Pathways for digital inclusion

Source– The post is based on the article “Pathways for digital inclusion” published in The Indian Express on 31st July 2023.

Syllabus: GS 2 – e-governance. GS 3 – Inclusive growth

Relevance: Issues related to flooding in cities

News- The article explains the Indian DPI and issues related to it.

What are some facts about DPI in India?

DPIs replicate physical infrastructures. These DPIs are digital pathways for seamless provision of essential services.

The Indian DPI ecosystem is envisioned as “India Stack”. India Stack is interconnected yet independent “blocks of a stack”. Each block ensures financial and social inclusion across sectors and benefits a diverse population.

It has multiple use cases. It generates novel solutions that drive innovation, inclusion and competition in the digital space.

What are successful examples of DPI in India?

Aadhaar has facilitated financial inclusion.

The Jan Dhan-Aadhaar-Mobile trinity has ensured the direct benefit transfers of welfare subsidies to bank accounts of the beneficiaries.

Unified Payments Interface has enabled citizens to transfer money from one bank account to another bank account digitally.

Future of India’s DPI involves sector specific DPIs such as account aggregators, Open Network for Digital Commerce, Ayushman Bharat Digital Mission and Agristack.

What should be done?

Placing users at the forefront-

User-centric design is needed to reduce the risks related to use of technology and reduce the inequalities amongst rural and urban populations, genders or economic groups.

For DPI usage, compatible protocols for feature phones, assisted-tech models and Interactive Voice Response System should be implemented. These should provide support to consumers with limited smartphone access or low digital literacy.

The RBI’s launch of UPI123Pay is an example of inclusivity. It gives feature phone owners an app that enables them with most UPI features.

Inclusion– It should be a key policy objective for DPI participants. It must be embedded within the regulatory framework.

Several countries like Nigeria, the UK and Brazil, have adopted open banking for financial inclusion within the regulatory framework. Estonia’s information policy emphasises avoiding information disparities between regions or communities.

There is a need to identify the underserved target segments and develop use cases that caters to their needs for promoting inclusion.

For instance, MSMEs have limited access to formal sources of credit. The account aggregator ecosystem can ensure access to low-cost, low-ticket-size, collateral-free sources of credit by utilising the digital trail of all consented transactional data.

For the successful implementation of any digital public infrastructure on a large scale, it is essential to establish meaningful engagement with the DPI. Digital connectivity and literacy are big challenges in India, and addressing these issues becomes crucial.

Offline channels should be considered, alongside efforts to enhance institutional capacity for generating trust and awareness. This approach not only ensures access to the last mile for vulnerable consumers.

For example, business correspondents play a crucial role as intermediaries that banks rely on to expand access to and usage of financial products.