[vc_row equal_height="yes" content_placement="middle" type="image" enable_parallax="false" parallax_speed="0.4" padding_top="110" padding_bottom="0" bg_image="39430"][vc_column][kleo_gap size="100px"][vc_row_inner][vc_column_inner width="1/6"][/vc_column_inner][vc_column_inner width="2/3"][vc_custom_heading text="USING COMIC BOOKS TO INCREASE DIGITAL FINANCIAL CAPABILITIES IN LOW-INCOME CLUSTERS" font_container="tag:h2|font_size:48px|text_align:center|color:%23ffffff|line_height:54px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing=""][/vc_column_inner][vc_column_inner width="1/6"][/vc_column_inner][/vc_row_inner][kleo_gap size="140px"][kleo_gap size="50px"][/vc_column][/vc_row][vc_row equal_height="yes" content_placement="middle" padding_bottom="0"][vc_column width="1/2"][/vc_column][vc_column width="1/2"][vc_row_inner equal_height="yes" content_placement="middle"][vc_column_inner width="5/12"][/vc_column_inner][vc_column_inner width="1/3" css=".vc_custom_1488531456733{padding-right: 0px !important;}"][vc_column_text letter_spacing=""][addtoany][/vc_column_text][/vc_column_inner][vc_column_inner width="1/4" css=".vc_custom_1488531444909{padding-left: 0px !important;}"][kleo_button title="Print this page" href="https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note-v2.pdf" target="_blank" style="custom" position="left" size="lg" special="no" border="no" icon="print" font_size="16px" letter_spacing="" el_class="grey-icon" custom_text="#d11e3c"][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff"][vc_column][vc_custom_heading text="INTRODUCTION" font_container="tag:h2|font_size:26px|text_align:left|color:%23383b3b|line_height:32px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing=""][vc_row_inner css=".vc_custom_1537456868816{margin-bottom: 35px !important;}"][vc_column_inner][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]<p>The 2011 Census of India reports a total of 65.49 million slum inhabitants living in 13.92 million households in India. Although India’s urban population has an estimated total of 33,510 slums, great variability exists in legal status, deprivation, living condition, type of structure, etc. The inhabitants of these slums are the urban poor and remain outside the ambit of formal finance. Conventional finance so far has not been able to serve this last mile, keeping them excluded from the financial system. Uptake of digital payments can greatly benefit these last mile consumers by facilitating faster and simpler financial transactions, thereby connecting them to formal financial channels. Recognizing this potential, CATALYST launched its pilot project in Bhatta Basti, an urban slum located on the outskirts of Jaipur city, Rajasthan. A migrant settlement with a population of 45,000 people and 1,000 households, it is predominantly a Muslim community where most of the population has low educational achievement.</p>
<p>Our baseline study in 2017 indicated that digital financial capability of slum dwellers in Bhatta Basti was significantly low. Thus, CATALYST experimented with a range of collaterals to promote digital financial inclusion in Bhatta Basti and attempted to understand people’s attitude and perceptions towards each of these media. One such attempt involved using illustrated comic books to spread awareness and encourage adoption of digital
payment solutions among people. Past research in the field had indicated that comic books may be a successful medium for sensitization on a range of
issues because they appeal to people from various age groups. A study on digital financial inclusion conducted by Institute for Financial Management and Research -Leveraging Evidence for Access and Development (IFMR LEAD) in Mumbai’s Dharavi slums in 2012 used comic books for disseminating important information. The learnings from this study helped us in establishing important guidelines for designing our comics and their stories.</p>
<p>A significant learning from the Dharavi study was that it is important to customize the comic books to the target audience. Use of characters and scenarios similar to those seen by the target audience every day is crucial to enable them to form a connection between issues they face and benefits of adopting digital payments. There exists a huge gap in awareness and access to financial services between men and women in low-income clusters and using women as protagonists in the stories may be more effective to reach out and impact women in lowincome clusters.</p>
<p>Using this learning as a guideline, we created and distributed three comic books over the course of three months: one on Automated Teller Machine
(ATM) pin generation; one on Aadhaar Enabled Payment System (AEPS); and one on Unified Payments Interface (UPI) payments. The comic books
on ATM pin generation and AEPS had women as the main characters while the one on UPI payments had male protagonists.</p>[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="image" bg_position_horizontal="center" enable_parallax="false" parallax_speed="0.4" padding_top="150" padding_bottom="150" bg_image="39431"][vc_column][vc_custom_heading text="INSIGHTS FROM THE PILOT" font_container="tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing=""][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff"][vc_column][vc_row_inner][vc_column_inner][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]Testing the hypothesis involved bringing together a payment provider and a lender — a role that was played by CATALYST. For the pilot, CATALYST partnered with Nupay, a Point of Sale (PoS) device or card swipe machine provider and an early stage startup, and Capital First, a Non Banking Financial Company (NBFC), which agreed to provide term loans to fixed store merchants in Jaipur. The combination of a payment device and loan was offered as a bundle, with the intention of testing the extent to which credit can act as a ‘hook’ to adopt and use digital payments. This combination was created for the purpose of the pilot alone since lenders are unclear of the risks involved in offering a small amount of credit, no matter how small, before they can establish credit history based on transactions on the device provided. Since the combination of partners was arranged by CATALYST for the pilot, CATALYST also had to provide a set of Feet on Street (FoS) for on-the-ground support to roll out the services. The FoS team, trained by CATALYST, provided support in marketing and customer acquisition.

