Reams and reams have been written about whether demonetization was the right move, and whether it achieved its objectives of reducing black money and improving digital access for the financially excluded.
I saw an infographic from Kstart (a seed programme from Kalaari Capital), which showed a drop in active wallet users—after the November-December rise—in January by 50%. Of course, the base itself shifted but there’s an unmistakable drop in digital payments vis-a-vis the time when people had to.
With the cash situation set to return to almost the same state as it was pre-8 November, I believe that there’s a lot more that remains to be done if a less-cash economy is to become a reality. Here is what I think it will take:
Cash is not inconvenient: Most people propagating the use of digital payments because it is higher tech or more convenient would be shocked by statistics of lower usage, given that digital payments were supposed to have made things more convenient than using cash. However, if you think about it, cash is not inconvenient. In fact, at a toll booth or at a checkout counter in a parking lot, nothing’s faster than a Rs100 note. I have been using credit cards for almost everything for 20 years but even I can see how easy cash is in many cases. I am reminded of a start-up rule that says, if you are trying to improve user experience by your solution, it cannot be a little better or even twice as good. It has to be 10 times better, else people won’t switch. Clearly, a large chunk of Indians haven’t found digital payments 10 times better.
Cash is not low tech: There is a widespread belief that most semi- and uneducated Indians don’t go digital and that is why they use cash. To my mind, nothing can be further from the truth. There are plenty of examples where tech has been put to good use by the common folk, but my favourite example is Uber. The person who used to drive for me, left to sign up with Uber. I have been curious to know how he is faring. I went to the extent of understanding how he learnt to use navigation and the driver app, and how he went about maximizing the incentives the company offers. Most do a great job on all of the above and these all tools are complicated. My point is that if technology solves a real problem—in this case increase the earnings substantially—I bet that the users can figure it out.
The government must take the lead: This is probably where government’s efforts must be lauded but we have a long way to go. In December, I got a shock at the passport office. When renewing my son’s passport I was told that the Tatkal fees would be accepted only in cash. The rest of the process is arguably among the most hi-tech anywhere in the world.
It has to be a lot more than just convenience: The one place that has been a let down for me is the failure to communicate the benefit of a digital footprint to those to whom it would make a meaningful difference. It’s nice to tell the common man that going cashless will help strengthen the nation or cut down black money, but frankly, what’s really in it for him? Have you seen any communication that states the guaranteed (or ‘pre-approved’ in industry speak) availability of a loan if a person demonstrates continuous credits (or activity) in his bank accounts for a minimum period of time? Isn’t that a much better incentive for people to stay digital—the possibility of a loan at an interest rate that’s likely to come at less than half of what they borrow at in the internal market?
Eliminating black money by reducing cash without addressing transparency in political funding, real estate and gold transactions and more esoteric instruments like P-notes has already come a cropper. How about we take the common people along on the second objective: of increasing inclusion via their digital footprint by highlighting personal benefits rather than loftier, nationalistic goals? And while we are at it, let’s rid ourselves of the notion that they don’t get ‘it’. I believe they get what they have to and it’s time to make it work for them.
Manish A. Shah is head-digital banking, Nainital Bank, a subsidiary of Bank of Baroda.