Why cheap data won’t be enough
The real impact of Reliance Jio will be measured by the extent to which it propels India’s financial inclusion mission
Reliance Jio has burst on to India’s digital world promising to change the way data is used in the country. The company plans to roll out a pan-India high-speed network and has come out with a slew of pricing offers. While this will impact the telecom sector, it will have a different implication for India’s financial inclusion mission.
India’s financial inclusion has been focused on access to banking and financial services, with a broad consensus that technology is key to a cost-effective financial transactions landscape. This explains the thrust to payments banks by the Reserve Bank of India (RBI). Fintech is already the new El Dorado. We find not just young techies getting into the game but also industry veterans like Ratan Tata, Nandan Nilekani and Vijay Kelkar coming together for a new venture, Avanti Finance—a “technology-enabled financial inclusion vehicle” that aims to provide affordable credit to low-income customers.
However, the critical role of telcos in ensuring the requisite connectivity for this digital world is rarely discussed. Reliance Jio’s ambitious plan to provide cheap data connectivity across India underlines the need to focus on telecom infrastructure and service quality to enable transactions, transfers and withdrawals of funds. Without this, financial inclusion will be a non-starter in areas with low or no connectivity. If Reliance Jio’s nationwide roll-out prioritizes the financially excluded pockets, it will be a game changer. If it spurs competition to reduce prices across the market, it could make a significant difference to the affordability of digital financial services.
Meanwhile, India’s telecom industry is in turmoil. It is in the midst of a dispute over inter-connection points as well as demands by existing telecom operators to charge higher termination fees than currently mandated—all to compensate for the financial burden resulting from the overwhelming pressure of calls originating from Jio.
The problem is that while the national focus is always on call drops, there is barely any discussion on connectivity for financial inclusion. In fact, there is little data to even take stock of where we stand today. The Pradhan Mantri Jan Dhan Yojana (PMJDY) website marks 750 locations as “un-served” but does not track the issues faced by business correspondents and rural branches in making digital transactions.
Connectivity is a serious operational challenge reported by agents in the MicroSave nationwide survey of PMJDY agents (October 2015). Agents tend to focus their business at locations that have better connectivity, and around a third use their mobile phone as a “makeshift arrangement” to connect to the Internet for transactions. On the demand side, according to a national survey by the Consultative Group to Assist the Poor last year, the first concern reported by low-income customers in adopting digital financial services was the inability to transact i.e. downtime. As the MicroSave work notes, one failed transaction is often enough to turn away the entire village from digital transactions.
The Indicus Centre for Financial Inclusion (Icfi) has been flagging this issue for a year now. It is time that the Department of Financial Services (DFS), the Telecom Regulatory Authority of India (Trai), the RBI, the Indian Banks Association (IBA) and the Cellular Operators Association of India (Coai) coordinate to notify the minimum telecom service requirements for devices for conducting mobile financial transactions. Trai must ensure more granular reporting by service providers of their telecom footprint and data service quality down to the sub-service area level, and regularly update the availability and level of telecom connectivity (2G, 3G).
India needs to build a geographic information system heat map of telecom towers, data service quality profiles and transaction quality at the locations of “Bank Mitras” (business correspondents or BCs) and rural branches across India. There are some pieces already in place that need to be tied together.
RBI has accepted one of the recommendations made by Icfi last year i.e. to compile an online harmonized database of the financial inclusion footprint, in terms of outlets, service points, devices, connectivity and agent networks. The IBA is working on this. Trai has already initiated a MySpeed app which can be used by each agent to record the state of connectivity at the location. Trai has also set up a quality of service analytics portal that tracks the call-drop rate for 2G networks at the tower level. These need to be adapted for metrics suited for financial transactions. While both regulators are working to introduce transparency at a granular level, the two must come together with banking and telco associations and set up a monitoring framework with appropriate metrics for financial transactions.
A heat map for digital financial services can highlight activity at the village level, which can be mapped to the socio-economic profile for that area. The data from such a map can be also used to ensure that the blanket mandates for financial inclusion set by RBI are a thing of the past. Rather than order banks to place a quarter of their branches or access points in areas as defined by the census, a heat map can easily pinpoint where financial access is lacking and where the banks need to target their work.
We have enough energy, excitement and expectation at the national level. It’s time to dive deep into India’s countryside and focus on those pockets where services are needed the most. It is only when DFS, Trai and RBI work together that we will get a holistic picture of whether the banks and the telcos are truly delivering that which is needed at the right time and at the right place.
Sumita Kale and S.V. Divvaakar are with the Indicus Centre for Financial Inclusion.
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