&nbsp;

<strong>Product bundle: Capital First and Nupay, a term loan with a card swipe machine</strong>

Product bundle details: Capital First (the lender) agreed to provide loans of a ticket size of INR 25,000 to INR 5 lakh at an interest rate of 18 percent to 24 percent annually for a tenure of nine months to 36 months, depending on the ticket size and repayment capacity.

Nupay’s card swipe machine had a monthly rental of INR 350 (~ US$5) plus 18 percent Goods and Service Tax (GST), which was also to be paid by merchants. The lender agreed that merchants would be considered for an incremental loan based on their repayment history observed in the first tranche of the loan, and their digital transaction footprint.

&nbsp;

<strong>Project roll-out and findings: digital payment adoption vs. non-adoption</strong>

During the pilot, CATALYST reached out to 409 fixed store merchants across six major markets in Jaipur (Shastri Nagar, Sodala, Durgapura, Khatirpura, Jhotwara and Bani Park).<sup>9</sup> These stores have been in business for an average of 10 years and had a median monthly revenue of INR 45,000. Most stores (99 percent) were owned by men; 87 percent was sole proprietorships while a smaller group (13 percent) was managed jointly with other family members. Sixty-five of them were already using a PoS or a card swipe machine and the remaining 344 merchants were given a demo on using a new PoS machine with the help of CATALYST’s FoS team.[/vc_column_text][vc_single_image image="39426" img_size="full" alignment="center"][vc_column_text text_color="#757c74" font_size="14px" letter_spacing=""]<em><sup>9</sup>This data set is separate from the earlier CNAS data. With a time lag of eight months, it is often difficult to work with earlier data sets. So, 490 new fixed stores were chosen from six new markets in Jaipur</em>[/vc_column_text][/vc_column_inner][/vc_row_inner][vc_row_inner css=".vc_custom_1537937440359{padding-top: 30px !important;}"][vc_column_inner][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]<strong>Key results from the experiment were:</strong>
<ul>
	<li>There were eight fixed store merchants who had never used a card swipe machine but eventually adopted digital payment solutions after being trained on card swipe usage by the CATALYST FoS team.</li>
	<li>The primary reason for adoption was that it would allow them to service a broader customer segment that used (debit/credit) cards to make payments. In other words, the ability to serve a specific customer segment that was familiar with digital solutions was a key driver. This would also result in new customer acquisition over a period of time.</li>
	<li>Among the merchants who refused to use or adopt a PoS machine, the dominant reason for nonadoption was the absence of customer demand (62 percent, Figure 1). These merchants were unwilling to act as enablers to train customers in using a new digital solution. If the customers asked for the service, they were happy to provide it.</li>
	<li>The remaining 10 percent (Figure 1) reported the inherent cash stickiness of their business as a major deterrent. Another 2 percent (Figure 1) cited the cost of the machine as a major barrier to accepting digital payments.</li>
</ul>
[/vc_column_text][vc_single_image image="39433" img_size="full" alignment="center"][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]<em>Note: From top right: existing loan usage, source of loan, purpose of loans and awareness about CIBIL scores of 18 merchants who agreed to reveal information about a prior loan.</em>[/vc_column_text][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]While most merchants who were part of the pilot preferred not to share their current loan practices, those who revealed that they had availed a loan (18 out of 409) had done so from a formal source. Fourteen of the 18 were also aware of their credit score (CIBIL) and its related impact on their credit eligibility.
<ul>
	<li>Only 18 fixed store merchants (4 percent) with an average monthly revenue of INR 90,000 (double the population median of INR 45,000) reported that they had availed of a loan in the past.</li>
	<li>The average tenure of the loans was two to three years; 17 merchants sourced the loan from banks and one from a Micro Finance Institution (MFI);</li>
	<li>The purpose for which loans were taken varied from business expansion (10 merchants), household requirements (four merchants) to health emergencies (one merchant). Utility loans such as for two wheelers (three merchants) formed another major category of reasons for taking loans; and</li>
	<li>The ticket size of the loans taken by the merchants varied from INR 40,000 to INR 9 lakhs.</li>
</ul>
[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="image" bg_color="#c9213b" enable_parallax="false" padding_top="150" padding_bottom="150" inline_style="font-style: normal;" bg_image="39439"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text="MERCHANTS’ PERCEPTION ON THE BUNDLED PRODUCT
" font_container="tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing="" el_class="normal-style "][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff" inline_style="font-style: normal;"][vc_column][vc_row_inner][vc_column_inner el_class="normal-style "][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]Perceived vs. real interest in loan: When offered the bundled product of payment device and credit, 25 merchants showed initial interest solely in accessing the loan during their first interaction with the CATALYST FoS team. However, 24 had changed their minds when the lender’s agent approached them after a week, perhaps because merchants are always interested in understanding options for credit but may not avail of it even if they express an interest initially.

