How major disruptions created two digital worlds of India
The disruption caused by Jio, Jan Dhan accounts and UPI has led to the emergence of two digital India and different products catering to the two worlds.
Competition Commission of India has just approved the multi-billion dollar Facebook investment in Jio. Indian economy for a harsh winter due to a pandemic which is expected to contract the economy by ~5%. Still, Reliance managed to pull through multiple investments in Jio. This is clearly a big bet on digital India which will have 840 million internet users by 2022. Though the world likes to see this as a single block of customers paving roads for next unicorns, this is actually divided into a mostly urban English speaking middle-upper class and a rural vernacular lower-lower middle class.
From the early 2000s Indian economy was clocking an average 6% growth rate which moved a good chunk of the population to the middle-class bracket. This usually happens when someone attains a certain level of financial and educational capabilities. This also made them sophisticated enough to use the internet and associated digital products especially internet banking. This gradual growth was disrupted by three independent yet interrelated products.Reliance Jio, Jan Dhan Bank accounts and UPI Payment system.
Reliance Jio is the biggest disruption India saw in the last decade which made India’s internet bill cheapest in the world lowering the income bar for the underprivileged to be digital
Jan Dhan Bank Accounts is a government-led financial inclusion program that created around 300 million new bank accounts
UPI is the instant real time payment system launched by NPCI which simplified online transactions.
It is the convergence of these entities that created the “other” digital India. They are more comfortable reading a regional language news portal than an English daily. Though India was familiar with Instagram, it was the straight forward user interface and short video format of Tiktok that attracted the rural masses. Incidentally, the average monthly income of more than half of the TikTok users in India is less than 25k. Netflix, Amazon Prime and Hotstar are racing to capture India’s OTT market. But they are getting a tough fight in semi-urban and rural areas from MXPlayer with desi contents.
LinkedIn is now an indispensable portal for corporate employees and students. But the fact that it caters only to the formal employment market has led to the emergence of blue-collar job portals like WorkIndia and Aasaanjobs, some of them with over 10 million downloads.
India’s traditional banks shy away from lending to people in the informal sector, especially for personal loans. They are equally puzzled about the fast-growing gig workers. Jan Dhan Bank accounts gave first interaction for a large segment of the Indian population with the Indian banking system. This was capitalized by many digital lenders who set up e-NACH with bank accounts for customer verification and repayment. The arrival of UPI payment generated a large amount of SMS transactional information which along with telecom data was mined by these players for underwriting, especially for first-time loan takers. The average interest rate for these loans are above 25% which is higher than 12%-14% offered by banks but much lower than the hefty interest rate of local money lenders. Sachin Bansal is betting $400 million in the banking business. Part of the reason is to bridge this gap left by traditional banks.
There are attempts by traditional players to address this issue. Youtube is experimenting with a new short video feature to rival TikTok. Yes Bank has launched a new payment app Yuva Pay targeting low-income groups. But till India emerges as a middle-income country these two digital worlds are here to stay.