By Moin Qazi
Digital finance is spreading rapidly in India as digital payments surged to 55 per cent in 2016-17 alone, compared to a growth of 28 per cent in the last five years. India reportedly had 133 million messaging app users in 2016. Sensing an opportunity, several messaging apps are launching payment wallets which would ease digital transactions in India.
Big names in India’s digital finance market
In June 2017, Hike Messenger launched its own payment wallet. The wallet is United Payments Interface (UPI) enabled and allows users to transfer money across banks, along with enabling them to do mobile recharges. Hike is the first messenger app to launch a payments service in India, and its 10 crore users will now be able to use the messenger app as a digital wallet as well. But what is it about messaging apps that are making companies more interested in using them as potential tools to enter the digital finance scenario?
WhatsApp has 200 million active users in India, making it one of the most used apps in the country. The already existing large user bases make entering the digital finance market much easier for messaging apps, as they do not require building a user base of their own. This is precisely the reason why Google, Amazon, and WhatsApp are all potential entrants in the digital finance market.
While total internet user growth is flat worldwide, India surged 40 percent year-over-year and now has 277 million users. This finding is according to the annual Internet Trends Report from Mary Meeker, a partner at the Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers.
The case of fin-tech
The new wave of financial technology — better known as fin-tech — is often portrayed as a disruptive force that threatens banks with new, agile, and savvy competitors. Fin-tech is transforming the way people and companies connect with their banks, and the way banks manage their back-office operations. Today’s financial-technology innovation boom represents evolution rather than revolution for traditional banking. It is supplementing and diversifying the existing financial system — not replacing or disrupting it.
But for mobile money to be the transformative digital finance tool, consumers must have greater confidence in the markets and services should be suited to the customers’ needs and delivered responsibly, at a cost both affordable to customers and sustainable for providers. The painful reality is that providers too often focus on short-term incentives at the expense of long-term consumer trust and loyalty.
Fostering inclusivity in digital economies
In India, RBI has been instrumental in enabling the development of the fin-tech sector and espousing a cautious approach in addressing concerns around consumer protection and law enforcement. The key objective of the regulator has been around creating an environment for unhindered innovations by fin-tech, expanding the reach of banking services for the unbanked population, regulating an efficient electronic payment and providing alternative options to the consumers.
Building inclusive digital economies requires the collective action of governments, industry, financiers, and civil society. Before speeding ahead, we need to build the infrastructure, align the policies, and create the tools that will enable the poor to comfortably board the digital train.
A lack of trust in technology?
The aversion of the ‘other India’ to digital finance has more to do with their aversion to everything that has to do with technology. And this stems from their lack of trust in it. Although we must continue to make the case that responsible digital finance is good business, we know that isn’t enough. Independent and well-resourced regulators, consumer groups, and other organisations are critical to ensuring that the consumer protections afforded by law and regulation are actually followed and enforced.
The Helix Institute of Digital Finance’s latest survey of agent networks in Uganda highlighted just how commonplace fraud and robbery is for agents, not just in Uganda, but worldwide. And customers continue to experience trust-eroding problems in their transactions.
Understanding the risks and looking forward
With the many opportunities provided by groundbreaking technology and innovative business operations also come new risks. The risks related to implementing digital financial services extend far beyond operational and technical risks. The fin-tech revolution is no different. Loss of privacy is the most obvious risk; indeed, despite efforts to create safeguards, it is all but inevitable.
In order for the financial inclusion industry to be able to capitalise fully on the benefits of digital financial services, it is important that the accompanying risks are understood and adequately addressed. Though these risks cannot be eliminated, they can be mitigated.
The right way to drive a revolution is through empathy — not a form of empathy that comes from superiority, but one that born from profound humility. It is an offering of respect, a moment of listening to stand in the shoes of another. The most successful leaders were those who recognised it and invoked it in the social and development interventions which they shepherded.
Moin Qazi, a former banker and an accomplished poet and writer, has extensively contributed articles to leading publications around the globe and authored several books.
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