FROM THE DRAWING BOARD TO THE FIELDï¿½ AND BACK
By Tunisha Kapoor, Catalyst, New
A journey from the drawing board to the real-world is always fascinating. It involves an ever-changing context which challenges ideas and solutions that seem near perfect on the drawing board.
My engagement with Government of Rajasthanï¿½s e-Mitra network, which literally translates as digital friend, has been an exercise in tracing this journey backward through intuitive moments and encounters with people, and their day-to-day reality. My visit to the market in that sense has an entirely different purpose and meaning.
In this blog from the field, I share an operational view of our ongoing work with e-Mitra merchants and customers as part of Catalystï¿½s initiatives at its Jaipur Digital Payments Lab. The blog celebrates the opportunities that we see in creating a symbiotic relationship between merchants and customers ï¿½ a relationship which is based on the value and convenience of adopting digital payments.
A NETWORK OF OPPORTUNITIES
When I hear the term e-Mitra, my imagination brings forth the image of a mammoth network which connects merchants and customers through a state-run interface, and provides over 350 offerings such as birth or death certificates, pension services, identity cards, passports etc. and the highly popular bill payment services. I see hundreds of small/medium shops and single desk windows run by eager individuals who have become the last-mile enablers for access to digital services and, in our case, change agents for nudging customers to take up digital payments.
At the centre of the e-Mitra network are entrepreneurs such as small shop merchants who are enrolled with the government for providing these services from their shops or outlets, acting as the closest point of contact with communities. These e-Mitra entrepreneurs harness this economic opportunity through the commissions that they receive for citizen services and convenience charges that utility departments provide for receiving payments.
A DIGITAL NETWORK ENTRENCHED IN CASH
An e-Mitra merchant operates through a digital wallet or e-wallet in which he or she places money before undertaking any transactions. When the customer hands over cash for a transaction, an equivalent amount is deducted from the e-Mitraï¿½s wallet account.
While it seems perfectly in sync so far, here comes the challenge. The payments made by e-Mitra customers in Rajasthan are overwhelmingly in cash, 98% to be precise. The customer is entrenched in cash which means that the amount in the e-Mitraï¿½s wallet account in turn determines the number of transactions he can undertake. Especially on busy days, this could mean having to replenish the wallet multiple times to serve customers. Thus, in the absence of digital payments this burden of digitizing cash is passed on to the e-Mitra entrepreneurs, who sometimes have to visit the banks multiple times a day to deposit cash to replenish their wallet.
For e-Mitras, receiving payments in cash is a pain point and a drain on their time and earnings; they need to sustain high volumes of transactions to generate revenue, as the commissions earned are small. Many of the entrepreneurs have more than one business and would prefer to avoid the additional work that comes with accepting cash payments. Here is what one of the e-Mitra entrepreneurs has to say about thisï¿½
CREATING AN ENABLING INTERFACE
The entrepreneurs see potential in digital payments as these will reach the Government directly, reducing the need for maintaining large amounts in the pre-paid wallet. Their visits to the bank would also come down. For customers, digitisation will do away with the need for withdrawing and carrying cash, and tendering exact change.
However, for an e-Mitra entrepreneur the margins and income are not sufficient to bear the additional costs that come along with the benefits of going digital. The customer too is unwilling to pay any charges over and above the bill amount. Moreover, if the e-Mitras do adopt a digital payment solution, the transaction charges are usually passed on to the customer, which acts as a disincentive for them to pay digitally.
Thus, despite these obvious benefits that can accrue from a shift to digital payments, there is a need to facilitate these transactions and create an enabling operating environment for e-Mitra entrepreneurs and customers alike.
Based on our iterative design and implementation approach (from the drawing board to the field and back!) ï¿½ we are working with a select group of e-Mitra merchants and customers in Jaipur through a combination of incentives and handholding initiatives, apart from ensuring that both segments do not have to incur additional charges for making digital payments.
ON BOARDING MERCHANTS
These e-Mitra merchants were selected based on their transaction history, the locality that they cater to, and their participation in a training held by the Government of Rajasthan. The Catalyst feet-on-street initiative supported these entrepreneurs in conducting digital transactions, and nudging their customers to pay digitally during the initial few days. Collaterals were also placed to inform customers of the availability of digital solutions at zero additional charges.
ON BOARDING CUSTOMERS
During our discussions with these e-Mitra entrepreneurs they indicated that a significant proportion of customers consist of senior citizens and women, many of which do not have the means to pay digitally. The earning members of the family usually cannot visit the e-Mitra centre, and so instead hand over cash to other members in the family to make the payments at their convenience.
