While the jury is out on whether Demonetisation was indeed 'The Biggest Disruption For Electronic Payments In 2016', what is evidently clear is that the drive unleashed a series of campaigns on the ground that will have a revolutionary impact on the financial
behavior of Indians for generations to come. Primary among these is the rigorous structured effort to enable Indians to be digital financial literates.
What is Digital Financial Literacy?
Digital Financial Literacy is having the knowledge, acquired skills and developing necessary habits to effectively use digital devices to for financial transactions. This intersects with an individual's basic literacy levels and the individuals ability to
use digital devices/technology. However, in the purist sense, it is
- Simply the ability to have a relationship with a bank/Financial Institution to keep your money safe
- Use facilities to transact using your own money for your needs in the safest most secure way possible
- Be aware, vigilant and extremely protective about your financial identity
Why is Digital Financial Literacy Important?
As India focuses on the biggest digital transformation in recent history, Union Budget 2017 had a section on Promoting Digital (You can read more - Decoding
Union Budget 2017's Impact on Digital Payments in India) in the budget speech apart from Policy
Provisions in the Union Budget to impact these changes. With this deep focus, its a a necessary imperative to empower every citizen with the information and knowledge necessary to join the revolution and help India progress along the path of a Less-cash
Three Tenets of Digital Financial Literacy
(A) Inform citizens about government policies, initiatives and digital financial options available for them
This by far remains the biggest hurdle and hence offers the widest range of opportunities to ensure every citizen regardless of financial status, current literacy levels and geographical distance from the main cities is empowered with all necessary information.
India is a diverse country with languages, cultures changing every 100 kilometers, to standardize a method or approach to imparting a program with mass impact is next to impossible. A one-size-fits-all may not work but a standard template can be created which
can be customized to meet the needs of various target groups.
A decentralized approach lead locally and with the assistance of local communities is the best and most efficient way.
The government makes policies but local administration should be made responsible for measurable success along with periodic program tracking and reviewing success parameters.
(B) Building Awareness of Digital Payment Methods
Digital Financial Literacy is the (convenient) marriage of all three paradigms: Digital, Finances and Literacy. An Individual and family may be at various different stages of each or all put together. Ensuring these needs are met by compatible payment methods
is an absolute must
For example, for a rural farmer who doesn't even own a bank account, a USSD method of payment on mobile is not suitable. However helping the farmer open a bank account and learn to understand how to put cash and withdraw from the bank account can be the
first step followed by how to use a bank card and transacting on mobile.
The government has created a slew of resources to enable volunteers for building awareness
(C) Imparting knowledge of Safety and Security of Digital Payments
In a digital world, safety and security is the topmost priority for everyone. Remaining safe is an individual's own responsibility which has to be taken seriously. Payment providers can put in the most fool proof systems in the world but the human element
of payments and hence actions resulting in fraud cannot be emphasized enough.
Three Facilitators of Digital Financial Literacy
(A) Digital Payments Infrastructure to allow digital transactions: Merchants and Consumers
The goal of education is not to increase the amount of knowledge but to create the possibilities for a child to invent and discover, to create men who are capable of doing new things. Jean Piaget
Creating possibilities and avenues for customers (consumers using the service or merchants providing the service) is key to ensuring the education drive bears fruit and allows the citizens of a Digital Economy to transact digitally as effortlessly and without
barriers. Consumer choice is paramount and should drive what merchants provide for payments as well
(B) Assisting less-cash behavior shift
Some amount of hand holding will be needed through this transition period. Its foolhardy to presume a one time effort can result in long lasting change. Using public service communication channels like National TV, Radio, Print and Digital campaigns will
ensure the message is delivered to recipients and reiterated many times over. Consistency and over managing delivery will be key. Addressing consumer issues and pain points with active listening and fast action are other necessary actions.
(C) Incentivizing less-cash behavior
The most effective method in introducing trial and creating a habit is incentives, carefully timed to an individuals progress in usage of a product with periodic interventions to ensure instant gratification and drive habit change. Monetary incentives such
a lotteries, cash backs and prizes will certainly motivate individuals to first try and later stick to paying digitally.
In my next post, I shall cover the Indian government's initiatives for digital financial literacy following Demonetisation in 2016. Stay tuned.
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