Digital Inclusion – New Risks, New Learnings

April 2021


The month of March reminded us that the pandemic is not over yet, with a sudden dramatic surge, especially in Maharashtra where active cases surpassed the peak last seen in September. This year the government is steering clear of an all-out lockdown, but growth will stumble as local authorities set restrictions on activity, and more cases result in lower productivity. The overall impact on the economy will of course depend on the duration and severity of this wave across the country.

Some favourable data in now – GST collections in March were at a record high at Rs. 1,23,902 crores, see PIB graph giving monthly data showing the impact of the lockdown last year; Indian Railways clocked in higher cumulative freight loading in 2020-21 compared to the previous year; auto sales saw strong month-on-month growth in March, and expecting continued high demand with excellent rabi harvest and higher MSPs boosting rural incomesCMIE data showed a decline in the unemployment rate in March compared to February. Going forward, growth forecasts for the year are varied. The United Nations Economic and Social Commission for Asia and the Pacific estimates growth at 7% in 2021, with output below 2019 levels, despite the rapid vaccination drive, and the World Bank is more optimistic, despite the “ significant uncertainty”, setting a range of 7.5-12.5% for the year. We find the World Bank view more likely to pan out.

Even as the economy faltered, outstanding growth in digital payments last year pushed India into the top spot globally, beating China as consumers opted for the convenient payment options. The value of UPI transactions made a record of over Rs 5 lakh crore in March. However, the Reserve Bank of India (RBI) ran up against payment providers unprepared to meet the deadline to comply with regulations towards customer protection and data security. The deadline for the framework for e-mandates of recurring online transactions has now been extended till September 30, 2021 while the deadline for implementing a framework like tokenization on card transactions has been extended to December 31, 2021. While the payment providers had requested extensions citing unpreparedness due to last year’s disruptions, the language in the RBI notifications is uncharacteristically stern, time for the service providers to get their act together within the updated timeline.

RBI is not the only regulator grappling with customer protection. China has been cracking down on digital platforms – read Alexandra Rizzi’s blog post on “Regulatory Headwinds on the Horizon for Chinese Fintechs: Where Do Consumers Fit In?”. CGAP has a report out, “ Elevating the Collective Consumer Voice in Financial Regulation” with three recommendations - empower consumer groups to represent consumer interests to regulators, create more forums for regulators to listen to consumers and leverage technology to connect consumers and regulators.

The pandemic has focused attention on the cracks in the financial inclusion mission worldwide. For instance, agent networks in rural areas have been under stress and CGAP’s Nitish Narain, Gayatri and Christopher Blackburn have a blog post out on experiences in India and other countries bringing out the strengths and the weaknesses in the system at the last mile that need to be fixed.

The increasing gender gap has also come to the forefront over the past year as V. Anantha Nageswaran and Sumita Kale point out in their article in the MintJulia Arnold has a detailed blog post on what it takes to make a woman financially capable. Women’s World Banking has identified a 10 point action plan to bring financial equality to women, while MicroSave has come out with a framework that helps design gender-sensitive ID systems.

Last but not the least, there is absolutely fascinating research out by the Centre of Financial Inclusion Accion, “ The Stories Algorithms Tell: Bias and Financial Inclusion at the Data Margins”. While the increasing use of technology has helped the financial inclusion mission globally, it is critical to remember that algorithms used are man-made with all the biases built-in. Read Genevieve Smith and Ishita Rustagi on “ When Good Algorithms Go Sexist: Why and How to Advance AI Gender Equity”.


Some Other Highlights

•    Uttar Pradesh will be the first state in India to train a woman banking agent for every village this year – “ The training programme of 56,875 BC Sakhi has started and by April they will start operation.
•    An interview with Nandan Nilekani, “ The West created monopolies, we democratised data”.  
•    Raghuram Rajan writes on what the rise of digital payments means for central banks.    
•    Anand Kumar Bajaj, MD and CEO, Pay Nearby explains how ‘sachetisation’ by fintech can get financial services to the bottom of the rural stratum.
•    MicroSave has a video out on the challenges Indian states face in targeting and tracking beneficiaries of various social programs and the importance of household-level databases.
•    NPCI is looking to launch a new digital payments product for feature phones, this will allow low-income customers to move to digital transactions.
•    An explainer on Bloomberg on what NUE is in India and why Amazon wants a piece.
•    The RBI has reached out to Google and other industry leaders to explore appropriate ways to regulating digital lending. In a reply to a query in the Parliament, the government confirmed blocking 27 fraud lending apps offering instant credit online but did not name them.
•    Innovative product launch by NCR Corporation - the first interoperable cardless cash-withdrawal solution based on the UPI platform.

Editor: The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. ©Indicus Centre for Financial Inclusion. All rights reserved. 4thJanuary 2019

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