The challenge of exclusion

Posted on April 01, 2018 by Sumita Kale

As the PMJDY and DBT mission have significantly improved access to banking and financial services, the government should now pay closer attention to the examples of exclusion that are coming to the fore. The hearings in the Supreme Court on Aadhaar have brought to light instances where authentication failures occur, and while the government has argued that authentication failures do not lead to denial of benefits, there is no data in the public domain. It is true that no system can be made perfect, however, the intention of the system must be to address failures where they occur, resolve them and ensure they do not persist.

It is therefore important for the government to institute a monitoring mechanism for transaction failures and denial of service at a granular level. Transaction failures occur for many reasons. For instance, the MicroSave and Helix Institute of Institute of Digital Finance survey, February 2018 showed that agents have differential experiences across software - Out of the agents who use only bank-specific software, 65% experience service downtime compared to 49% among those who use other platforms; out of the agents who use only mobile banking app, 30% experience service downtime compared to 61% among others and most importantly, among the agents who deny at least one customer per day, 38% reported fingerprint authentication as the primary reason for denial of service. The Economic Survey 2016-17 had also flagged the issue of higher failure rate of off-us transactions compared to on-us transactions. It is essential that the government go into the transactions data at the granular level and identify the specific glitches at each location. There is clearly a need for more data and analysis for greater understanding of where the transaction failures stem from.

At the crux of the challenge is that without granular data, specific problems at specific locations will not be understood and the growing challenges of exclusion, rising from digitisation of payments, will not be addressed.

Going one step further, a CGAP work has uncovered the many faces of social exclusion that can be addressed along with financial inclusion measures, provided the issues are identified correctly. For example, the CGAP data show that women above 55 years old have limited access to basic services such as electricity, clean water, sanitation or transportation, more so than their younger peers. This is clearly an area that should be prioritized since financial solutions can enable access to these essential services. The Niti Aayog can initiate work in this area for India, to identify the specific issues and their possible financial solutions. 

Now that the universality of access to financial services has been addressed through the PMJDY and digital payments have taken root in the country, a closer look at the issues that are arising at a granular level will give India a much more inclusive society, financially and socially. 

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