miscommunication and mis-selling are serious impediments to sustained adoption of financial products in the low to middle income segments in India. Structured academic research in these areas could yield exciting complementarities for regulators and financial service providers.

Conversations deepened and discussants grasped at the core lacunae in devising appropriate financial products for the under-served segments in India — the question of effectively contouring the financial lives and financial behaviours of the target segment. BIRF fellow Monami Dasgupta called attention to the differential needs, attributes, and risks inherent in the lives of different segments of the poor in India. The urban poor in India, she evoked, are as vulnerable as the rural poor. Yet inclusion initiatives, other than micro lending have almost exclusively focussed on the rural poor. A good place to begin, she surmised, would be to extensively evaluate financial diaries of the urban poor to draw a sense of their income volatilities, coping strategies, financial needs, and realistic ability to access financial products/services.

BIRF Fellows Magda Hassan, Parul Agarwal and Khushboo Gupta suggested an experimental lens to capture the financial behaviour of low income consumers. They proposed the exploration of the influence of peer-comparison on awareness, acceptability and adoption of digital payments among low income consumers and micro-merchants.

As the day winded up, the tinkling sparks of innumerous parallel and future conversations reaffirmed our belief in the transformative synergies of academic and entrepreneurial pursuits towards financial access for all India. But then, we are only getting started!

References

[1] UN (2015). Resolution Adopted by the General Assembly on 25 September 2015. New York NY: United Nations

[2] Vohra, N., & D’Souza, E. (2018, May 18). Now is the best time to create solutions for Bharat. livemint. Retrieved from https://www.livemint.com/Opinion/5hM5GSvo2iihfylakkf4SJ/Now-is-the-best-time-to-create-solutions-for-Bharat.html

[3] Bharat Inclusion Research Fellowship

The conversations featured in this piece are from the formal commencement of the Bharat Inclusion Research Fellowship (BIRF).