Mobile Talktime as a Digital Currency in India

Making digital payments easy, affordable and widely available in India is the holy grail of Digital India. One possible solution is given here.

'Cashless’ is the flavour of December, like ‘Black Money’ was last month, writes Amod Kumar (secretary to chief minister of UP) in the Economic Times. The press is full of questions on why and how to go cashless, while many TV shows are dedicating themselves to promoting a cashless society. This has prompted me to moot, once again, the idea of mCurrency, a concept I had pursued in 2013, albeit unsuccessfully. The idea is simple. Imagine Ramesh, whose mobile no. is 95345xxx22, buying vegetables worth Rs 42 from a local vegetable vendor Shyam, using mobile number 98123xxx11. In mCurrency, Ramesh simply dials *222*42*98123xxx11# from his mobile phone to transfer Rs 42 worth of talktime to Shyam. Both receive a message confirming the transaction, immediately. The exchange is completed in 5 seconds with no bank account, no registration, no net connectivity, no smartphone, no download, and no reconciliation. Shyam keeps collecting talktime by selling vegetables for the rest of the day. Next morning, he goes to a transferring talktime, mobile recharge shop where he transfers Rs 1500 talktime to Babloo, the owner, on his mobile no. 80045xxx12, by dialing *222*1500*80045xxx12#. Once again, both immediately receive messages confirming the transaction. Babloo now hands over Rs 1490 to Shyam, after deducting Rs 10 as commission.

Looks simple? The end product actually is. The mCurrency has two aspects: one, getting cash by surrendering talktime at any customer service provider (CSP). And two, transferring talktime from one mobile user to another, even when they use sim cards of different telecom providers. So, can we become a cashless society without mCurrency, and still use the existing 4 to 5 cashless methods? No. That’s because you need, at present, five prerequisites to make a transaction cashless: 1. An active bank/credit card account 2. A smartphone (about 90% cases mandate it) 3. Access to internet 4. Literate/educated users smart enough to go cashless 5. Both ends of a transaction must have the above four. mCurrency, though, needs none of the above. It only needs a basic mobile phone to serve as a powerful tool for a cashless society for the relatively poor Indians. One, because the number of mobile phone users in India is significantly higher than bank account holders. Two, because the number of mobile recharge outlets (a type of CSPs) is also higher than the cumulative number of bank branches, ATMs and banking correspondents (BCs).

But implementing mCurrency will be onerous. It needs a strong and complex backend. It needs strict regulation and KYC norms in the telecom sector, a robust IT backbone to take care of millions of daily transactions, a rational commission/user charge/transaction fee structure for encashment as well as for transferring talktime from one user to another, and, a mega call centre to educate people and to handle grievances. Since mCurrency will involve dealing with thousands of crores of people’s hard earned cash stored as talktime, it also needs strict, fresh regulations to ensure data security and privacy. Last, but not the least, since CSPs will handle large quantities of cash under mCurrency, regulation and management of CSPs, including liquidity management and their physical security, will also need to be ensured. Apart from being used as currency in retail transactions, mCurrency can have other advantages too. The domestic remittance market in India is more than $10 billion, with 80% directed towards rural households and 70% channelised through the informal sector, which is expensive, unsafe and inconvenient.

Many Direct Benefit Transfer (DBT) schemes of central and state governments can be channelised through mCurrency. Though mCurrency is not proposed as an alternative to the banking system and is intended as an interim measure, it can continue to remain in use, once successful, even after banking coverage is completed. However, there are challenges associated with implementing mCurrency that must be tackled. Weak KYC norms of telecom companies can lead to increased risk of financial fraud at the consumer end. After all, obtaining a benami sim is easier than opening a benami bank account. A weak regulatory framework for telecom companies as compared to banks also raises the risk of financial fraud at service provider’s end.

None of these challenges, though, is insurmountable, especially in light of the sizeable benefits to India’s poor. Safety restrictions, beginning with capping talktime, limiting the number and quantum of transactions, Adhar linkages, allowing only telcos with minimum subscriber base of 50 million to operate, and prescribing banking regulations like SLR, CRR, and mandating interest payments are some of the safeguards that can be instituted.

SJP @DigitalAsian - ShareYaar

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