‘Note ban has put digital inclusion on fast forward’

Civil Society News, New Delhi

With the demonetisation of Rs 500 and Rs 1,000 notes the goal of rapidly converting India into a cashless economy and promoting financial transactions through the Internet, has become a critical priority. The question is — what is achievable and how soon?

Though India has taken to the mobile phone faster than any other country in the world, only a very small part of the population truly enjoys reliable digital access. Even of that number only a small percentage uses debit and credit cards and logs into bank accounts through phones and computers.

Digital transactions have been increasing, but the fact is they are insignificant considering the size of the population. Can demonetisation be the impetus to quickly change things and bring more people on board? Will it speed up the search for solutions to the problems of connectivity, bandwidth, availability of handsets, cyber security and use of local languages?

To get a perspective on these issues, Civil Society spoke to R. Chandrashekhar, president of the National Association of Software and Services Companies (NASSCOM), who has a lot of experience in the telecom sector.

A career bureaucrat, Chandrashekhar has  served as  Union Telecom Secretary and and chairman of the Telecom Commission.

Under Chandrababu Naidu in Andhra Pradesh many years ago, Chandrashekhar played a key role in setting up the state's department of information technology. Andhra Pradesh went on to be a role model for other states.

In the wake of demonetisation there are concerns about digital access. How far have we got with the Digital India mission?

There are two very different perspectives. Digital inclusion from the perspective of financial inclusion and digital inclusion as a larger objective — of empowering people with low income who may not have had access to the kind of opportunities that you can get today through access to the net due to the advent of disruptive technologies. These are two different things we are talking about — and while they are not unconnected they are distinctly different.

Out of the population we have how many have access and the potential to actually do financial transactions digitally? And out of those who have the access, how many are actually doing so?

The picture is quite mixed. We do have a sprinkling of smartphones and an urban population that is reasonably well-connected where mobile penetration is high. It’s pretty much full coverage in most urban areas. Access to a mobile phone is more the rule than the exception.

When you go to rural areas, the picture is a little more mixed. There is, barring the most remote areas, fairly extensive coverage. We now have almost a billion subscribers. Most analysts believe at least 600 million would be unique users, or about half the population, which is not bad if you consider the average household is about five people. So, most households, we can presume, either have a mobile phone or have access to one through a friend or colleague.

There are, of course, many ways to transact financially using the mobile phone: from wallets to online systems that banks have put in place to the very basic star 99 hash that works for very simple feature phones and so on.

Therefore, at a conceptual level and in theory, everybody who has a mobile phone has the potential to transact digitally financially. Some of the higher-end solutions that require a smartphone are obviously limited to people who have a smartphone — around 20 percent of the entire mobile devices.

However, if you look at the data, the number of transactions and number of users is really very small.  There are reports of lack of user- friendliness, long response time, etc.

When you look at a rural area where there is patchy, unreliable connectivity then the practical availability of even the ability to transact does become somewhat doubtful.

The situation is, therefore, much more mixed than one would imagine just looking at the number of mobile phones and drawing some simplistic inferences.

But one area where immediate steps are possible is to bring in those who can but don’t (use the Internet/mobile) for digital financial transactions. I believe this percentage is quite significant. There are people who may not be transacting today, but they can with a bit of encouragement and support actually make that transition.

What would that percentage be?

In the absence of a study it would be very difficult to say but a fairly large number of people who have mobile phones and smartphones would fall in that category. I would imagine it would be over 50 percent. That category of people need to be educated and made aware of how they can transact financially. Then you have variants of people who have a mobile but no bank account, Aadhar card but no bank account.

Therefore, what people need is not a wide-ranging lesson on all the options, but one that is simply tailored to that individual. It’s not difficult to learn. It is so simple that someone who learns won’t feel tempted to go back to the old ways. So, these are areas you can do something about in the short term.

How difficult is this? Is it bleak?

I would say it is challenging. I am optimistic. Used imaginatively, this situation can provide a big boost to bring more people into the digital financial mode.

You have restricted yourself to the mobile?

Yes. I think when you are dealing with a billion people you have to look at what is instantly scalable. Everyone knows we have cards and POS (point of service) devices and we are accustomed to using those in shops, restaurants, etc. In urban areas this is taken as part of daily life. But it is much less in rural areas. If you look at card penetration in terms of credit cards it is less than 5 percent and 95 percent are debit cards. Therefore, card penetration is confined to bank accounts. I think most people who have a card almost definitely have a mobile phone. Somebody who has a credit card has every single option available. A person who has a debit card may have slightly fewer options.

But it’s really people who don’t have a card or don’t have a bank account who are part of the real challenge because pre-demonetisation that transition was happening at a certain pace. Post-demonetisation it will happen at a hugely accelerated pace for the pains of demonetisation to be reduced to the minimum.

Doesn’t the success of this depend on the success of the Digital India programme?

Of course it does. But given the reality in the context of digital financial payments, this is a simpler and narrower quest. When you come to Digital India it’s a much broader question. To say that if you had solved the bigger question the smaller question would have been easy is almost a trivial statement. It is what you can do to solve the immediate problem even as you are grappling with the bigger problem.