One merchant who agreed to try the combination of a PoS device and loan had a fixed cloth store in Shastri Nagar market. He wanted a loan of INR 1-2 lakhs. Unfortunately, the request was denied since his residence was located outside the serviceable area set by the lender. This fact was discovered after the processing was done, and resulted in a poor customer experience for the merchant.

<strong>Why was there a low uptake? </strong>

The experiment shows that while there was individual adoption of the card swipe machines, there was little uptake of the bundled product. Technology did seamlessly bind the products together but the communication to merchants was often unclear and did not explain how payment device usage would help them get a loan of higher amount in the future. The reasons this product could not cater to customer expectations or improve customer experience as expected are:

<strong>Loan structure:</strong> While the lender assured the merchants of a credit-build-up model, the merchants were keen to understand the exact qualifiers for the build-up process, i.e., number and/or value of transactions required to qualify for the next tranche of loans. Additionally, they wanted to know by what percentage the loan amount could grow through increased usage of digital transactions. None of this information was provided to merchants since the lender had not yet thought it through. The product’s value proposition stated in one line by the lender as ‘enhanced loan size for incremental usage of digital payments’ failed to gain the merchants’ trust.

<strong>Single interface for credit and digital payments:</strong> During the CATALYST pilot, the lending company and the digital payment solution company used two separate applications to onboard customers. For the merchants who saw the two as a single product, it was important for the digital payment solution provider and the lending partner to integrate their solution into one single application for simplicity and usage. The existing process offered poor customer experience because filling out two applications is a time-consuming process.

<strong>Large time lags:</strong> Loan disbursal followed a lengthy process, i.e., lead generation by field agents (CATALYST FoS team) from an initial interaction, followed by a calling exercise by the credit assessor and then a site verification. This long time period between initial contact and disbursement was a pain point. Additionally, there were delays in disbursing the card swipe machine. Partnering with an early stage startup for PoS machines led to a resource crunch, which resulted in operational delays. The time lag between initial lead generation and delivery of the machine ranged from 15-20 days which was too long a time to retain interest.

<strong>High cost of on boarding:</strong> The loan offer had a customer onboarding cost plus GST that hiked up the existing rates of interest by 3 to 4 percent so the lending interest rate worked out to be around 30 percent annually. These nuanced details deterred many of the merchants to finally take up the loan despite having shown an initial interest in the loan product.

<strong>Short tenure of the pilot:</strong> Lastly, one must note that three or four months is too short a time to launch and iterate on a product bundle that includes a loan repayment timeline of nine to 36 months. To understand access and usage of repeat loans, the pilot experiment should essentially be of a much longer tenure.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#373b3c" padding_top="75" padding_bottom="75" inline_style="font-style: normal;"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text="RECOMMENDATIONS" font_container="tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing="" el_class="normal-style "][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff"][vc_column][vc_row_inner equal_height="yes"][vc_column_inner el_class="normal-style"][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]<strong>Need for a local presence: </strong>An implementation challenge that needs to be addressed in order to iterate on the pilot experiment and help it succeed is decreasing the time lags between the first point of contact to in-person onboarding with the card swipe machine and the loan. To avoid such operational delays, it is advisable to work with a local company with a greater field presence than with a well-known company based out of another metropolis but with little field support, as was the case during this pilot. Otherwise, the card swipe company/loan company should partner with a channel partner that should be assigned locally to cover the high customer acquisition cost which must be incurred (by default) for wider reach and larger impact among the segment of merchants who are new to digital payment usage.

<strong>Lower cost of product:</strong> If such loans could get priority sector lending status, obtaining funds would be easier for an NBFC, making access to credit easier and cheaper.

<strong>Alternate digital payment solutions:</strong> Current credit products are more inclined towards PoS machine uptake and usage. However, given the rise in use of other digital payment modes such as Unified Payments Interface (UPI), e-wallets and other Aadhaar-based solutions could lead to faster and cheaper adoption among merchants.