When we spoke to customers visiting e-Mitra merchants, 90% indicated that they had a debit card but only 60% had smartphones. They are accustomed to pay in cash and in some cases through cheques as many e-Mitras have gradually stopped accepting cash above a certain amount. Many customers receive their income in cash, thus their subsequent payments were also done in cash due to a lack of digitized money at their disposal.
Even though a number of e-Mitra centres are located close to each other, most citizens visit a particular centre regularly for utility bill payments. Thus, entrepreneurs know their customers and have a relationship with them. ï¿½We believe that this could provide a starting point to convince these customers to shift to digital payments.
However, entrepreneurs have also indicated that this behaviour change from cash/cheque to digital would be gradual. Since citizens only visit one or two times in a month, the opportunity to interact with them and nudge them to pay digitally is limited, and needs consistent engagement.
A DIGITAL NETWORK ENTRENCHED IN CASH
What does an encounter between the merchants and customer, entrenched in cash, look like you may ask? Well, as the customers at e-Mitra merchants are usually folks from the neighbourhood, there is an element of trust between the two parties. Even so, this does not always lead to a conversion.
The merchants need to be proactive and confident about their pitch, as customers often need to be educated and convinced about the broader aspects of digital transactions.
The merchants have to chat with customers about the availability of digital payment solutions and in many cases, convince them to make the shift, despite a heavy rush and an entrenched mindset in favour of cash.
Coming back to the initiative that the Catalyst team is currently implementing, we started with a pilot in July 2017, with 10 e-Mitra merchants initially active on Point of Sale (PoS) machines, scaling up to 25 merchants. In this six-month period, digital transactions have gone up to 9 % of the total utility bill payments at these e-Mitra outlets. In terms of value, around 15% of the total value of these transactions has been digitized through January 2018.
Customer surveys were also conducted at select e-Mitra merchants during this period with around 250 customers. Many customers said that they did not pay digitally as they had already carried cash for the transaction or were not carrying their card. Around one-fourth said that they preferred cash and one in 10 indicated trust issues as the reason.
Digital transaction rates also varied across e-Mitra outlets as this is dependent upon the entrepreneurï¿½s interest as well as ability to convince his customers. Another factor is the value of the bill, as data suggests that both citizens and entrepreneurs are more likely to pay digitally for a higher value bill. While the average ticket size for a water bill is around Rs. 500, electricity bills are of higher ticket sizes, around Rs. 5,000. Therefore, it should be no surprise that digital transactions are skewed towards electricity bills. In terms of digitization, while around 14 % of electricity bills are paid digitally, the same is just over 5 % for water bills. Payments made digitally also involve more steps to complete the transaction as compared to cash which could also be a reason for lower uptake for smaller value transactions.
While the shift towards digital payments among e-Mitra merchants and customers has been gradual, it rests on solid foundations. The ripple effect of convenience, trust and eventually value will be visible in an even more apparent way with sustained engagement by the merchants. ï¿½For this to happen, there is a need to address the challenges that they face in terms of technical knowhow, timely information and quick resolution of glitches.
While significant changes such as decrease in wallet balance as well as bank trips may not be apparent yet due to the current transaction rate, the potential benefits are apparent to most entrepreneurs. However, the burden of additional charges associated with digital payments cannot be borne by both the entrepreneurs as well customers. The latest central government announcement of waiving of these transaction fees for up to Rs. 2000 is a welcome step towards promotion of digital payments. These e-Mitras can become centres of change in the move from cash to a digital economy.
One of rewarding aspects of the relationships that the team has built with merchants and service providers has been the constant feedback from them, with the single objective of enabling customers to take confident steps, and become a co-traveller in this journey.
One critical hurdle faced in digital payment uptake is transaction failures related to the bank network or the e-Mitra portal. The payment process first requires the money to be debited from the customerï¿½s account through the PoS machine. The slip generated has a particular transaction number that needs to be entered on the e-Mitra portal to link this specific payment to a particular bill. Many times, while the amount is debited, the transaction fails to validate on the portal which leaves the entrepreneur with limited choices, the most appropriate being cancelling the transaction which would refund the amount back to the customer. While this process ideally should take up to a day or two, for some customers it has taken as long as a month to get their refund. Such failures, though very few, do have an impact on customers who lose trust in this method of payment. ï¿½In some cases, it also affects the entrepreneurï¿½s motivation to convince customers to pay digitally, as he or she needs to face their questions in case of any failures.
If you would like to get a peek into how merchants and customers connect through the network,
The e-Mitra network is a state-level variant of the Common Service Centers that the Government of India created in 2009 as a special purpose vehicle for providing last mile digital access for G2C service with the motto of governance at the doorstep.