Imparting Digital Literacy Will Take Inclusion To Next Level  

Digital footprints in financial intermediation are on exponential rise. The digital banking channels are fast reaching out to rural areas with Business Correspondents (BCs) and retail grocery outlets equipped with Point of Sales (POS). The rural business community too has come to understand the merits of accepting digital wallets. According to recent Reserve Bank of India (RBI) data of August 2018, the number of ATMs are 2,13,004, POS terminals,33.32 lakhs, debit cards have reached 98 crore while credit cards are at 4.1 crore.

The number of basic savings bank deposit accounts (BSBDA) has reached 53.6 crore by March 2018, of which 32.4 crore are contributed by the Prime Minister’s Jan Dhan Yozana (PMJDY) scheme. PMJDY is now made into an open-ended scheme with focus shifted from covering ‘families’ to ‘individuals’. This will accelerate opening of new accounts and issue of debit cards further adding to the scope of digital banking.

More Digitisation

On the recommendation of Dr Nachiket Mor ‘Committee on Comprehensive Financial Services for Small Businesses and Low Income Households’, several differentiated banks are rolled out. More significant is the setting up of payment banks. The ‘India Post Payment Bank (IPPB)’ holds more potentiality due to its deeper reach in interior hinterland with post office outlets close to 1,55,000. The payment banks can play a greater role in digital payment space as they are not allowed to lend. In addition to banks, close to 1,000 fintech companies are fast collaborating with banks and have floated diversified types of prepaid payment instruments to increase the scope for using digital mode for small value transactions.

Several banks and card issuing organisations have provided ‘payment gateways’ for customer convenience to enable quick online payments. The Internet and mobile banking transactions are generally supported by dual authentication based on one time password (OTP) routed through a registered mobile number. With development of such huge digital banking infrastructure, the number of user base is set to increase manifold. Along with spurt in digital bank users, the systems are getting exposed to cyber threats. The digital mode is convenient and accessible any time but unless the user is conscious about the operational risks, it becomes difficult to ensure customer protection.

RBI Initiatives

Looking to the potentiality of digital banking, the RBI has now further liberalised interoperability among entities using prepaid payment instruments (PPIs) or Digital Wallets (DWs). The holders of PPIs can now transfer funds from one PPI to another and also to a bank. Even account portability methods among banks are being worked out to expand the scope of digitisation of banking. With the number of internet user bases rising from 500 million in June 2018 to 730 million by 2020 and smart mobile phone base increasing from 339 million to 402 million during the corresponding period, there will be an exponential rise in digital transactions.

Despite expanding scope of digital banking, a large number of potential customers is still shy and apprehensive in using digital and online services. Compared to the debit cards issued by banks, the ATM hits are far from satisfactory. In order to allay their fears, there is an urgent need to focus on customer education. Rightly so, RBI has recently started a new campaign of using electronic/print media using prime shows in televisions to spread the messages on financial and digital literacy investing huge funds. It is in the public interest to sensitise bank customers. It is in addition to financial literacy and credit counseling Cells (FLCCs) operating from rural branches and some of the block level centres.

Customer Protection

The strategic move of RBI for customer protection is laudable and explains its increasing importance. It must be understood that conducting responsible banking is the onus of customers too. In the melee of catching up with digital banking convenience by new set of users, vulnerability to cyber attacks is on the rise. Fraudsters are always on the look out to find the weaknesses both from bank and customer angle. Stealing identity and pilfering digital money is possible in many ways unless the customer is cautious and joins banks and regulators in safeguarding digital banking space.

Therefore, it is expedient to sensitise bank customers to preserve the sanctity of passwords, login id, Card Verification Value (CVV) and One Time Password (OTPs) meant to ensure safety of customer access to bank accounts through digital mode. As part of enforcing customer protection measures, RBI directed banks to make good the loss on account of unauthorised digital transactions if the customer reports it to banks within three working days, provided the customer has not compromised the identity credentials. There is limited liability to the customers if reported between four and seven days. If the wrongful transactions are reported after seven days, banks can deal with it in terms of board approved policy. Subscribing to SMS services of banks can bring wrongful transactions to the notice of customers quickly.

Way Forward

In our quest towards digital banking to reduce cost of operations and improve efficiency, every stakeholder will have to join in effectively sanitising digital banking space. Every business entity, institute, school, college, corporate house and social activist will have to put up banners, broadcast messages educating public on how to safely use the digital banking mode. A sustained and collective commitment of every responsible stakeholder will be necessary to educate the public. At this phase, digital banking is not an option. Digitisation is part of development in every walk of life and therefore digital literacy should be comprehensive to transform lifestyle into a digital friendly life. Augmenting resources to bring digital literacy to the centre stage can only make our digital financial intermediation safe and fraud proof.

(*The author is Director, National Institute of Banking Studies and Corporate Management – NIBSCOM. The views are his own)