Dazzle and dark co-exist this Diwali!
India’s financial inclusion and digital payments mission continues to scale new heights – Pradhan Mantri Jan Dhan Yojana accounts, which had crossed 50 crore in number in August, have a total balance of INR 2.05 lakh crore in October as against INR 1.75 lakh last year; UPI payments set a new record in October, crossing 11 billion transactions valued at INR 17.15 trillion; the account aggregator (AA) ecosystem has crossed 28.4 million accounts linked, with more than 30 million consent requests successfully fulfilled so far; the Reserve Bank of India (RBI) has expanded the AA ecosystem by mandating that all Regulated Entities joining as Financial Information User shall necessarily join as Financial Information Provider (FIP), if they fulfil the criteria as FIP; draft rules under the Digital Personal Data Protection (DPDP) Act will be released soon for public consultation.
And yet, as the digital ecosystem grows, the risk of fraud increases, and stringent monitoring becomes critical. The RBI banned Bank of Baroda from onboarding customers through its app as business correspondents and bank staff colluded to link bank accounts to unauthorized mobile numbers and siphon money away from customer accounts. Another story emerged from Karnataka with the arrest of three people in Bihar who had gamed the Aadhaar-enabled payment system (AePS) by misusing property documents uploaded in the state government registration portal- NPCI has flagged the issue for all banks and payment companies to enhance security measures and also stop AePS payments to accounts which have seen no debits in the past 12 months.
So, there’s blatant fraud as highlighted above and when it comes to the expanding digital universe, there’s also the subtle art of deceptive design patterns in the interface aimed at misleading a customer. The Ministry of Consumer Affairs came up with Draft Guidelines for Prevention and Regulation of Dark Patterns for public feedback, and though the guidelines are essentially for ecommerce, Gaurav Noronha does a deep dive into the fintech world, looking at practices that can be seen to literally trick customers into a financial decision that is inappropriate or unsuitable. Anand Kalyanraman points out that advertising of yield for fixed deposits under various terms and calculations - “annualized yield” or “average annual yield” or “effective yield”- also forms a dark pattern, pushing depositors into making wrong choices and this can be fixed if the regulators bring in a standardized industry definition of yield.
The task for regulators and policy makers has definitely become more challenging, as M Rajeshwar Rao, Deputy Governor RBI highlighted in his recent speech “Reflections: Challenges in Regulations” where he spoke of regulators having to maneuver four transitions – climate, technology, digital intermediation and social media. The strategy adopted by the RBI has five pillars – forward looking, nimble, data driven, consultative and collaborative. In this digital interconnected world, the RBI, government ministries, NPCI, state governments, police and others have their task cut out for them to ensure that trust in financial services is sustained.
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The Centre for Advanced Financial Research and Learning (CAFRAL) released the “India Finance Report 2023” with "Connecting the Last Mile" as its theme, providing an in-depth assessment of non-banking financial companies (NBFCs) in India.
D91 Labs put out a blog covering key comments and policy recommendations for the prevention and regulation of deceptive design patterns or ‘dark’ patterns in the Indian digital landscape.
Emilio Hernandez-Hernandez and Cristina Martínez have a paper out on agent networks, they discuss five key actions that rank as the most catalytical for DFS providers, policymakers, regulators and funders to unlock the expansion of rural CICO agent networks based on CGAP's global experience.
Poulomi Ghosh, Sonal Jaitly and Shantanu Sahay, MicroSave Consulting write a blog explaining how Bihar Rural Livelihoods Promotion Society (JEEViKA) mobilizes women SHG-based fish farmer producer groups and provides them with access to community ponds and water resources to take up aquaculture as a livelihood activity.
Rounak Kumar Gunjan, The Ken, explains how India’s insurers are finding ways towards inclusion of LGBTQIA+ couples
Srikanth Nadhamuni writes for Forbes India on driving financial inclusion through digital public infrastructure.
Anirban Sarma, ORF India, writes on India’s DPI proposition.
Anand Kumar Bajaj, PayNearby writes on how open network platforms are empowering MSMEs at last mile.
Nikhil Subramaniam writes on the UPI Paradox.
Indradeep Ghosh, Hasna Ashraf & Amol Kulkarni begin a blog series on trust in digital financial services.
Emilio Hernandez-Hernandez, Dr. Rebecca Calder, Divya Hariharan, and Cristina Martínez have presented learnings from CGAP research that show how DSF providers, policymakers, regulators, and funders can influence agent networks to be more inclusive of women and other vulnerable customer segments.
Rajat Deshpande, Finbox, looks at the role fintechs play in financial inclusion.