Monthly Archives: May 2012

Containing Black Money: Promoting Debit Card Usage Holds the Key

Recently, RBI released its annual data on electronic payment transactions in India. The retail electronic payment systems data showed that the downward trend that credit card numbers had started showing from 2008-09 onwards has continued through 2011-12. Total number of outstanding credit cards dropped to 17.65 million by the end of March 2012 from 18.04 million a year ago. This was a 36% drop from the peak of March 08 when credit card numbers rose to 27.55 million. This was a conscious exercise on part of banks to minimize NPA. Most of the banks drastically cut issuing credit cards to those without good credit history. As a result, defaults went down drastically.

“In the last one year, the percentage of cardholders who have not met their payment obligations for more than 90 days has dropped from 2.82% in the fourth quarter of 2010 to 1.62% in Q4 2011,” says this recent report by Moneycontrol. By and large, analysts have interpreted it as a positive trend. As credit cards were denied to those with bad/suspect credit history, the limited number of cards remained with affluent people and professionals. That naturally took up the average spend on the cards. While the overall aggregate spend on credit cards jumped from Rs 57985 crore in March 2008 to Rs 96613 crore (that is a 68% jump), doing a little arithmetic on RBI data shows that during the same time, the average monthly spend increased more than two and half times—from Rs 1754 to Rs 4562.

There are, of course, reasons to cheer up the trends. But here is the stark reality. The total number of credit cards are just 17.65 million in a country of more than one billion people. Accounting for multiple card ownership by individuals—most of the people that I know have at least two active credit cards; I have three—the penetration of credit cards hovers around just a little above 1% of the population.

On the other hand, look at the rise of debit cards. In the same period—March 08 to March 12—when number of credit cards fell by 36%, debit cards grew 172%. At the end of March 2012, there were 278 million debit cards. Not surprising considering most banks today give ATM cards to their account holders which double up as debit cards. But look at the spend data. The 278 million cards accounted for a mere Rs 53423 crores. Simple calculations show that the average monthly spend on them is a mere Rs 136—that is 3% of the average monthly spend on credit cards.

That is not an encouraging figure. Especially when the finance ministry acknowledges that the card payments should be incentivized to arrest black money growth. The white paper on black money tabled in the Parliament by the finance minister Mr Pranab Mukherji was quite unequivocal about that. “Use of banking channels and credit/debit cards should be encouraged, while trade practices such as cheque discounting should be discouraged,” notes the paper. “Payments by debit/credit cards through e-service intermediaries will simplify and encourage payments in these modes and reduce the cash economy,” it further says. Reducing the cash economy is vital for arresting black money.

But so far, banks have not cared to do much for promotion of usage of debit cards. Most users do not even know that they can directly make payments through debit cards. They still rush to the ATM to withdraw cash to pay in a shop. In small towns, many shopkeepers actually encourage that even though they are aware about debit card payment. That is because they save on paying the transaction fees. Yes, banks still charge similar kind of transaction fees that they charge on credit cards.

Of late, RBI has voiced its concern about that. G Padmanabhan, Executive Director, RBI, in charge of payment and settlement systems recently called the practice illogical. “We are saying that the debit card interchange fee should be lower because credit cards get paid after sometime, whereas in debit cards, there is an instantaneous debit into my account. Hence, logically debit cards charges should be lower,” Business Standard reported him as saying, at the launch of RuPay debit cards, promoted by National Payments Corporation of India (NPCI).

There is no participation fee in RuPay for banks and there is aggressive plans by NPCI to take up its market share. If successful, it may actually cut down the transaction cost drastically—something similar to what the National Financial Switch (NFS) has done for ATM transactions. NFS, started by Institute for Development and Research in Banking Technology (IDRBT) is now managed by NPCI.

But that is some time away. Till such time, RBI can well go proactive on promoting use of debit cards, as they provide a risk free way for banks to increase electronic payment. Just asking banks to promote/build awareness on debit cards can go a long way in growing the use of debit cards. Removing artificial blocks like high transaction fees can further accelerate the trend. Any other incentive can only help.

We may well see some concrete action on this front this year, if the government is really serious about minimizing the hold of black money on our economy.

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Of Numbers, Business Journalism and the Emerging World of Data Journalism

Yesterday was my last day at CyberMedia India Ltd—an organization where I served in various capacities for the last 18 years. This also happened to be—going by my current plans for the future—my last day as a journalist; business journalist, as I never forget to emphasize.

I thought this is an apt time to share what I believe are the most essential requirments for a business journalist. It would not be new to people who have worked closely with me—my juniors for sure, but many of my peers and seniors too. I have often preached two simple mantras to freshers. Many may and do disagree with me on this—and that is fine with me—but I dare anyone to point out even one instance when I have been unfaithful to these mantras!

Those mantras would sound astoundingly simple to you. In fact, I believe they really are. And here they go…

  1. Never underestimate the value of numbers
  2. Never overestimate the value of numbers

That is common sense, na?

Yes, it is.

But unfortunately, I have encountered so many youngsters who believe they can “stay away” from numbers and still be succesful business journalists. They believe I am some sort of a fundamentalist to insist on something so mundane. I take the criticism with alll humility but would still stand by my assertion. And the fact that I chose to highlight this as the most important requirement as I say good bye to the field just shows how much importance I attach to these two mantras.

