Technical writersDeepti KC, Nithya Srinivasan andArbind Vishwakarma

DIGITIZING LOW-INCOME CLUSTERS IN AN URBAN SLUMTESTING THE EFFICACY OF DIGITAL PAYMENT SOLUTIONS IN BHATTA BASTI, JAIPUR

TECHNICAL REPORT

This publication is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of CATALYST and do not necessarily reflect the views of USAID or the United States Government.

About CATALYSTCATALYST is a user-centric ‘digital financial inclusion innovation platform’ for the underserved last mile. The initiative is funded by the United States Agency for International Development (USAID) under the mSTAR Program, through funding provided to FHI 360. Housed within the Institute for Financial Management and Research, Leveraging Evidence for Access and Development (IFMR LEAD), the initiative aims to expand digital payments and financial inclusion in India.

CATALYST identifies, develops and validates solution frameworks and business models in collaboration with facilitating government agencies and participating industry solution providers to responsibly transition small business ecosystems (i.e., merchants, consumers, suppliers) from an inefficient cash economy to digital payment platforms, and further onto broader digital finance solutions. CATALYST has also launched a new business incubator, ‘Fintech for the Last Mile,’ to promote entrepreneurs focused on developing innovative digital finance solutions for traditionally underserved segments.

Technical teamArbind Vishwakarma has an experience of over 6 years in business consulting and ICT Solutions for various Government Ministries and Departments. He has also been associated with National Institute for Smart Government, Bluefrog mobile technologies Pvt. Ltd and IIM Indore. Prior to joining Catalyst, he has been a part of the National Institute for Smart Government (NISG) New Delhi, where he was associated with various Ministries and Govt. departments, which included Controller General of Defence (MoD), Department of Finance (Govt. of Bihar), Election Commission of India, Ministry of Labour and Employment, Punjab Governance Reforms and others.

AcknowledgementsThe authors would like to thank and acknowledge the support of Preethi Rao for work on conceptualizing project design and partner management. Gratitude is also extended to SEWA Bharat, the local community partner, and FIA Technologies, the banking correspondent for their support in successful implementation of the interventions. Special thanks also to the very hardworking Catalyst feet-on-street (FoS) team, who carried out the data collection, and to Darshan Singh for FoS coordination and management.

Thanks to Josh Woodard, Jaheed Parvez and Harsh Pandey (FHI 360) for editorial reviews and feedback, and to Sharon Buteau and Badal Malick for their consistent support and encouragement. Ananda Swaroop, Kanika Khanna for content editing, and Allan Macdonald for design of the report.

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SummaryGiven the massive growth in the penetration of mobile phone and internet connectivity in urban India, some of the most effective methods of increasing financial inclusion have been based on the application of mobile-based technologies. This has created a new opportunity for providers seeking rapid and robust cost-effective expansion of services to reach excluded populations in new and emerging markets such as urban slums.

Recognizing the opportunity, CATALYST initiated a project to expand uptake and usage of digital payment solutions by implementing a holistic ecosystem approach, in conjunction with a range of public and private partners in a low-income cluster, Bhatta Basti – an urban slum on the outskirts of the city of Jaipur, Rajasthan, where infrastructure and financial capabilities are weak while the role of informal community institutions is strong.

The project had a two-stage approach. In the first stage, the project focused on understanding efforts that go into opening of bank accounts and identifying the pain-points and challenges that account holders face in the process – from opening bank accounts to preparing to adopt digital payments. In the second stage, the project focused on understanding the challenges and pain-points in onboarding account holders with debit cards linked to bank accounts on Unified Payments Interface (UPI) and other modes of digital payments.

CATALYST partnered with SEWA Bharat (Sewa) and FIA Technology Service Private Limited (FIA) in the first stage which included lead generation and account opening initiatives in Bhatta Basti focused on community-based efforts to build trust and encourage engagement through door-to-door and camp-based outreach efforts. The initial months were focused on bringing low-income individuals from poor households onto the formal banking system and promoting active banking among them. By June 2018, we had facilitated several account opening camps and opened accounts of 619 individuals. (In total, 1,703 accounts were opened till November 2018 but, for our experiment's purpose, we considered 619 accounts that were opened prior June 2018).

In August 2018, we contacted these 619 account holders to understand their access to debit cards and smartphones. The result helped us divide our base into four tiers – each tier had account holders that were similar in specific ways.

• The study indicated 135 account holders (22 percent) had a functional debit card (PIN generated) [Tier 1];

• 167 account holders (27 percent) had collected their debit cards but not generated Automated Teller Machine (ATM) PIN [Tier 2];

• 155 account holders (25 percent) had not received or collected their debit cards [Tier 3]; and

• 162 account holders (26 percent) had already changed their mobile numbers and were unreachable despite multiple attempts [Tier 4].

After differentiating account holders by their behaviors and the drivers of behavior, we acted in response to a tier-based intervention instead of a ‘one-size-fits-all’ approach. Our focus was to provide handholding support for the adoption of digital payment solutions to Tier 1 account holders as they were proactive about adopting debit cards without external support and had positive attitudes towards technology used in banking. We aimed to discover ‘early adopters’ amongst them, who are excited by the possibilities of new ideas and new ways of doing digital transactions.

First, we ran an experiment with account holders by organizing a community-level ATM PIN Generation Camp to understand account holders’ interest in collecting debit cards from the Customer Service Points (CSPs) and generating PINs if they were provided basic information about the benefits of a debit card. We targeted Tier 2 account holders (167 account holders) and tracked 44 debit cards of Tier 3 account holders in the CSP. We contacted 211 account holders, informed them about the benefits of a functional debit card and invited them to our camp to generate ATM PINs. Only 59 obliged (response rate= 28 percent). We now had 184 account holders that had a functional debit card.

Second, we targeted 184 account holders, emphasizing personalized interactions to discuss digital payment solutions, particularly onboarding them on the UPI platform. Only 112 eligible account holders (61 percent) agreed to our visit — the rest either rejected (6 percent) or were not eligible as they did not have a smartphone (33 percent). Amongst 112 account holders that we visited, only 61 (54 percent) were successfully onboarded on the UPI platform; and the rest were unsuccessful due to technical difficulties as such as poor network connectivity, registration failures, etc.

By the end of the experiment (September 2018), only 61 account holders (10 percent of the 619 account holders) were onboarded on UPI.

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• 70 percent (435 account holders) on the list was excluded because of the lack of a functional debit card;

• 12 percent (72 account holders) rejected our visits or did not own a smartphone; and

• 8 percent (51 account holders) could not be onboarded due to technical problems despite them showing interest.

Early adopters constituted 10 percent of the total number of account holders. They were young (average age 27), male (not head of the household), smartphone owners, internet friendly, and active users of social media such as Facebook, WhatsApp and YouTube.

