Jan Dhan Yojana accounts and other central schemes have laid the foundation for financial inclusion, believes Ari Sarker, co-president, Asia Pacific, Mastercard. Close to $9 billion ( ₹63,600 crore) worth of transactions take place every year in these accounts, he says. Sarker, a chartered accountant with a management degree from Cardiff University, says it is time to take it to the next level. In an interview with Fortune India, he talks about the role Mastercard is playing in the fintech revolution in the country. Edited excerpts:
How do you see the story of financial inclusion in India?
I believe that the government has already laid the foundation for financial inclusion by launching the Pradhan Mantri Jan Dhan Yojana and pushing its use through direct-benefit-transfer schemes where money is directly being transferred into the accounts of the poor. Since the launch of the Unified Payments Interface [instant transfers between two bank accounts on a mobile platform] and the Immediate Payment Service [an instant interbank electronic fund transfer system], there has been a significant step-up in the use of these accounts. Close to $9 billion worth of transactions is happening every year in these accounts. But we believe the point is to take this financial inclusion to the next level. And for that a fintech revolution is important.
How are you helping to create a financially inclusive India?
We are doing three things. One area of inclusive growth for us is consumer education, which we are taking to the heart of India. We have signed up former Indian cricket team captain Mahendra Singh Dhoni as our brand ambassador. A lot of our media campaigns are on educating consumers in digital services using even small-ticket transactions and that it is very safe and secure. Last year, we reached out to about 520 million in middle India—tier 2 and tier 3 cities. We are also educating merchants about the benefits of electronic payment by tying up with the Confederation of All-India Traders (CAIT), which has traditionally never been a great champion of anything electronic or digital. Lastly, we are helping farmers in Andhra Pradesh by launching a pilot programme under the e-Rythu programme. This is an app, which can be used even on a feature phone. It helps farmers get access to pricing and other information about their produce in 10 states, whether it is in the supermarket chain or mandis [markets], without the help of middlemen. It is about bringing all stakeholders on a single platform to offer an easy and secure way of trading agricultural products through the use of feature phones.
Why is it important to have a fintech revolution in the country?
Global studies have shown that a fintech revolution can power up to 1% of GDP growth and is an enabler of transparency, e-governance, better services to consumers and government stakeholders. And with technology barriers coming down, it will be easy for new businesses to come up and challenge existing ones—which is a good thing. So fintech is a massive enabler for the economy by bringing in more competition and that is why this revolution is so important. Moreover, by bringing the informal sector into the formal one, you are also ensuring that a lot of small- and medium-sized companies and small merchants have access to bank credit—a huge pain point for most small players in this country. This will be transformative, as it will be a big enabler for employment and small and midsize enterprises.
What role will traditional banks have in this fintech revolution?
My sense is that banks are going to be important stakeholders in this revolution. But will they be innovating everything in the financial services space like in earlier years—this is something I am not sure about. The new mindset of banks is to leverage the best in-house capabilities, capabilities which they can rely on from their partners, and even draw upon those of third parties which were never part of their ecosystem. It is a big shift in thinking because the idea now is to provide the best possible services to consumers and merchants, etc. Moreover, in 2015, there were about 1.3 million point-of-sale terminals, but today that figure is five million.
How are you helping the banks in this journey?
We have invested in a startup called Signzy, which is helping in the onboarding of merchants and the KYC services, which have been a pain point for banks. So Signzy is actually helping banks and financial institutions to onboard merchants through e-KYC at a fraction of earlier costs. Earlier, it was a feet-on-the-ground model of physical paperwork, checking documents, signing papers, etc. Similarly, Fluid AI—another startup we have invested in—is helping banks provide banking services in an augmented reality environment. It is actually a digital bank at play. All this allows banks to provide far greater innovation-led services to their customers. Hence, collaboration is becoming the central theme in a highly competitive, innovation-led market environment.
Can you give us a few more examples of how you are bringing about a fintech revolution in India?
Even four or five years ago, there was a notion that if there was too much focus on safety and security then it meant sacrificing consumer experience and convenience. But that is no longer true. By investing in artificial intelligence firms like Brighterion AI, we are creating a persistent authentication of “Who am I as a consumer?” So, the way I use my phone and tap digits, the errors that I make in typing, the speed of typing is all creating a unique footprint of who I am. If by mistake I leave my phone open, others will not be able to use it. So we are saying that you can get both safety and security as well as the best consumer experience and not sacrifice one for another. Again, we are committing $1 billion for India in the next five years and also building a global technology platform in India that will bring all our global capabilities into the country and will be connected to our global network. We have also invested in a host of tech startups like Razorpay and ToneTag to help in the fintech revolution in the country.