But before that, I must make a clarification. These are not sufficient conditions for becoming good business journalists. A person who is on top of numbers but is not good at finding stories is good to be a statistician, not a business journalist. A business journalist should be a journalist first. And a good business journalist should be a good journalist first. A good journalist, I am repeating for the sake of completeness, should have an eye for a story. A good business journalist, often, may find a story in a set of numbers itself, though that is just one aspect of it.

So, what do I mean? When I say never underestimate the value of numbers, it simply means you must be comfortable to deal with numbers if you want to be a business journalist. You do not need to be an economics or engineering or mathematics graduate, but you must not fear numbers. You need to learn how to read them and they must not repel you. I think there is no other way. In many ways, Mantra 1 is a necessary condition to be a business journalist. It is the beginning of the journey.

Mantra 2, on the other hand, is what would help you transform yourself to a good business journalist from an average one. At first, it sounds contradicting the first mantra, but in essence, it is not. The first mantra just emphasizes the importance of being comfortable with numbers. The second suggests you should not get obsessed by numbers. Practically, it could mean one of the two things: one, tell yourself that numbers could often give you a good story, or an idea to pursue, but there are other important sources too. Two—and this is more important—just because you have discovered something by doing some number crunching does not mean the reader is interested in all those numbers. The fact is that most readers do not like a copy that is full of numbers; it must tell a story. But very often, you have got to the story by doing some heavy number crunching in the background. Resist from throwing all those numbers in the story. Tell the reader the story, may be suported by a couple of big numbers. But don’t subject him to all that you have worked out. That is what I mean when I say never overestimate the value of numbers.

If mantra 1 is about starting the journey, mantra 2 is about reaching virtuosity; knowing when to exercise restraint. Sometimes, numbers are just for the input; not for the output.

The reason I chose this topic for highlighting is not just my love for numbers. It is about the increasing relevance of this skill on part of a journalist (and not just business journalists) in a world that is going through a data revoloution, driven primarily by a movement towards transparency. Releasing of data by governments, such as the US government’s data.gov and similar initiatives the world over, is becoming mainstream. Apart from governments, international organizations and business organizations too are releasing huge raw datasets to the public domain. These datasets are invaluable sources of treasure as far as spotting trends is comcerned. And that is what good journalists have done traditionally—to be out with a trend. These datasets provide a great opportunity to analyze and come out with interesting stories by the journalists. So much so that, a new term, data journalism, is now becoming vogue.

Wikipedia calls it data driven journalism and defines it thus

Data-driven journalism is a journalistic process based on analyzing and filtering large data sets for the purpose of creating a new story. Data-driven journalism deals with open data that is freely available online and analyzed with open source tools. Data-driven journalism strives to reach new levels of service for the public, helping consumers, managers, politicians to understand patterns and make decisions based on the findings. As such, data driven journalism might help to put journalists into a role relevant for society in a new way.

I, however, find the explanation of Guardian to be far more relevant and simple.

My major disagreement with the Wikipedia definition is this: while I do believe that open data will revoloutionize the way data journalism is handled, I will not like to include it in the definition of data journalism. Journalism should not concern itself with the nature of the source of that data. Even if it is not open data, it should still be called data journalism. Having said that, open data, because of its sheer volume and openness—the fact that is available to all—will make a huge impact on how data journalism evolves.

I will also recommend this piece  by Guardian, that is an extract from its Data Journalism handbook. While you go through that yourself, I will like to reproduce extracts from its first tip and last tip.

The best tip for handling data is to enjoy yourself. Data can appear forbidding. But allow it to intimidate you and you’ll get nowhere. Treat it as something to play with and explore and it will often yield secrets and stories with surprising ease. So handle it simply as you’d handle other evidence, without fear or favour.

…….

…….

The best questions are the old ones: is that really a big number? Where did it come from? Are you sure it counts what you think it counts? These are generally just prompts to think around the data, the stuff at the edges that got squeezed by looking at a single number, the real-life complications, the wide range of other potential comparisons over time, group or geography; in short, context.

As it is, data journalism is not a new concept. All business journalists (and other journalists) would have done it in some way or other—in the earning season, for example.

As far as I am concerned, I have done many big stories, purely basing them on analysis of data. That is why some of the international multilateral organizations as well as bodies like RBI are my regular stops. They often release data that reveal exciting stories if you look for them. In fact, I have even managed to earn a name for such stories from many who term them, armchair stories. Honestly, I did not know the term data journalism while doing those.

For those who call them armchair stories, I have just one more piece of news. I have gone a step ahead. In recent days, I have focused on what one could well term lazy man’s data journalism. Many of my tweets are actually based on those “hunted” data from various sources (minister’s answer to a question in parliament, RBI Governor’s speech or GITR report by WEF) often without any analysis on my part. But what makes me select a few from so much that is around is that I know what is a little surprising, counter intuitive, or plain interesting. That does not come from my comfort with numbers. That comes from my familiarity with the area of ICT/public services. I cannot do the same in say, biotechnology.

I have found those tweets to be the most retweeted. So, there must be something interesting in them.

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