A month after UPI onboarding (October 2018), we followed up with 61 account holders to understand the usage of the UPI application. We were able to contact 50 account holders. Only 24 early adopters (48 percent) were actively using the UPI app at the time of the interview and the top motivations for using UPI applications were for mobile recharge (74 percent) and bank-to-bank transfer (65 percent). Twenty-six early adopters did not actively use an UPI app after being onboarded three weeks prior to the interview. The top reasons were: users’ perceptions that they did not have enough savings in the bank account; and their preference for cash transactions mainly due to others in their social network not having UPI apps. One of four found the procedure complicated despite being provided with handholding support and necessary instructions.

Finally, the following are the key learnings from the experiment.

• Segmentation is the key to identify early adopters who can help pinpoint the challenges in adopting digital payment solutions. This was also the best way for us to use our resources more effectively and make better strategic marketing decisions

to convert early adopters to influencers in the community.

• Poor experience faced by early adopters can limit the uptake of digital payment solutions. In our pilot, 46 percent of potential early adopters who showed interest in digital payment solutions could not be onboarded due to technical problems. Early adopters generally play a crucial role as they tend to be ‘opinion leaders’ in a community like Bhatta Basti, and such incidences faced by potential early adopters when heard through word-of-mouth might result in other consumers rejecting the uptake of digital payment solutions.

• Understanding the infrastructure constraints prior to entering the market: Prior to entering any community such as Bhatta Basti, a financial provider should be aware of infrastructure constraints that could be hurdles in mobilizing the community. They should assess if the community has institutional support from banks and government agencies to promote financial inclusion and adequate infrastructure to make digital payment solutions viable.

• Digital literacy is the need of the hour: Finally, in our follow-up study with early adopters, 35 percent reported to be inactive because they did not have enough savings in the bank account for any kind of digital transaction. One key observation that we made in Bhatta Basti was that the community had not fully realized the potential of digital finance. For example, our qualitative study indicated that wage laborers have an option to ask their employer to transfer money directly into their account. However, most are not aware of the concept of stored value and tend to regard savings as simple unspent money. Hence, financial literacy using technology (the power of media such as WhatsApp groups, mobile and internet) is the key to promote the concept of active banking and digital savings in a community such as Bhatta Basti.

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Table of contents

1 Background and context 81.1 Overview 9

1.2 Diagnostic 10

1.3 Feet-on-street activity and digital payment camp 10

2 Pilot design and implementation 122.1 Theory of change 13

2.2 Scope 13

2.2.1 Target segment 13

2.2.2 Partnerships 14

2.2.3 Objective 14

2.2.4 Methodology 14

3 Observations and insights 163.1 Overall metrics 17

3.2 Lead generation and account opening 18

3.2.1 Characteristics of the account holders 18

3.2.2 Key learnings – opening of bank accounts 19

3.3 Debit cards access and activation 19

3.3.1 Attitude towards a debit card 20

3.3.2 Key learnings – accessing a functional debit card 21

3.4 Active banking and pathway to digital payments 21

3.4.1 Promoting active banking through PIN generation camps 22

3.4.2 Key learnings – ATM PIN generation 22

3.5 Going digital - UPI onboarding 23

3.5.1 Conversion funnel 24

3.5.2 Challenges and barriers to conversion 24

3.5.3 Key challenges for UPI onboarding 25

3.5.4 User profile of early adopters 27

3.6 Key learnings 28

3.7 Cost-benefit analysis 29

3.7.1 Project investment 29

3.7.2 Outcomes 29

3.8 SWOT analysis 30

4 Recommendations 32

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BACKGROUND AND CONTEXT

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1.1 OverviewThe world is rapidly urbanizing, and India is no exception. Urban India is undergoing a process of great transformation amid economic reform, liberalization and globalization. As rural residents move to urban areas in search of jobs and villages are overtaken by expanding urban agglomerations, the rapidity and scale of urban growth has raced far ahead of provision of services, and many developing countries are increasingly concerned with the urbanization of poverty.1

It is a well-established fact that financial inclusion is a key instrument to promote inclusive growth; nevertheless, despite advances in financial inclusion across the globe, about 1.7 billion adults remain unbanked without an account at a financial institution or through a mobile money provider.2 According to the Global Findex Database 2017, India’s adult population with a bank account has more than doubled to 80 percent since 2011. Nevertheless, the country still has 190 million adults without a bank account despite the government’s ambitious financial inclusion scheme – Jan Dhan Yojana – making it the world’s second largest unbanked population after that of China.

As the magnitude of financial exclusion is more widespread in rural areas and there are no clear estimates on the proportion of urban poor that are financially excluded,3 the government’s programs and

policies are predominantly rural-focused. As a result, exclusion of the urban poor is sometimes overlooked at a policy level even though it is widely known that there are pockets of poverty and exclusion in all urban areas, particularly among slum-dwellers.4 It may thus be concluded that although financial inclusion has become the buzzword in present-day financial circles, there are miles to go before it becomes a reality for the urban population living in low-income clusters. Hence, understanding how digital technology can be an enabler for the urban poor is essential.

As we move into the digital era, evidence is quickly escalating the power of digital payments to increase financial inclusion.5 Recognizing this potential, in the past few years, the government as well as private sector actors, including banks and non-banks, have made multiple efforts to use digital payments and mobile technology as a key component to drive real improvements in digital financial inclusion to benefit everyday life, including ‘the last mile,’ across the developing economies. Given the massive growth in the penetration of mobile phone and internet connectivity in urban India, some of the most effective methods of increasing financial inclusion have been based on the application of mobile-based technologies that has created a new opportunity for providers seeking rapid and robust cost-effective expansion of services to reach excluded populations in new and emerging markets such as urban slums.

1https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4746497/2https://globalfindex.worldbank.org/sites/globalfindex/files/chapters/2017%20Findex%20full%20report_chapter2.pdf3https://papers.ssrn.com/sol3/papers.cfm?abstract_id=28668534http://www.indiaenvironmentportal.org.in/files/Slums%20of%20Mumbai.pdf5https://www.sciencedirect.com/science/article/pii/S2214845017301503?via%3Dihub

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1.2 DiagnosticRecognizing the opportunities mentioned earlier, CATALYST has initiated projects to expand uptake and usage of digital payment solutions by implementing a holistic ecosystem approach, in conjunction with a range of public and private partners. These multi-stage projects include a set of research and operational initiatives centered on a low-income cluster, Bhatta Basti, in Jaipur city, where infrastructure and financial capabilities are weak while the role of informal community institutions is strong. The project aims to design operational strategies to promote awareness, usage, and sustainable adoption of digital payments in economically depressed and socially marginalized communities.

The project’s two-stage approach is explained in Figure 1.

