Financial Ecosystems and Digital Payments: Initial Insights from Coffee Plantations in Karnataka

By Khushboo Gupta, Magda Hassan, Parul Agarwal, Jaideep Prabhu and Arjun Malhotra

Bharat Inclusion Initiative
7 min readNov 8, 2018


Photo by Andre Nery on Shutterstock.

With the advent of digital payments, financial technology provides a great opportunity to achieve the goal of financial inclusion in countries like India. As we describe in an earlier blog, in this study, we will be using the ecosystems approach and behavioral interventions to increase (i) knowledge about, (ii) acceptability of and (iii) the adoption of digital payments for both micro-merchants and low income consumers.

Brief Overview of the Plantations

As part of the study, we conducted field visits in September and October to two plantations in Chikmagalur district of Karnataka to understand the ground realities. We chose to study plantations as they are relatively enclosed ecosystems which allow us to keep track of the suppliers, customers and merchants during multiple rounds of surveys. Moreover, since demonetization, plantations in Karnataka are required to pay workers in their bank accounts. This guarantees that the first step of financial inclusion is achieved and we could focus on studying further financial inclusion by adopting digital payments.

The plantations have permanent, temporary and migrant workers with the majority of workers being female across all the three categories. Roughly 50 percent of the workers are above 45 years of age. The workers have an 8-hour work day with paid leaves on Sundays, election days and national holidays. Migrant workers come to the plantation for work for a few peak months in the year. They mainly come from central states of Madhya Pradesh and Uttar Pradesh. According to one of the plantation managers, these workers are marginal land owners in their native states and are able to make enough money to sustain them for 2–3 years by working in the plantations for 9 months. This gives us an idea of their destitute background. On the other hand, temporary and permanent workers stay within or around the plantation. For the first plantation, around 251 permanent workers and their families stay within the plantation. In each household, only 1 family member works at the planation which means roughly 625 family members are not employed in the plantation, with 50% of those being completely unemployed.

Many permanent workers have taken out formal loans while temporary workers typically withdraw all their salary and invest it in informal savings like chit funds. Most of the permanent worker households own a TV and at least 1 smartphone, with the younger members more likely to use it. Additionally, the plantations provide a lot of free or subsidized services such as free creche facility; free water; subsidized school education up to class 6 and free housing for permanent workers; dispensary and a visiting doctor with free medical treatment as well as free transportation for temporary and permanent workers.

Current Situation of Financial Services

Financial Services Ecosystem in the Area

The plantations are close to three different markets in the region. The markets have approximately 200–250 permanent shops each and 50–150 temporary stalls that are set up on Sundays. All the markets have multiple active mobile networks in the region such as Vodafone, BSNL, JIO, Airtel, Idea and Docomo. Despite the remoteness, multiple financial institutions including banks, ATMs and insurance companies are housed in these markets. However despite such enabling conditions, usage of digital payments is very low in all the markets. Only about 5–10 percent of the customers pay digitally in each market. The ownership of POS machines is also low in all the markets with only 5–15 shops owning one out of 200 merchants in the markets.

According to the bank managers, since demonetization the usage of net banking, mobile banking and ATMs has increased especially amongst the younger population. In some cases the banks have also reached out to customers to issue debit cards during demonetization. The bank managers claimed that 60–90 percent of the customers are now covered by debit cards. Additionally, the banks have also improved the functioning of ATMs with regular monitoring of the availability of cash in ATMs. However, the corresponding increase in usage of debit cards to purchase items in the market has not increased. The banks claim that in the last two years, they have issued only 5–8 POS machines to the merchants.

The issues identified by bank managers which plague the adoption of digital payments include low levels of literacy, increased transparency in transactions (for merchants), poor network connectivity, slow refund process in case of wrong transaction and ATMs being far from the plantation. Another major reason identified by them is that most of the people belonging to younger generation who use digital financial services move to Bangalore for their education and then settle there. Thus, only older people who are not very literate and who do not use digital financial services are their customers.

Usage of Digital Financial Services by Merchants

The merchants run a variety of shops including grocery stores, mobile shops, jewelry showrooms, hardware and electronics shop, hotels, etc. Most of the shops are more than 20 years old and some of them are less than 10 years old.