There are people at the grassroots who tell us Aadhar doesn’t work, you can’t get a computer fixed and there is no connectivity.

Digital India has a large number of components and many moving parts which need to come together. Connectivity, for example. The latest statistics are that, barring about 30,000 villages, the rest are connected.

Again, this definition of connected and what we mean by it, is an important question. If connectivity is available in a small physical part of the village then you may call it connected but a large part of the village may not be connected. Then, because of the lack of power or equipment maintenance, connectivity may be available only for a few hours a day. Perhaps people can’t charge their mobile phones because there isn’t dedicated electricity. So there are all these challenges in rural areas where the mere tickmarking of a box that tells us a village is connected doesn’t give us the true picture.

The second thing is that the more interesting or sophisticated things you can do with the Internet and mobile require a smartphone, reliable connectivity, greater bandwidth — all of which are non-existent in rural areas. And anything that requires somewhat broadband — I won’t even say true broadband — is a challenge in villages.

The third is the affordability of devices. Affordability by people in the lower economic strata in villages is a limitation. But it is my belief that cost is relative. It’s a question of cost for what? The cost of the device and connectivity is high or low depending on what people can do with it and what they can get out of it. For many people in India, I believe for a significant population in India, the mobile is an instrument people use to supplement their income — whether it’s a vegetable vendor or a taxi driver or any other service. It has become a lifeline.

Language is also a big issue. Many of the service providers we have been interacting with, including mobile financial payments, have reported a big jump in their business once they have made available a local language interface.

We need a far greater degree of domestic innovation in terms of making apps and services available to people which are relevant to their situation and their problems in life.

It may be something simple like a minor innovation some years ago that enabled a farmer to turn off his pump set using his mobile phone. It makes a huge difference to the lives of people and there are millions of such innovations that are possible. You need a set of people who are familiar with the real problems of people on the ground and can quickly build solutions. And these solutions are not rocket science.

Would you say demonetisation provides us the impetus to do more and faster?

As far as digital financial inclusion is concerned, I would say certainly it does. As far as the other things are concerned, yes, it does help in creating a certain pull. Once you have experienced the comfort, convenience and power of transacting online, your readiness to absorb other things becomes much higher and we know that the fastest growing area in telecom is in the rural areas. The rapid rise in demand is also from the rural areas. The first revolution in India was putting the mobile phone in every hand, which is pretty much done, illiterate or literate, village or city. The next step is to use it for something other than conversing. The steps after that will follow much more easily. Bringing people on to the digital transaction mode is the most challenging aspect.

So it is going to be about people being able to use all that you spoke about. Are you positive about it?

It is undoubtedly a monumental challenge. It is wishful thinking to believe otherwise. But if we are able to work on all the elements in a concerted way then the transition is possible in India at a much faster pace than anywhere globally. The mobile revolution in India happened faster than in any other country, including China, though we began  a little later. Here, too, we are coming in a little later than other countries, including China, but the ground has been laid. There needs to be an overall gameplan for these things under Digital India.

There needs to be an interface between the state sector, research and private enterprise to achieve this?

Yes, I think that first of all one has to be very clear which of these can be met by market forces and which can be met by direct State intervention and which require State intervention by providing an enabling policy framework. These are three distinct boxes. We know that in the telecom space almost 50 years since Independence we got 50 million phone connections. With the right policy framework and the right technology evolution stage, in a little over 10 years we went to a billion.

Similarly, here too it’s a question of recognising when you need to put in place an enabling policy and letting the private sector run with it. That’s the kind of frenzied pace we need. It is beyond the competence of the government to do the programme directly. You do require the nimbleness, agility and innovation of the private sector together with extremely farsighted and perceptive policies.

What you are talking about then are socially impactful market forces with the right regulation?

Socially impactful, viable programmes, which are scalable, and supported by an enabling policy framework. The challenge is that regulation has to be nimble, and continuously adapted to changing times and with a light touch. It is practically impossible in today’s world of fast-changing technology for regulation to anticipate technology. Regulation should not try and solve a problem before it has occurred in the fond hope that it will avert the problem.

Does this change the focus of NASSCOM's digital literacy programme?

I think digital literacy has always included many dimensions. It’s not the digital equivalent of the 3Rs. It’s also been about life skills — what you need to be able to do for your own livelihood, for enhancing your income, accessing services and so on. Digital financial literacy was always a part of the overall digital literacy programme. What demonetisation has done is to increase the importance of that and actually fast-forward it.

How much of a concern should cyber security be?

In my opinion it is something we should worry about the most. It’s not cyber security simply in terms of hackers. It’s about simple do’s and don’ts in life for people using this medium and especially people using it for the first time. Simple things like not sharing your password or changing your password or sharing information with people you don’t know very well and the kind of phishing messages people get. I think in the early stages people falling prey to that is quite high. Even regular users fall for that.

The second part is for the government, the regulatory system and others to balance ease of use and convenience of use with the need for security. It is important when you want to get a large number of people to use these technologies without putting off early entrants.