In the first stage, the project focused on understanding efforts that go into opening of bank accounts and identifying the pain-points and challenges that account holders face in the process, from opening bank accounts to getting ready for adopting digital payments.

In the second stage, the project focused on understanding challenges and pain-points in onboarding account holders with debit cards linked to bank accounts on UPI and other modes of digital payments.

1.3 Stakeholder analysis • CATALYST partnered with two implementing

partners: FIA Technology Service Private Limited (FIA) and SEWA Bharat (Sewa).

» Along with our account opening implementing partner, FIA, we facilitated several account

opening camps and opened bank accounts of 619 individuals from Bhatta Basti by June 2018. In August 2018, we began the process of converting these account holders to users of digital payments and solutions. For our multi-stage pilot, we conducted a research with these 619 account holders to understand the challenges and pain-points that users face in the process of opening a bank account to becoming an adopter of digital payment solutions

» FIA introduced Customer Service Points (CSPs)/Bank Mitras in and around Bhatta Basti, and activated, trained and supervised the CSP personnel as change agents to drive digitization in the area. It took the lead in enrolling residents to open savings bank account, inculcating habits of regular savings, and use of bank account for digital transactions. FIA also audited and monitored the CSPs’ activities with respect to statutory compliance, adherence to guidelines of the bank, and safeguards in the interest of customers.

» Sewa, with its strong networks in the Bhatta Basti cluster especially among the women, collaborated closely with FIA and CATALYST to enable access to the Bhatta Basti community across several education and digitization initiatives. Sewa worked with CATALYST to build awareness among the target group to avail of locally available banking services through its mobilization efforts and campaigns. It took up the role of educating low-income communities on financial and digital literacy which can facilitate better uptake of banking and payment digitization solutions among the target groups.

• Anchor merchants that were provided with digital payment solutions such as Aadhaar-Enabled Payment System (AEPS); UPI QR Code

• New bank account holders (customers)

Debit cards access and activation

• PIN generation camps

• Customer education for protection: PIN generation

• Micro-ATM to generate PIN

Active banking

• Encourage wage payments into accounts

• Government to People (G2P)

• Financial education camps

Digital Payments

• UPI onboarding

• Merchant education and incentives to use UPI

• PoS/eMitras/AEPS devices at key merchants

Lead generation and account opening camps

• Create awareness of account features

• Ensure CSP operations and timings are convenient

Figure 1: Project implementation strategies

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PILOT DESIGN AND IMPLEMENTATION

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2.1 Theory of changeCATALYST adopted a holistic approach towards going digital by bringing low-income individuals from ultra-poor households into the formal banking system, promoting active bank usage and providing handholding support to account holders to graduate from active bank users to adopters of digital payment solutions.

No bank accounts

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

Converting to bank account

holders

Converting to users of digital payment

solutions

Converting to active users of bank accounts

Converting to active users of digital

payment solutions

Figure 2: Theory of change

2.2 ScopeThe overall scope of this initiative was to create access points and awareness for an inclusive financial ecosystem that supports digital financial transactions for 10,000 residents of Bhatta Basti, Shastri Nagar, Jaipur.

2.2.1 Target segment

Bhatta Basti, an ultra-poor urban locality on the outskirts of the city of Jaipur, Rajasthan, is a migrant settlement with an estimated 10,000 households and a population of over 45,000 people. It is predominantly a Muslim community with low levels of literacy. Bhatta Basti residents are primarily engaged in home-based work, including the production of chemical-based bangles.

The Institute for Financial Management and Research, Leveraging Evidence for Access and Development (IFMR LEAD) conducted a baseline survey with randomly selected 442 low-income households in Bhatta Basti in August 2017 to assess their socio-demographic profile and financial needs.6 The study indicated that low-income households of Bhatta Basti largely relied on cash-based payments, depending on their social network for financial advice and borrowing/saving activities. Despite being located in the urban city of Jaipur, Bhatta Basti still lacks an adequate internet network, smartphones, Point of Sale (PoS)/mobile PoS (mPoS) machines which limits the adoption of digital payment solutions by households.

Key findings from the baseline survey are highlighted in Figure 3.

6IFMR- LEAD Baseline Survey.

# households (approx.): 10,000

Avg. household size: 5

Average income per householdINR 1,800 per

week

(94% salaries are in cash)

<2 bank accounts per

household

Approx. 80% bank accounts

are inactive due to non-usage in the last 30 days

or more

Employment rate: 74%

Primarily employed as:

daily wage laborers,

home-based businesses

39% of the employed maintain

savings, with the majority keeping savings as cash

at home

Household level mobile phone penetration:

77%

Household level smartphone penetration:

29%

Figure 3: Findings from the baseline survey in Bhatta Basti

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2.2.2 Partnerships

CATALYST partnered with two implementing partners: FIA Technology Service Private Limited (FIA) and SEWA Bharat (Sewa).

2.2.3 Objective

Given that many financial institutions are focusing on devising the perfect customer experience in an effective and seamless way, the main objective of this all-inclusive pilot was to capture triggers and pitfalls in the process that low-income customers face and better understand their experience, needs, goals and context at each stage.

2.2.4 Methodology

The following implementation strategies were adopted:

1. Conduct customer/provider interviews at each stage: Assessing the current situation and understanding the customer at each stage (gain key insights into customers’ motivations, behaviors, and emotions at each step of the financial journey);

2. Affinity mapping: Discover trends, challenges and areas of opportunity at each stage;

3. User journey mapping: Form a deeper understanding of customers’ processes, needs and perceptions at each stage; and

4. User-centric testing: Ensure the product/intervention is functional, user-friendly and valuable for customers at each stage. Document what is working and what is not working.

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OBSERVATIONS AND INSIGHTS

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3.1 Overall metricsOver the duration of the project from November 2017 to October 2018, a total of 1,703 accounts were opened at the Bank of Baroda (BoB) and State Bank of India (SBI) CSPs set up by FIA. Out of this, 144 accounts were actively transacting and 158 accounts recorded digital outflows.

The month-wise trends are visualized in Figures 5 and 6. Active usage is defined as accounts where there are transactions recorded at least two out of three consecutive months. Over the life of the project, only unique accounts are reported as active. Digital transactions include payments into ‘Lakshya’ savings account, which is a goal-based savings mechanism promoted by Kaleidofin7, and into the government’s

accident insurance scheme, Pradan Mantri Suraksha Bima Yojana (PMSBY). It also includes transactions made through Immediate Payment Service (IMPS) and through FIA’s own digital payment application called m-Pay. It does not include the UPI transactions conducted by the consumers who were actively onboarded on UPI by our field team.8 As well, the digital transaction numbers exclude the Aadhaar Pay transactions promoted by Fingpay9 among the identified anchor merchants in Bhatta Basti.