General awareness among the merchants about digital payment services seems to be high. Most have heard about mobile wallets like PayTm, net banking and other digital payment services like Phonepe and Google Pay. Most merchants also have a bank account and have been issued an ATM card. Ownership of smartphones also seems to be high among merchants. Some merchants pay their suppliers through bank account transfers.

While the above are positive revelations that could enable the adoption of digital payment systems, many roadblocks still exist. The primary roadblock for merchants to adopt digital financial services is the absence of a local ecosystem. While merchants might be ready to adopt digital technologies, their customers are quite far from adopting such technologies and mostly transact in cash. Most merchants report that very few or none of their customers ask to make payments through mobile wallets or debit cards. Consequently, very few merchants have applied for a POS machine or accept payments through mobile wallets as they don’t feel the need to do so. Moreover, most merchants themselves have mobile wallet accounts which they use for personal purposes but not for accepting payments from customers. They also pay their suppliers through bank transfers. This clearly indicates that merchants lack the incentive to adopt digital payment services. The adoption of POS machines is also hindered by the fact that merchants have to pay monthly charges as well as charges on individual transactions above Rs. 2000.

Usage of Digital Financial Services by Plantation Workers

In both plantations, the use of digital payments by workers is quite low and mostly restricted to people below the age of 40. According to the manager of the second plantation, only 10% of the workers own smartphones while in the first one they are mostly used by younger workers. In terms of connectivity, the first plantation had one BSNL tower and the second had Airtel and JIO in addition to BSNL connectivity.

The usage of digital products by plantation workers is a function of their position in the working hierarchy, their age and gender. People higher in the working hierarchy are more exposed to digital financial services like mobile wallets and debit cards. Also, mostly male workers use debit cards at ATMs and shops as well as for online recharges and payments. Even women who own a debit card rely on their husbands to withdraw money for them. In some cases workers also depend on their children to withdraw money. This reliance tends to be higher for women. In fact, one female worker was not comfortable sharing her card details with her children as she feared that, unbeknownst to her, they might transact more than she asks them to. As far as the ownership of smartphones is concerned, the children of workers are more likely to own a smartphone. Overall, the usage of digital payment methods seems to be low due to lack of trust and training in the technology.


Our visits to the plantations reveal that over the past two years, enabling conditions have been created to increase the acceptability, adoption and usage of digital financial payments. However, a major hindrance in achieving this objective remains the absence of an ecosystem. Merchants would be willing to adopt digital payments, however the same push from the customer side is missing. This was revealed in our visits to the plantation whose workers are regular patrons at local markets. This points to the fact that a greater push needs to be given from the demand side to increase the usage of digital payment systems. Our study will therefore focus on designing an testing interventions which will increase the usage of digital payments by workers and micro-merchants. We will particularly focus on training female workers, and we are planning to use the younger population in the plantations who are financially more literate and aware of using digital financial payments to do so. We believe that this could potentially increase the effectiveness and acceptance of the training.

About the Author:

Magda Hassan, Jaideep Prabhu, Khushboo Gupta and Parul Agarwal are Bharat Inclusion Research Fellows and Arjun Malhotra (Research Associate) who are working on understanding the ‘Impact of Digital Technology on Financial Inclusion and the Performance of Micro-Entrepreneurs’. They tweet at @jaideepprabhu, @hassanmagda, @parulagarw, @khushboogupta92.

About Bharat Inclusion Initiative:

Bharat Inclusion Initiative (BII) is an incubator platform at CIIE that provides entrepreneurs the domain knowledge, training, financial support, mentorship, and market access they need to bring inclusive, for profit-business to life. BII’s core design is to promote technology driven entrepreneurship towards the delivery of affordable services to the Bharat Segment- the poorest 200 million households in India who survive on less than $5 per person a day through programs, fellowships, and funding where possible.

The program focuses on solutions leveraging technology open access, inclusive technology platforms such as the India Stack. It integrates financial inclusion research with entrepreneurship and training to transform these solutions into scalable, viable and high impact businesses. We are keen on partnering with entrepreneurs who are driven by building next-generation digital services for India. Reach out to us at or ask your questions in the comments section below.



Bharat Inclusion Initiative

We aim to build knowledge, foster innovation & entrepreneurial activity towards improving financial inclusion and livelihood for the poor.