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The digital journey of India’s Next Half Billion

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Fostering openness to making financial transactions is the hardest step in the journey and requires entrepreneurs and providers to adopt a highly consumer-centric approach, addressing the barriers that the NHB perceive and experience

By Roopa Kudva

Since early 2018, the concept of the “Next Half Billion,” (NHB) has gained salience. The NHB refers to the 500-million first-time internet users coming online via their mobile phones in the five years till end-2022.

The NHB differs in many ways from the first wave of internet users that came pre-2018. Being “mobile first” is only one of them. Unlike the first wave of internet users, who were mostly upper- and upper-middle income, the NHB are less affluent, coming mainly from the bottom 60% of India’s income distribution and earning less than Rs 21,000 per household per month. Typically, the NHB have lower education levels, different language skills (comfort with local languages over English), and different social and cultural milieus. This is a population segment that has been traditionally been excluded and underserved.

Like the rest of India, the NHB too represents the broadest array of ages and occupations. Their incomes vary widely, as does their internet usage and the types of mobile phones they carry. Despite these variations, they all have significant unmet financial and daily living needs, along with high levels of vulnerability to economic shocks arising from injury, illness, and loss of livelihoods. Today, new innovative business models have emerged to meet these needs, created by entrepreneurs who are able to improve the access to and affordability of a range of basic products and services for this population segment.

The last two years of the NHB cohort coming online have also been shaped by Covid-19. On the one hand, Covid accelerated digital adoption, providing new pathways for the NHB to improve their lives. At the same time, the vulnerabilities and challenges for the NHB have increased.

This is a good time to take stock of the NHB’s digital journey. A triangulation of data from three surveys provides interesting insights. These include two of India’s most robust household surveys, by Centre for Monitoring Indian Economy (CMIE) and People’s Research on India’s Consumer Economy (PRICE), covering a cumulative 4,75,000 households. The third is a survey by 60 Decibels of 5,000+ NHB customers of digital start-ups and social enterprises across sectors like education, financial inclusion, agriculture and health. The bottom 60% of India’s income distribution has been used as a measurement proxy for the NHB.
Average NHB household income has grown 1.1 points faster (7.7% CAGR) than the national average (6.6% CAGR) between 2015 and 2021. This is particularly encouraging in the backdrop of high inequality.

Although a large segment of the NHB has internet access, what has always been clear is that to be truly empowered by the internet, NHB users will need to go beyond using the internet for social communication and entertainment, towards conducting financial and commercial transactions on their mobile devices. A significant increase in economic activity through a range of use cases is key to leveraging the internet to improve their lives. This requires entrepreneurs to deploy business models that foster trust and confidence in the internet and e-commerce.

The digital journey of users typically start with communication, and then extends towards consuming entertainment, religious or cultural content, and accessing basic utility apps for device efficiency. The next phase involves more sophisticated uses, such as accessing news and information. Making the subsequent transition—openness to making financial transactions—is the hardest step in the journey and requires entrepreneurs and providers to adopt a highly consumer-centric approach, addressing the barriers that the NHB perceive and experience. These barriers can be addressed by affordable data costs, more local social communication apps, providing local language content, being attuned to the NHB’s cultural and social contexts, building trust and confidence to transact online, enabling more women to participate more actively, and innovating for affordable products/services.

India has seen a surge in innovative entrepreneurs who are seeking to provide new ways of access to jobs, education, health care, transportation, financial services, and government services via the smartphone. They have been supported by a high quality enabling digital public infrastructure (India stack) and a low-cost payment system. And the results are evident.

The average NHB household spent `250 a month on mobile voice and data in 2021, 60% higher than in 2015. The growth is driven largely by higher data consumption. Analysis done on these surveys suggests that the adoption of mature internet use cases by NHB users increased multifold between 2018 and 2021. Payments reached 60-65 million NHB users, tripling since 2018. Education, health, travel had 45-75 million users in 2021, a 10x growth. And online shopping users grew 13x, reaching 45 million.

Notwithstanding this progress, the NHB faced severe hardships during the pandemic. Over 70% of NHB customers in the 60 Decibels Survey reported using special coping strategies like borrowing, dis-saving, finding additional work and stopping loan payments. Sadly, 20% reported extreme strategies like reducing food consumption and selling or pawning their assets.

Work remains to be done on overcoming the barriers that the NHB face in their digital journey. Trust was cited as a barrier by 51% of respondents in the 60 Decibels survey. A majority of women respondents (56%) indicated that safety continues to be a barrier in using the internet. Affordability and accessibility too, continue to be hurdles yet to be fully overcome.

The NHB are a priority for India—the fortunes of this cohort will define India’s trajectory of growth, well-being and prosperity in the decades to come. In many ways, the progress in the NHB’s digital journey so far has been better than expected. This provides a strong foundation for Indian entrepreneurs to double down on the NHB segment and help create a meaningful life for them.

(The author is Managing partner, Omidyar Network India. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited)

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