The jump in accounts opened in July and August were due to the concentrated efforts put in by the CATALYST field team to convert engagement into opening of accounts. From September 2018 onwards, we directed our efforts towards promoting digital payment uptake while monitoring the organic growth of the number of accounts opened and their activity.

7Kaleidofin is one of the incubatees of CATALYST which had also engaged in actively promoting its product in Bhatta Basti. 8Due to absence of validated data, the transactions made via this mode cannot be reported.9Fingpay is another CATALYST incubatee promoting the Aadhaar Pay mode of digital payments. Due to absence of validated data from Fingpay, the transactions made via this mode have not been reported.

Figure 4: Account opening and digitization funnel

Total accounts opened1,703

Total digital transactions158

Active users144

Figure 5: Account opened by month

450

400

350

300

250

200

150

100

50

0

65

Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18

86

37

168

75 79109

52

386

258

65

167

18

Figure 6: Active user by month

Figure 7: Digital transactions

35

30

25

20

15

10

5

0

14

Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18

16

6

29

11 12

18

9 108 9

2

60

50

40

30

20

10

0

11

3 4

2520

34

50

10

Lakshya PMSBY IMPS FIA m-Pay

Sep-18 Oct-18

3.2 Lead generation and account openingIn partnership with FIA and Sewa, lead generation and account opening initiatives in Bhatta Basti focused on community-based efforts to build trust and encourage engagement through door-to-door and camp-based outreach efforts.

Sewa, with its experience of working very closely with the low-income communities in urban slums of Jaipur, supported our team in mobilizing community members and building awareness about account opening, digital finance and payment solutions in Bhatta Basti households. Sewa also helped the team in identifying locations for account opening camps and mobilizing the community on the days of the camps.

The initial months were geared towards bringing low-income individuals from poor households into the

formal banking system and promoting active banking among them. By June 2018, along with our account opening implementing partner FIA, we had facilitated several account opening camps and opened accounts of 619 individuals.

3.2.1 Characteristics of the account holders

• Half of the account holders were women;

• The majority of account holders was engaged in home-based bangle making; the second largest proportion of the account holders was students;

• Only 45 percent of the interviewed account holders (N=457) owned a smartphone registered with the bank account; and

• There was a gender disparity in the ownership of smartphones. Only 33 percent of female account holders owned a smartphone compared to 56 percent male account holders.

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Figure 8: Tier-based segmentation of account holders

3.2.2 Key learnings – opening of bank accounts

Field challenges Solutions

Lead generation

Refusal to open bank accounts due to prior experience with cases of fraud in Bhatta Basti

Used Sewa brand to motivate the community through the value proposition of having bank accounts

Problem associated with name printed with (.) on Aadhaar card

Identified the Aadhaar enrolment center near Bhatta Basti, FIA/ Sewa representatives took community members to centers for updating names, addresses and figure prints

Identification of location for account opening camps

Limited availability of places for organizing account opening camps. Scarcity of amenities like electricity, space for installing laptop and computers

Targeted schools and madarsas for organizing the bank account opening camps

Opening accounts at the CSP

Biometric issues while validating the individual identity, leading to delays in issuing passbooks

Consulted with the bank at corporate levels for resolving this issue

Timings of CSPs. Trust factor – householders trust a CSP less compared to a bank branch

Asked FIA to make sure that CSP is open from 8 am to 8 pm

Value proposition of CSP through CSP branding, placing signage boards and display stands to replicate the feel of a bank branch

Manpower

Community organization failed to recruit, train and deploy effective Youth Ambassadors for community mobilization. High employee turnover every month, affecting the pace of the account opening process

CATALYST recruited feet-on-street staff in July 2018. We trained, managed and supervised our team which worked with Sewa staff. The team first focused on mobilizing the community to open bank accounts, promoting active use of banking services, and then providing handholding support for digital transaction

3.3 Debit cards access and activationWe called 619 account holders whose bank accounts were opened prior to June 2018 to understand their access to debit cards and smartphones. Our hypotheses, as of August 2018, were that all 619 account holders should have received their debit cards; they should have generated the ATM PIN; and their bank-registered mobile numbers should have been active.

The study indicated 135 account holders (22 percent) had a functional debit card (PIN generated); 167 account holders (27 percent) had collected their debit cards but not generated Automated Teller Machine (ATM) PIN; 155 account holders (25 percent) had not received or collected their debit cards; and 166 account holders (27 percent) had already changed their mobile numbers and were unreachable despite multiple attempts. This result helped us divide our base into four tiers – each tier had account holders that were similar in specific ways as explained in Figure 4.

Account holders with a functional debit cardTier 1135 account holders (22%)

Account holders have a debit card but have not generated an ATM PIN

Tier 2167 account holders (27%)

Account holders do not have a debit cardTier 3155 account holders (25%)

Account holders have already changed their number/unreachable

Tier 4162 account holders (26%)

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3.3.1 Attitude towards a debit card

We conducted qualitative interviews with 8 to 10 account holders from each tier. The interaction focused on their attitudes towards banking services, in particular, debit cards. Table 1 shows highlights of the interviews, which helped us identify their outlook and plan distinct interventions for each tier.

• Perceived location and round the clock availability of ATMs are convenient.

• Did not perceive queue at ATM as problematic compared to dealing with queue in bank branch.

• Perceived debit card essential for transactions, particularly withdrawal of cash.

Tier 1Proactive about visiting CSPs to collect the debit card and generate PIN on their own.

• Some of them were waiting for their card.

• Most of the account holders in this tier showed frustration about not receiving the debit card despite opening an account.

• Not applicable

Tier 3Not received the debit card.

Tier 4Not able to reach them due to change in mobile number.

• They did not have any experience using any banking services, including ATMs.

• Women perceived the location of ATMs as not accessible (on average, the closest ATM is 2 km away from Bhatta Basti).

• Concern about the security of using ATM card.

• Some tried to generate an ATM PIN but failed and they perceived generating an ATM PIN as a daunting and complex task.

Tier 2Collected debit card from CSPs but have not generated ATM PIN.

