Ramesh S Arunachalam
If
you look at the structure of what’s happening in digital financial inclusion,
you are seeing a large number of stakeholders get involved and these are not
necessarily financial institutions. TELCOS, merchants, intermediaries, agents and
a whole range of other NEW stakeholders are getting involved in the delivery of
(digital) financial inclusion services. That is fine but what is very important
and also needs to be noted is that none of them have serious regulatory/supervisory
oversight and because of that client rights are being violated!
Let
me give a few examples of what happened to a friend to illustrate what I am
saying. This friend recently started using a digital wallet (through his
mobile) to top up air time and also buy small things. On several occasions, his
complaint was that due to poor network connectivity and/or some other
(technical) reason, the money had been debited from his digital wallet account
but the purchase did not go through. Now he claimed that this is also happened
in the case of his recently acquired credit card and he offers these two
instances.
First,
when he tried to top up his mobile, a transaction for Rs. 500/- (about US $
7.5) through the digital wallet, the money got debited from his digital wallet account
but then the TELCO did not top up air time. He called their customer care department
(with great difficulty as there was a long list of options to go through and
choose from to reach a customer service staff) and the staff were extremely
rude. When he told the staff about the problem, they said they would check and
revert and soon enough, he got a message from the TELCO saying that due to
technical reasons the top up did not happen. It is important to note that he
did not get any message initially but got this only after he spoke to the
customer service staff.
He
again called their customer care and told them that his money had been debited
already for which the customer service staff said it will take at least 5
working days for the money to reflect back in his digital wallet. The key point
to note here is that apart from not getting the airtime top up, which my friend
required at that point in time, he was also poorer by Rs 500 (about US $ 7.5)
for a few days. Technically that was his money and it should not have been
parked with someone else – either the Digital Wallet owner and/or TELCO to whom
it did not belong. In this case, the digital wallet was owned by the TELCO and
so, the money was essentially with the TELCO.
The
flip side is that if several such transactions occurred in a day, imagine the
money that the digital wallet company and/or TELCO would be holding (unfairly).
This is one serious issue with (digital) financial inclusion and needs to be
noted by the regulators. And when this happens, while the amounts may be small
for the individual clients, the aggregated amounts can be large on a PAN India
basis for the digital wallet company and/or TELCO.
Second,
the friend related a similar happening in the case of an airline booking
thorough the mobile using his recently acquired credit card. Now that’s again
using a digital financial inclusion service where my friend used his SMART credit
card through his mobile and the money for the transaction was debited and went
into the account of the airline (and/or merchant) but the ticket was not
issued.
“The booking could not completed successfully was the
message that flashed on my friend’s mobile and yet his money had been debited!”
Is
this not unfair to my friend, the customer? Now there are serious issues here
too. Also, for the money to come back to my friend’s credit card, it took more
than 3 weeks.
Now,
imagine that 500 rupees (about US $ 7.5) or, 10,000 rupees (about US$150) or
15,000 rupees (about US$225) are lying somewhere in between heaven and earth with somebody to whom they
don’t belong because the service/product was not sold. Without doubt, this is legitimately
clients’ money which is lying elsewhere and it takes more than 2/3 weeks to
come back. Imagine the digital wallet company or airline or intermediary or
merchant whose is making money out of this! How to regulate this is again a
very serious issue for the regulators? And what happens to my friend and
thousands of others like him whose accounts have been debited but who have not
received the services that they desired? Have they not been unfairly treated?
Who protects them now?
Three
issues need to be answered given the above:
a)
If educated and
technology savvy customers (like my friend) themselves find it a huge problem
to deal with such issues, what can low income and bottom of pyramid clients do,
provided the same aspect happens when they use a (digital) financial inclusion
product/service? Who, specifically, will provide them redressal and who,
specifically will protect their very hard earned money (which in relative terms
could make all the difference to their daily living)?
b)
How does a
regulator/supervisor (presently, the RBI) sitting in Mumbai or for that matter
a state capital reach out to customers and assure them that their money is safe
under such circumstances? Specifically, how can the regulator even know that
this is happening on the ground especially, when low income and bottom of
pyramid clients are involved (as these clients have no real means to get back
to the regulator who is presently, the RBI)? Intimidation aspects apart, there
are logistic and livelihood issues which prevent low income and bottom of
pyramid clients from getting back to regulators like the RBI.
c)
What about the
money (in an individual and aggregate sense) unfairly gained by the TELCO or
the digital wallet company at the expense of a customer? What happens to that
money? Let us not underestimate this amount as small change. Having been an
enterprise architecture person for over 25 years and having been involved in
development and implementation of core banking and ERP systems for a long, long
time, “aggregation of small change” can indeed be very big. This is analogous
to the “rounding off” phenomenon in core banking and ERP systems.
There
are many more issues and examples that I can give you with regard to (digital)
financial inclusion but the larger point is that when this can happen to highly
literate customers, imagine the plight of low-income and bottom of pyramid
clients. And most importantly, how can we expect bottom of pyramid and
low-income clients to deal with these issues and who will ultimately protect
them and their hard earned money?
That
is why we need a specialized client protection agency focussing exclusively on (digital)
financial inclusion as newer products/services using newer technologies are
being delivered through newer stakeholders through newer processes. Innovation
is fine but cannot come at the expense of client rights and these need to be
protected! On a daily basis, client rights are INDEED being violated even as we
rake up innovations through digital financial inclusion and that needs to be
squarely addressed!
Treating
the client fairly is a very critical component of any service and that is sadly
missing in much of India’s digital financial inclusion space in real time! As
noted above, I can provide innumerable examples but the key point is that the
Reserve Bank of India doesn’t have wherewithal to look at all of this. And I
don’t think clients (educated or low income or BoP) have the tenacity, ability and
time to approach the Reserve Bank of India for redressal as some of these
violations happen regularly.
And
as I noted earlier in another post, I am very sorry to say this but given the past
poor experiences of clients trying to contact people in the Reserve Bank of
India for client protection issues, getting in touch with the banking ombudsman
or other such stakeholders will indeed prove extremely difficult! Therefore,
given the fast pace of innovations and given the burgeoning rate at which clients
(including low income and bop clients) are being acquired in the digital
financial inclusion space in India, it is about time that we set up an
exclusive agency for client protection immediately!
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