Recently news broke that Google is developing an ambitious online platform that aligns with India’s flagship Pradhan Mantri Jan Dhan Yojana (PMJDY) financial inclusion scheme, and will support users in building their financial literacy and accessing appropriate financial services. If the platform does indeed come to fruition, and functions as intended, it could mean huge benefits for the country. It is reported that the PMJDY program has succeeded in enabling every household in the country in having a formal bank account, and as of the end of 2015, according to the Finance Ministry, 60 percent of the accounts opened under the program have been used and have a balance. However, concerns over account dormancy and lack of account usage in the country persist, as do concerns over financial capability. A platform that empowers Indians to best use PMJDY financial services, harnessing the horsepower of Google, could be a game-changer.
The proposed platform, called Bharat Saves, is comprised of two different sections. First, users complete financial literacy modules and take a financial literacy test. The results of this test determine if the user receives a financial literacy certificate. Second, using these certificates, users gain access to a section of the platform where they can browse, compare, and ultimately purchase financial products, including PMJDY accounts.
Bharat Saves would be accessible online and via mobile phone app. The project is said to be specifically targeting small business owners, those newly employed and self-employed, retired persons, and farmers. As it stands, the Government of India has reportedly received and is considering Google’s proposal for the project.
If implemented as effectively and as expansively as is being discussed, Bharat Saves could help take PMJDY to the next level and boost financial capability in the country. A number of reports have indicated that the PMJDY program has not been as successful as claimed, either in reaching the poorest of the poor or in preventing dormancy of accounts. One research study spanning four districts in Tamil Nadu, a state boasting fairly high access to bank branches, literacy rates, and social security programs, found that only 16 percent of households were aware of the PMJDY program. Dormant accounts not only hinder their account holders but also the financial institutions and other BoP customers. When low-cost accounts targeting lower-income individuals aren’t used, they become a burden for financial institutions and lead to the perception that the poor are “unbankable.” Reports indicate that an awareness campaign might be part of the Bharat Saves project, which would be most welcomed in combating account dormancy.
Beyond account awareness and dormancy, a lack of account usage is fueled, at least in part, from low financial capability levels. The vast majority of banks in India promote financial literacy through camps and group classes, while the government also relies heavily on similar tactics. These approaches are effective in engaging a massive number of individuals, yet their efficacy is mixed. Account holders need to better understand how their accounts function and how they can benefit their lives.
In our Innovations in Financial Capability project, we examined a number of unique initiatives in India helping to empower financial services users. IFMR and Janalakshmi both customize their financial capability efforts to clients’ unique needs: IFMR’s KGFS staff speak with clients at length about their financial lives and afterwards offer financial advice tailored to their specific situations; Janalakshmi, similarly, uses a tool called Kaleido that helps uncover customers’ circumstances, set goals, and offer ongoing counseling to help achieve these goals. Money View, a mobile app, harnesses bank account transaction information to function as a personal money manager, tracking bills, expenses, and account balances, and incorporating timely alerts. India Money also demonstrates how technology can deliver financial capability interventions at scale and cheaply, by providing automated advice online, backed up by a call center.
Bharat Saves would be wise to borrow from these efforts. An online and mobile app-based platform with linkages to financial service offerings presents an array of opportunities to leverage the most effective financial capability-building elements. India has the third-highest number of internet users in the world, with this figure only expected to rise given the falling prices of smartphones and data packages. With more unbanked individuals coming online and able to navigate PMJDY offerings via a web or mobile app, a platform like Bharat Saves could help curb account dormancy and low levels of financial capability by: gathering client information to offer tailored financial capability-building content, financial advice, and appropriate products and services; incorporating tailored and timely nudges and reminders via mobile phones to promote positive financial behaviors; employing an automated messaging system to field users’ queries; and using popular media to make messaging more engaging.
The financial services under PMJDY include savings and deposits, remittances, credit, insurance, and pensions. Now that this ambitious PMJDY program is here, whether it’s through Bharat Saves or other means, it’s worth investing in this next step to ensure we go beyond account access to financial inclusion.
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