Figure 9: Tier-wise attitudes towards a debit card

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3.3.2 Key learnings – accessing a functional debit card

Implications

Frequently changing mobile numbers have a significant impact on financial inclusion

We observed a few trends in Bhatta Basti regarding usage of mobile phone numbers; numbers are frequently changed due to network problems, insufficient funds in the mobile account and new plans offered by different service providers. For example, residents suggested some SIM cards did not have the ability to pick up mobile data signals in Bhatta Basti, hence, they upgraded to a better SIM card, which resulted in their receiving a new phone number

If a mobile number registered with the bank account has already changed prior to the arrival of the debit card, the account holder cannot generate an ATM PIN unless he/she visits the bank branch to change/update his/her mobile number

Many account holders in urban slum do not receive their debit card

At the time of the interview, 155 account holders (25 percent) reported not receiving their debit cards. They were either waiting for the card or had not collected it from the CSP. Only 58 (37 percent of 155 account holders) reported enquiring with the CSP or nearby bank branch

PoS, online banking or UPI onboarding is not possible without a functional debit card

Many are unaware of how to generate an ATM PIN despite having a debit card

Amongst these 619 account holders, 167 (27 percent) reported not generating an ATM PIN despite collecting the card. When probed, 34 percent of these 167 account holders reported failure of the ATM machine when they tried to generate a PIN; 31 percent did not see value in generating a PIN due to lack of savings and fear of safety; and 29 percent were not aware of the procedure. This result indicates that perceived risk, complexity, lack of knowledge and fear of safety and confidentiality are the major factors that discourage the use of ATMs

Internet banking, ATM withdrawals, or any other digital transactions using a debit card are not possible without an ATM PIN

Figure 10: Tier-based interventions to promote bank usage

3.4 Active banking and pathway to digital paymentsAfter differentiating account holders by their behaviors and the drivers of behavior, we acted in response to a tier-based intervention instead of ‘one-size-fits-all’ approach. We designed the

following intervention model ensuring each tier was covered; nonetheless, our focus was to provide handholding support to Tier 1 account holders as they were proactive about adopting debit cards without external support and had positive attitudes towards technology used in banking. Our goal was to discover ‘early adopters’ amongst them, who are excited by the possibilities of new ideas and new ways of doing digital transactions.

Introduced to any intervention

Track their activities over the period of time

Handholding support (in person meeting) for UPI onboarding/promote other digital payment solutions such as AEPS- FingPay; digital savings

ATM PIN generation camps

Track debit cards and inform the account holdersDigital mela

camps

Tier 4Intervention

Tier 3Intervention

Tier 2Intervention

Tier 1Intervention

Panel

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3.4.1 Promoting active banking through PIN generation camps

We ran an experiment with account holders by organizing a community-level ATM PIN Generation Camp to understand account holders’ interest in collecting debit cards from the CSPs and generating PINs if they were provided basic information about the benefits of a debit card. We targeted Tier 2 account holders (167 account holders) and tracked 44 debit cards of Tier 3 account holders from the CSP [the agent suggested that despite making multiple calls, these account holders had not collected their debit cards]. We called 211 account holders, informed them about the benefits of a functional debit card and invited them to our camp to generate ATM PINs. We demonstrated how to generate an ATM PIN using Bank of Baroda’s videos and pamphlets designed by our internal team.

Amongst 211 account holders that were invited to generate ATM PINs, only 59 obliged (response rate= 28 percent). Amongst these, 10 immediately agreed to UPI onboarding.

Half of the account holders (54 percent) without a functional debit cards were women. However, despite getting calls from our team, their active participation was low. In many cases, women were accompanied by a male member of the household and, in some cases, instead of the female account holder, her husband came with the debit card. In-depth qualitative interviews with women in their houses revealed that they chose not to come (or come with the male member) because they perceived the procedure of generating ATM PIN as too complex.

Figure 11: ATM PIN generation analysis

Telephone call a day before the camp

Basic information about the importance of a PIN generated debit card and digital payments

Canopy in front of Bank of Baroda branch (around 2 km away from Bhatta Basti)

Distributed pamphlets

Provided handholding support to download and register any UPI-based application

Total account holders that were called 211

28% successfully generated ATM PIN

59

17% UPI adoption10

3.4.2 Key learnings – ATM PIN generation

Opportunities

Young students and youths in the community are excited about card-based products

Many young students in Bhatta Basti showed interest in owning a functional debit card because they perceived it as giving them a higher social status in school (in many cases in their own household too)

If financial institutions can create a favorable impression on the minds of these young customers, it can go a long way in creating valuable customers

Many smartphone holders are attracted to mobile-based digital payment options such as UPI or wallets.

Active banking can be promoted to such individuals showing such payment options as a useful value proposition

Low women’s participation

Women either did not turn up or were accompanied by male household members

There is an opportunity for community organizations like Sewa to create innovative and interactive financial literacy modules on PIN generation and benefits of a debit card

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Field Story 1: Why installation of a card machine in Bhatta Basti market did not work

In July 2018, we interviewed 67 anchor merchants from Bhatta Basti to understand if they were interested in installing a PoS machine in their shops. Twenty-one anchor merchants showed initial interest. The branch manager of State Bank of India (SBI) accepted our invitation to visit Bhatta Basti and discuss the installation of PoS machines with these interested merchants. However, because merchants did not have landline numbers, there was a cost associated with the installation of PoS machines, due to which no merchant was ready to adopt them.

Their resistance to digital payments resulted from transaction costs of rental and installation of the

card machine and fear of losing existing profits. Addressing their concern about the transactional and hidden costs with transparent information to enhance their user experience could be a trigger to promote adoption of digital payments by this group.

At the same time, in a community where the majority of account holders do not have access to a functional debit card, it is possible that many account holders do not use their debit card for transactions. All merchants reported that if customers demand for digital payments existed, they would be ready to pay the costs of rental as well. However, at present, since there was no demand from the customers, they decided to opt out of installing PoS machines.

3.5 Going digital - UPI onboardingWe targeted 184 account holders who had functional debit cards, emphasizing personalized interactions to discuss digital payment solutions with them. Only 112 eligible account holders (61 percent) agreed to our visit — the rest either rejected (6 percent) or were not eligible as they did not have a smartphone (33 percent). Amongst 112 account holders that we visited, only 61 (54 percent) were successfully onboarded; and the rest were unsuccessful due to several technical difficulties as highlighted in the subsequent sections.

Figure 12: Outcomes of handholding support for UPI onboarding

Outcome of home visits

61%

29%

14%

8%

Successful registration and activationof UPI app

Did not receive OTP or dropped out due to network issue

Technical difficulties such as multiple accounts linked with the same number

Debit card was already lost

100%

N=184

33%

6%

112 home visits

Interventions: UPI onboarding, information about AEPS

61%

Home visit

Rejected to meet

No smartphone

One-on-one handholding support for UPI onboarding

Pros: High attention as the message was customized, helpful in identifying different use cases, persuasive impact, potential of development of a relationship, high conversion rate

Cons: Labor intensive, only reached a limited number of customers, high cost

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Figure 13: Conversion funnel

Stage 1: Initial list Target list of 619 account holders

70% from the list excluded (435) — those without a PIN generated debit card

39% of 'contacted' excluded (72) — those who rejected our visits or did not own a smartphone

46% of qualified excluded (51) — those that could not be onboarded due to technical problems

Stage 2: Contacted

Stage 3: Qualified

Stage 4: Successful onboarding

184

Those that had a PIN generated debit card

30%

Total- 619 account holders

(100%)

112

Those who had shown initial interest in UPI

onboarding

18%

61

Successful UPI onboarding

10%

3.5.1 Conversion funnel

Figure 13 describes at which stage account holders were excluded; the reasons for exclusion; and the profile of those that were successfully onboarded in the end.