<strong>Simple product structure:</strong> As the pilot results suggest, clearly informing the merchants of the exact qualifying factors for incremental loans will help develop higher trust and better customer relationships for a credit-builder model.

<strong>Provide digital training and awareness:</strong> Multiple field visits and available data on awareness of credit history or usage of digital payments suggest that small fixed store merchants need substantial handholding, training and awareness to understand fundamental financial concepts, the importance of formal loans, and use of credit history. The experiment results suggest that the small merchants would be better off with expert handholding support and training from their first point of contact, as they would be without operational delays. Further, digital training and awareness building must extend to consumers who shop at these merchant locations, since customer demand is a huge driver in merchant acceptance of digital solutions.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#c9213b" padding_top="75" padding_bottom="75" inline_style="font-style: normal;"][vc_column][vc_row_inner][vc_column_inner][vc_custom_heading text="CONCLUSION" font_container="tag:h2|font_size:26px|text_align:center|color:%23ffffff|line_height:32px" google_fonts="font_family:Roboto%20Condensed%3A300%2C300italic%2Cregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal" letter_spacing="" el_class="normal-style "][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff"][vc_column][vc_row_inner equal_height="yes"][vc_column_inner el_class="normal-style"][vc_column_text text_color="#383b3b" font_size="16px" letter_spacing="" el_class="lh22 ptext-justify"]Credit can potentially act as a hook for usage of digital solutions, provided the effective costs are lower compared to credit from informal sources, and access is speedier. Merchants also need to be provided information on the clear pathway on increase in credit as they continue using the digital facilities. Lenders and payment service providers must present a unified front and offer a superior customer experience to the merchants. Lastly, acceptance of new payment solutions requires end customers to be sensitized equally[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type="color" bg_color="#ffffff"][vc_column][vc_column_text letter_spacing=""]
<p style="text-align: left;"><span style="color: #da092b;">TECHNICAL WRITERS:</span> John Arun and Shubhranka Mondal</p>
<p style="text-align: left;"><span style="color: #da092b;">ACKNOWLEDGEMENTS:</span> The authors would like to thank Jayshree Venkatesan for her expert advice, and CATALYST’s Feet on Street team, for their ground support</p>

[/vc_column_text][kleo_button title="Download full report" href="https://cashlesscatalyst.org/wp-content/uploads/2018/11/CH-Learning-Note-v2.pdf" target="_blank" position="center" size="lg" type="boxed-icon" special="no" icon="download" font_size="14px" letter_spacing="" el_class="pkirbtn" icon_custom_background="#d11e3c" icon_custom_text="#ffffff"][/vc_column][/vc_row][vc_row el_id="footer_area" text_align="center" type="image" bg_position_horizontal="center" enable_parallax="false" padding_top="50px" padding_bottom="50px" bg_image="7886"][vc_column width="1/4"][/vc_column][vc_column width="1/2" offset="vc_col-lg-offset-0 vc_col-md-offset-0 vc_col-sm-offset-0"][vc_single_image image="7888" img_size="full" alignment="center"][vc_column_text text_color="#ffffff" font_size="14px" letter_spacing="" css=".vc_custom_1484826151396{margin-top: 35px !important;margin-bottom: 5px !important;padding-right: 20px !important;}"]
<p style="text-align: center;">CATALYST is an initiative seeded by an alliance between the Government of India &amp; USAID, to expand digital payments and financial inclusion in India, especially for small merchants and low-income consumers.</p>

[/vc_column_text][kleo_gap][vc_column_text letter_spacing="" css=".vc_custom_1484051069491{margin-bottom: 0px !important;}"]
<p style="text-align: center;">[email-newsletter-plugin]</p>

[/vc_column_text][kleo_icon icon="facebook" href="https://www.facebook.com/CashlessCatalyst/" target="_blank" padding="15px" icon_color="#ffffff"][kleo_icon icon="linkedin" href="https://www.linkedin.com/company/13221050?trk=tyah&amp;trkInfo=clickedVertical%3Acompany%2CclickedEntityId%3A13221050%2Cidx%3A2-1-2%2CtarId%3A1476420479247%2Ctas%3Acashless%20catalyst" target="_blank" padding="15px" icon_color="#ffffff"][kleo_icon icon="twitter" href="https://twitter.com/cashlesscatalys" target="_blank" padding="15px" icon_color="#ffffff"][kleo_icon icon="youtube-play" href="https://www.youtube.com/channel/UChuc38_PfawDOu44IfYS4lw" target="_blank" padding="15px" icon_color="#ffffff"][/vc_column][vc_column width="1/4"][/vc_column][/vc_row]