The great Indian edtech refunds scam - The Morning Context

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• A week into the subscription, though, all his hopes were dashed. The teacher he followed had already left Unacademy. He was ready to learn from others, but he realized what they were teaching was irrelevant.

• He decided to leave the platform and started following up—on email, phone calls and Twitter—for a refund. Finally, he made a video on YouTube that went viral. He got a call from the company; a director told him they couldn’t guarantee or regulate what educators promised but would refund the money if he deleted the video.

• Kamlesh Kumar bought a course for Rs 1.25 lakh in March. He says despite cancelling within 15 days and after over a dozen emails and many more phone calls to Byju’s support team, he hasn’t got a refund.

• Social media is littered with such complaints of harassed students and parents running from pillar to post to get their hard-earned money back. But, then, why single out Unacademy?

• If you search for education technology online, the single largest thread that emerges is about people feeling trapped. Not about how edtech has revolutionized learning and education—which was the promise—but about how it has become the worst nightmare of Indian parents. Now, they are stuck with a dodo and have zero recourse.

• Put them together with the fear of missing out, or FOMO in millennial speak, gripping Indian parents and you get the next big—even if dormant—scam in edtech: the refund scam.

• One out of three schoolchildren uses supplementary education in the form of offline private coaching, according to Edtech in India, an Omidyar Network India and RedSeer report on edtech in 2019-20.

• Legacy challenges—poor quality of education in schools, crowded classrooms, lack of personal attention, questionable pedagogy and inconsistent standards, etc.—are the main drivers of the supplementary education market.

• Salespeople would ask for PAN and Aadhaar numbers and bank details, generate one-time passwords, assure parents that EMIs would start after several weeks and that they had the option of cancelling before that happens. They would all then pose for happy selfies.

• Parents would realize that the product was useless. They would keep going in circles, trying to return the product and cancel the subscription. But by then, the loan would have got approved, EMIs would kick in and the return window would close.

• “If you escalate the matter on social media, the chances of a refund and resolution is better. In return, the companies will ask you to delete the post,” says an edtech executive, requesting anonymity.

• As edtech expands beyond the metro cities to small towns and villages, this problem seems to be worsening. Because most parents require financing and once a third-party finances the purchase, there is just no way for a refund.

• “Edtech firms get paid in full by fintech firms. Then it becomes the fintech firm’s problem. In some cases, where there is a default, the edtech and fintech firms share the losses. But in most cases, the customers end up paying, fearing a legal mess or societal shame. Which more than recovers the overall loss for these companies.”

• Like one edtech consultant asked me: “How do you know education doesn’t work till you have finished it?”

• “Edtech companies blame the user’s acumen and IQ in case the outcome isn’t as expected. This is why people are moving towards the income sharing agreements (ISA) model in higher education. If the education provider fails to deliver, they don’t get paid.”

• ISA is a financial model where the recipient of a service agrees to pay a percentage of their income over time. Over the last few years, it has gained prominence as an alternative to the traditional education loan business.

• But the real problem, experts agree, lies in the K-12—short for kindergarten to grade 12—segment. With nearly 20% of India’s population in schools, it is the largest and most vulnerable segment.

• “There’s a pressure to sell, to grow. But no one does a psychometric test of the student—to see whether they are made for it or not—before selling the product,” says Kapal. “Because our edtech preys on acquisition more than retention and development.”

• Malpani thinks edtech, as it exists in India today, is a flawed business model based on profiteering and exploitation. Because when you’re on the clock, trying to book your next student, you are not treating them as future human capital but as sources of revenue. And when sales, growth and valuation numbers become your key metrics, education leaves the building.

• He offers two solutions. The first is creating a Khan Academy on steroids. Malpani is working on a couple of projects.

• “At some point, I hope we reach a stage where we start getting user-generated content. That is our Holy Grail when students start teaching students because that is the best way of helping children learn.”

• He wants the teachers to stop spoon-feeding information and evolve into coaches who nudge students in the right direction.

• The second solution he offers is the Netflix model for edtech.

• “What if edtech companies stopped selling courses for multiple years at one go? If they sold their courses monthly or even quarterly, edtech companies would have to provide the service they had promised, or they would lose consumers,” says Poonia.

• Companies like Coursera, he says, are doing subscription-based courses. But that is in higher education. In K-12, where the problem is the worst, neither the consumer nor the companies are ready to experiment.

• “There is a lot of angst and frustration against edtech companies, but most of it is hidden. Because people don’t know how or where to escalate matters,” says Malpani. “That’s why we have created a website to help people file their complaints.”