3.5.2 Challenges and barriers to conversion

Challenges Implications

Lack of a debit card

70 percent of account holders in the list were not qualified for onboarding because they had: i) already changed their bank registered mobile number; ii) not collected a debit card; iii) not received a debit card; or iv) not shown interest in generating an ATM PIN

Perceived risk, complexity, lack of knowledge, fear of safety and confidentiality were the major factors that discouraged the use of a debit card. PoS, online banking or UPI onboarding is not possible without a debit card and/or PIN

Lack of a smartphone

Amongst those that had generated debit card PINs, one in three did not own a smartphone. Most account holders that did not own a smartphone were women who had a feature phone (or even when they used a smartphone, they shared it with their husbands). While these individuals were provided with information about AEPS or digital transactions using a PoS machine, for UPI onboarding purpose, they were excluded from our list (we did not consider using the Unstructured Supplementary Service Data (USSD) version of Bharat Interface for Money (BHIM) because of its cumbersome procedure to use)

Use of app-based digital payment solutions such as wallets or UPI is not possible without a smartphone

Poor user experience during onboarding

We faced several challenges during the onboarding process resulting in half of eligible account holders dropping out. These challenges resulted in poor customer experience resulting in half of them dropping out before the completion of the onboarding process

Poor customer experience faced by early adopters can limit the uptake of digital payment solutions

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3.5.3 Key challenges for UPI onboarding

Lengthy onboarding process due to poor network connectivity: Affordable smartphones and reasonably priced internet connectivity in urban cities of India have played a significant role in the adoption of digital transactions using mobile internet in recent years. Nonetheless, even though the digital infrastructure in Jaipur city is good, there are places such as Bhatta Basti where network connectivity is unreliable and almost non-existent, resulting in a lengthy and time-consuming onboarding process. For example, in many cases, each successful UPI onboarding took more than 60 minutes (this includes visiting home, initial conversation to discuss UPI, walking to the central market and procedure for UPI onboarding) and account holders had to walk to the central market of Bhatta Basti (almost 1.5 kilometers away), where mobile data coverage was reliable.

Cases of financial loss: Some account holders’ experience of the onboarding process translated into financial loss. For instance, it is a must to send an SMS for mobile number verification that is linked to the bank account for UPI registration. The sender also bears the cost of sending the text messages (INR 1.50 per message). Despite sending multiple text messages (and being charged for each), some account holders did not receive the One Time Password (OTP) from the issuer bank on his/her registered mobile number. Worse, text messages that the account holders received were in English, which none of them understood. As many as 29 account holders decided to opt out during the onboarding process, mainly because of the poor user experience of not receiving the OTP despite being charged for text messages.

Registration failure due to multiple accounts linked to the same mobile number: While it is a common trend to frequently change mobile phone numbers in urban slums such as Bhatta Basti resulting in a registration failure, account holders also experienced a registration failure with a mobile number that was registered with the bank account. Some account holders reported the household head’s mobile number as their own. In such cases, UPI onboarding was not allowed given that the bank record showed the same mobile number registered to multiple account holders. Account holders were not informed that only one mobile number should be associated with one bank account holder’s name for that bank. We recommended that they visit the nearby bank branch to change the mobile number. Nonetheless, many chose not to go due to their perceived notion of the bank’s ‘customer unfriendly environment’ and the lengthy procedure (the banking agent was not authorized to update new mobile numbers in Bhatta Basti).

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Field Story 2: How a poor customer service adversely impacted digital payment solutions in Bhatta Basti

AEPS runs on the existing Aadhaar infrastructure through which a customer’s biometrics are used for authentication. Once the authentication is successful, the customer can transfer funds directly from one bank account to another without using a smartphone or a debit card.

Bhatta Basti is a community where many account holders do not have a functional debit card. Additionally, not all debit card holders have a smartphone. Hence, we decided to introduce the Aadhaar Pay application and provide handholding support to both merchants and customers to promote digitization of transactions.

We identified seven anchor merchants (kirana and garment shops) who were enthused about providing multiple payment options to their customers. The device was provided to these merchants at no subscription cost or monthly rental charge. The only condition was that merchants had to encourage their customers to use this payment option. A field staff was allotted to frequently visit these seven merchants to track their activities.

Nonetheless, our experiment was unsuccessful due to poor customer service by the solution provider. Firstly, the electronic Know Your Customer (eKYC) of the merchants was pending with the service provider for a long time, due to which these merchants were not able accept any payment higher than INR 500. Any transaction above INR 500 repeatedly failed. Despite multiple calls to the customer service agent, this issue was not resolved.

Secondly, customers preferred to pay in cash because of the lengthy transaction time required by the Aadhaar Pay application, especially for lower ticket size transactions. Many customers did not have Aadhaar-linked bank accounts, and such customers did not carry their Aadhaar card or remember their 16-digit Aadhaar number that was required for the transaction.

Finally, AEPS does not provide the instant money transfer facility between two parties. The cut off for transactions is at 11 pm every day and any transaction done before this time for the day is included in this settlement. For instance, a customer paid INR 100 using the AEPS device and received an instant message that INR 100 had been debited from his bank account. However, the merchant received information of a pending transaction. The merchant failed to contact the customer service agent, who could have assured him that he would be paid by the following day. The customer service agent’s failure to fix problems quickly created a serious conflict between the merchant and his customer (early adopters) resulting in poor customer experience. Early adopters generally play a crucial role as they tend to be ‘opinion leaders’ in a community such as Bhatta Basti and this incidence, when heard through word of mouth, resulted in other merchants limiting the uptake of the AEPS solution in Bhatta Basti.

Learnings: Three reasons for the failure of the product in Bhatta Basti

1. Poorly trained customer service team members: During the initial phase of the introduction of the solution in Bhatta Basti, both anchor merchants and their customers required a certain degree of handholding support. The agent representing the service provider was not knowledgeable nor courteous, which caused merchants to question whether this digital payment solution was the right payment option for them;

2. Poorly equipped customer service agent: The agent did not have the correct equipment or plan to execute his job which impacted accuracy, speed and efficiency in getting the job done; and

3. Inconsistent service: All it took was one negative customer service encounter to ruin our relationship with anchor merchants (early adopters) resulting in the failure of the pilot. Had the customer service agent reached the anchor merchants in a timely manner, we could have built trust amongst the early adopters.

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3.5.4 User profile of early adopters

Early adopters constituted 10 percent of the total number of account holders. They were young (average age 27), male (not head of the household), smartphone owners, internet friendly, and active users of social media such as Facebook, WhatsApp and YouTube.

Even though issues such as low internet connectivity had hampered the adoption of digital payments in Bhatta Basti, these early adopters had learning patience (on average they waited for 60 minutes for UPI onboarding); had positive attitudes towards banking technology,

including debit cards; and were not reluctant to try digital transactions.

Most of them had knowledge about PoS machines (89 percent) and half (45 percent) had made at least one debit card purchase. The majority was aware of the Paytm mobile wallet (73 percent) and almost half (42 percent) had tried to use Paytm. Only 27 percent had tried to use a UPI app at the time of the onboarding.

A month after UPI onboarding (in October 2018), we followed up with 61 account holders to understand the usage of the UPI application. We were able to contact 50 account holders.

Figure 14 highlights early adopters’ usage of banking services and technology within six months prior to the interview. The results indicated that the majority of early adopters was an active user of ATMs, more than half were active in checking account balance, visiting CSP/banks to deposit money, and/or transferring money between accounts. One in three was engaged in using downloadable apps such as Paytm, BHIM or PhonePe for payment.

When asked about the financial products or services used for transactions at least once six months prior to the interview, no one reported relying on cash only as indicated in Figure 15.

76%

59%

57%

45%

35%

Withdrew money from ATM

Checked account balance in my bank account

Visited bank branch/CSP to deposit money

Transferred money between accounts

Use downloadable apps such as Paytm, PhonePe, etc., for payment

100%

Figure 14: Usage of banking services and technology in the past six months

N=50 early adopters

80%

37%

20%

8%

4%

0%

ATM card

BHIM, PhonePe, Tez, etc.

Paytm

Check

Major credit card

None, only cash

100%

Figure 15: Financial products or services used in the past six months for financial transactions

N=50 early adopters

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At least 24 early adopters (48 percent) were actively using the UPI app at the time of the interview. Figure 16 highlights the primary motivations for actively using UPI apps as reported by active users.

There were 26 early adopters who did not actively use any UPI app after they were onboarded three weeks prior to the interview. Figure 17 highlights the top reasons for not using the app. The most common reasons were: users’ perceptions that they did not have enough savings in the bank account; and their preference for cash transactions mainly due to others in their social network not having UPI apps. One of four found the procedure complicated despite being provided with handholding support and necessary instructions.

35%

31%

31%

23%

I do not have enough savings in my bank account

My peers do not have any UPI application for any transaction

I prefer doing cash transactions

The procedure is still complicated

100%

Figure 17: Top reasons for not using UPI applications

N=N= 26 non-user

74%

65%

26%

26%

22%

Mobile recharge

Bant-to-bank transaction

Pay utility bills

Referral to get cash back

Check bank balance

100%

Figure 16: Top five motivations for using UPI applications

N=24 active users

3.6 Key learningsSegmentation is the key to identify early adopters: First, we learned that the task of getting new account holders onboarded on a digital payments platform required the highest degree of handholding support, which is both costly and time-consuming. Hence, it was important to identify account holders that already had a positive attitude towards banking technology (debit cards) as they would be more interested in digital payment solutions too. Our biggest learning from this exercise was that such an approach allowed us to contact these potential early adopters with specific needs. This was also the best way for us to use our resources more effectively and make better strategic marketing decisions to convert early adopters to influencers in the community.

Early adopters can help identify the challenges in adopting digital payment solutions: Second, we learned that, at this stage, such mobile-based digital payment solutions are more attractive to young, male members of the household (who are not necessarily heads of the household) who are already active on other mobile applications such as Facebook, WhatsApp and YouTube and curious about digital payment solutions. These young users faced problems during or after the adoption. However, they were the ones that positively responded to a problem description and offered detailed examples of their problems. For example, half of the early adopters had not used the UPI applications when we followed up with them a month after onboarding. None reported dropping out, rather they explained that it was their inability to save in the bank account or get their

friends onboard UPI apps that was hindering their own ability to actively use the application. At the same time, those who were actively using the UPI app were aware of the problems and could describe the last time a problem had happened and how they solved it. For example, some active users reported failed transactions; however, instead of focusing on what did not work, they were more excited to discuss how they tried to solve the problem by reaching out to customer support and get their problem resolved.

Poor experience faced by early adopters can limit the uptake of digital payment solutions: Third, early adopters represented only 10 percent of the potential customers in our experiment, and it is easy to be misled on the real requirements of mainstream customers. About 70 percent of the potential customers still do not have easy access to PIN generated debit cards, which could be a major hindrance to the adoption of digital payment solutions. Additionally, even those who showed initial interest in digital payment solutions faced challenges such as inability to transact due to network/service downtime, complex and confusing terms used on UPI apps (multiple accounts not possible), and non-transparent fees (cost of failed SMSs) resulting in poor customer experience. In our pilot, 46 percent of potential early adopters who showed interest in digital payment solutions could not be onboarded due to these technical problems. Early adopters generally play a crucial role as they tend to be ‘opinion leaders’ in a community like Bhatta Basti, and such incidences faced by potential early adopters when heard through word-of-mouth might result in other consumers limiting the uptake of digital payment solutions.

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3.7 Cost-benefit analysis3.7.1 Project investment

This pilot was more experimental in nature and involved taking a deep dive on understanding the full customer journey starting from bank account opening to digital payment usage. While rich insights have been gathered, the costs incurred in the pilot would not translate directly into break-even commercials.

3.7.2 Outcomes

Opening of new accountsAs of October 2018, in partnership with FIA, 1,703 new accounts were opened. Benefits to the new account holders included:

• Access to insurance benefits under Pradhan Mantri Jan Dhan Yojana (PMJDY);

• Access to Direct Benefits Transfer (DBT) schemes promoted by the government;

• Proximity to basic banking services as we have established Business Correspondent points within the community; and

• Handholding support for UPI onboarding and introduction to digital payment solutions.

Identification of the profile of early adopters and entry of PhonePe

• Conversion rate: In a community such as Bhatta Basti where infrastructure and financial capabilities are weak, the pilot helped us understand that, with strong handholding support to potential early adopters, one can expect 10 percent conversion of new account holders to adopters of digital payment solutions. Amongst the 619 account holders, 323 (52 percent) were male and 296 (48 percent) were female account holders. All, except one, of those that were onboarded were male. Hence, at this stage, one can expect a conversion of approximately 20 percent of male account holders, and less than 1percent of female account holders.

• Profile of early adopters: The experiment that we ran in Bhatta Basti also helped us pinpoint the profile of early adopters of digital payment solutions in poor urban communities. If financial providers are interested in entering an untapped market in urban slums, they need to first focus on identifying young male smartphone owners who could adopt digital payment solutions. These adopters have potential to influence other members in the community.

We started converting new account holders into potential adopters of digital payment solutions in

August 2018 when there was no financial provider in the Bhatta Basti market. We created enthusiasm among the early adopters from August to October 2018 and relied on their network to further promote digital payments. By the time we closed this project in October 2018, PhonePe had entered the market and started its marketing, which gave a boost to our campaign.

Identification of pain-pointsThe experiment helped us identify the pain-points in converting account holders into digital payment adopters in a community such as Bhatta Basti. Prior to entering any community like Bhatta Basti, a financial provider needs to first assess if the community has institutional support from banks and government agencies to promote financial inclusion and adequate infrastructure to make digital payment solutions viable.

• Institutional support

» The biggest pain-point is the lack of a functional debit card (exclusion of 70 percent of new account holders), which is a prerequisite for any digital transaction; and

» Financial providers should first assess how banks and government agencies are supporting the community in accessing a functional debit card.

• Infrastructure

» Even though infrastructure in Jaipur city for digital transactions is good, there are places such as Bhatta Basti where network connectivity is almost non-existent resulting in a lengthy and time-consuming onboarding process. Financial providers should be aware of such challenges before entering the market.

• Challenges in onboarding women account holders

» Our experiment suggested that men are more in charge of getting women online in the first place in lower income household. Qualitative interview in Bhatta Basti indicated that women with a smartphone are more likely to get their first smartphones as a present and choose a phone their partner weighed in.

» After contacting and getting consent from women, we visited 16 households of women who owned a smartphone, had a functional debit card (PIN generated) and the mobile number that was registered with the bank account. In all our visits, men were present; and men took the lead in communicating with our field staffs. We called these women after three weeks after our visits; and almost all reported that their husband using the payment solution, not them.

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3.8 SWOT analysis

Strengths

Community organizationsThe presence of robust and trusted community organization such as Sewa that has a strong local presence. The community can be easily mobilized through effective partnerships with such community organizations

Strong peer network

Networking and sharing experiences amongst peers is a key component of the customer experience. If a service provider can provide a positive customer experience to early adopters, the best tool in such a market is word-of-mouth advertising, which is free, reliable and viral

Emerging market A potential emerging market that presents opportunities for small companies looking to acquire new business

Coverage of smartphone amongst potential early adopters

Penetration of smartphones is high amongst the potential early adopters of digital payment solutions (young, male, bank account holders)

Weakness

Weak infrastructure Network connectivity could be unreliable and almost non-existent in such communities which could be the biggest hurdle for digital payment adoption

Lack of institutional support

Lack of a functional debit card, which is a prerequisite for any digital transaction. Banks should be proactive about promoting active banking and ensure the account holders have functional debit cards

Trust factorWithout the support of a trusted organization or influencer, inhabitants of such communities do not trust new financial providers in the market because of their prior experience with shams

Penetration of smartphone in the community

Penetration of mobile phones is still low with only one-third of the household owning a smartphone in Bhatta Basti ( especially amongst women account holders)

Opportunities

Word-of-mouth advertising

Positive word-of-mouth advertising is easy to create in such close-knit communities if financial providers deliver the products or services with good customer experience for early adopters, who are mostly influencers in the community

Product cross-selling There is an opportunity for selling related or complementary financial products, for example, digital savings or insurance products

Product testing with diverse segments

To ensure a business’ appeal to its customer segment, the business must understand who the customer is. Such an emerging market can provide an opportunity to evaluate different customer segments’ environment, experiences and general context and these factors contribution to how each segment is responding to the product

Threats

Negative word of mouth

Because this is a close-knit community, negative word-of-mouth also spreads faster than expected if early adopters face a negative experience. We learned that these early adopters in such communities are also community influencers

Change in regulatory compliance

Changes in the political environment and government regulations can affect the viability of the product

Poor data security

Cases of data breach and fraudulent transactions could result in payment failures especially because many residents in the community are not aware of data security. Instances of some residents sharing their ATM PIN number with others could be found in Bhatta Basti

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RECOMMENDATIONS4

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Handholding support is vital: The task of getting new account holders onboarded on digital payment solutions requires the highest degree of handholding support throughout the onboarding process. Hence, there is a clear need for greater guidance and handholding through the onboarding process and in helping an account holder make the first transaction.

Segmentation is the key: Because it is logistically not possible to provide handholding support to everyone, it is important to break down the market into specific, targetable segments. In our case, we used the account holders’ access to debit card and attitude towards banking technology as a basis for segmentation. The majority of (more than 75 percent) account holders did not have a PIN generated debit card; there were only 184 individuals who had collected their debit cards and visited the nearby bank branch (about 2 kilometer away) to generate a PIN on their own. Instead of targeting all 619 individuals, which would have been an expensive and ineffective exercise, we created a list of Tier 1 individuals (including those from Tier 2 and Tier 3, who graduated to Tier 1) and reached out to them; they responded positively.

Identification of early adopters leads to higher adoption of digital payment platforms: Segmentation of target audiences allowed us to precisely identify early adopters of UPI applications, and we were able to cater to their specific needs. This was also the best way for us to use our resources more effectively and make better strategic marketing decisions to convert early adopters to influencers in the community. For example, our experience on UPI onboarding indicated that the early adopters have huge potential to act as ambassadors of digital payments and to drive adoption of digital payment solutions in the community if provided with enough support. This should be therefore considered as one of the most important factors to determine the usability and sustainability of making transactions digitally in a low-income community.

Understanding the infrastructure constraints prior to entering the market: Before entering a community such as Bhatta Basti, a financial provider should be aware of infrastructure constraints that could act as hurdles in mobilizing the community. The service provider should assess if the community has institutional support from banks and government agencies to promote financial inclusion and adequate infrastructure to make digital payment solutions viable. For example, the biggest pain-points in Bhatta Basti were the lack of a functional debit card (exclusion of 70 percent of new account holders), which is a prerequisite for any digital transaction; and network connectivity that is almost non-existent resulting in a lengthy and time-consuming onboarding process. Financial providers should be aware of such challenges before entering the market.

Digital literacy is the need of the hour: Finally, in our follow-up study with early adopters, 35 percent was inactive because they did not have enough savings in the bank account for any kind of digital transaction. One key observation that we made in Bhatta Basti was that the community had not fully realized the potential of digital finance. For example, most inhabitants of Bhatta Basti are daily wage laborers working in the informal sector using cash as a mode of payment. Our qualitative study indicated that they have an option to ask their employer to transfer money directly to their account. However, most are not aware of the concept of stored value and tend to regard savings as simple unspent money. Hence, promotion of financial literacy using technology (use the power of media such as WhatsApp groups, mobile phones and the internet) is the key to foster the concept of active banking and digital savings in a community such as Bhatta Basti. Only once an adopter receives information about financial instruments and options, would he/she know about what to look for and think of the benefits that can be obtained from adopting digital financial solutions.

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