Caught in the swirl of Indian EdTech’s murky water, many families have been lured with false promises into vicious debt traps.
If one sector has grown exponentially during the peak of the pandemic and afterwards in India, it is the country’s EdTech sector, which happens to be among the fastest-growing in the world. While it is believed to have become the catalyst of India’s growth for India’s education and digital dominance in the segment, there is a darker picture no one is talking about. The EdTech industry is sending many families into high debt with false promises that it cannot keep.
The Indian EdTech industry is believed to have raised $16.1 billion in VC funding, which is a 32X increase from the $500 million received in 2010. Since 2014, India witnessed the launch of 4,450 EdTech startups, among which six firms (Byju’s, Unacademy, Eruditus, UpGrad, Vedantu, Lead) have joined the $1 billion unicorn club. Also, the Indian EdTech sector is estimated to grow at 39% CAGR. By 2025, the EdTech industry is estimated to enrol more than 37 million people. A large part of these EdTech’s growth is driven by the nearly 250 million school-going children who are in the ambit of the K-12 (Kindergarten to Class XII) segment.
This massive scale of the growth spurt in the Indian EdTech industry is driven majorly by the K-12 segment, which includes higher education and upskilling categories. For example, the EdTech startups are offering courses like MBA in merely six months, which usually takes two years to complete with four semesters divided into six month periods. Cutting down the duration of the MBA course to one-fourth comes at a cost that many cannot bear. Similarly, teaching coding in a very short span is another type of popular course various EdTechs are offering.
No wonder, dreams and aspirations often have no barriers and to fuel them, money can be channelized from different sources, even if it means plunging into dark poverty. For example, an EdTech startup offered a three-year course comprising Physics, Maths and Coding at an amount of Rs 25,000, which is near twice the yearly fees of a regular school. The startup even offered an EMI option and a full refund in case the student and his or her family don’t like the classes. Also, the startup promised an internship at a major tech firm after the end of the course.
Pretty lucrative offer for sure! Influenced by the offerings thousands of families opted to subscribe to the courses and they even invested in other peripherals such as laptops. The EMI repayment started, but the classes never started. Eventually, many of these students and their families who dreamt of a shining career after completing courses from EdTech were lured into vicious debt traps with irresponsible false promises. While this is the case of a specific EdTech firm, similar stories can be found in multiple numbers. For example, an EY report in 2021 estimated that 1,150 EdTech startups have shut down their operations. In 2022 as well, several large companies have started laying off their employees.
Educate or push marketing?
Not long ago, the classic case of Wolf Gupta rocked the internet world, where WhiteHat Jr misleadingly claimed that the child prodigy whose age used to keep changing between 9-14 years in different advertisements and who was claimed to have bagged a job at Google after learning coding from the EdTech. His salary amount too used to keep changing between Rs 1.2-150 crore in the advertisements, just like his age. Later, this EdTech was acquired by Byju’s in a $300-million deal in August 2020.
Interestingly, Byju’s too has been accused of push selling its Aakash tablet to the consumers. Ironically, they even sent business development associates or simply salespersons as well. In a highly competitive market, the EdTech startups have been pushing their business development associates or salespersons with immense pressure to increase sales and eventually the number of subscribers.
In an intense perform or perish system, these salespersons are usually given a time period between 15 days to 30 days to deliver on their targets, which often are absurd ones. They are threatened with job loss without delivering the target. In a nutshell, it’s a brutal industry selling education and increasing valuation.
Fear-driven sales
The sales ecosystem of the EdTech industry is massively dependent on the fear of the parents by emotionally blackmailing them by telling them that they and their kids are missing out. It’s a rat race and parents too are victims of that system. Naturally, these fear-driven sales tactics work in favour of the EdTech firms when the parents become anxious by thinking that their children are lagging behind their peers. While the anxiety is lower in the high-income households, the lower-income families often fell prey to this emotional blackmailing. Besides hammering the emotional soft spot, the salespersons of these EdTech firms also use other arsenals of inducements like scholarships, cashback and easy loans. However, nobody tells or reads the tale written in the fine print.
Parents and students: A rat race
It’s not just the students, their parents are equally the part of this rat race. There is a craze among parents, especially who are not so aware of the environment in the EdTech ecosystem. They believe that merely attending school is not enough. They opt for various lucrative courses offered by the EdTechs, without knowing that they are turning themselves into prey. The EdTech firms take the advantage of this fearful mindset and intend to replace the conventional schooling system.
Unregulated EdTechs and outmatched schools
It’s quite like an unfair competition between conventional schools and EdTechs. While the Schools in India are bound to follow a plethora of rules that determine stringent infrastructure requirements, proper fee structures, payment to the teachers, etc. Also, the schools are mandated to be non-profit in India. The EdTech companies on the other hand aren’t regulated. Also, National Education Policy 2022 states online and digital education must be promoted, which is promoting the EdTechs’ growth. The growth of the EdTech industry is not the problem, but their predatory practice and unregulated activities are.
Stopping the great Indian loot
The concerns about EdTech’s malpractices have already reached the Parliament. The Ministry of Education has already issued an advisory warning for parents. These include factors such as not blindly trusting EdTech advertisements, not taking out loans and understanding EdTech marketing strategies. However, the issue is not as easy as it seems. The first and foremost step should be regulating the sector. The growth this sector has witnessed in the last few years is massive and at this pace of growth, regulating the industry is tough. But, if not regulated, it could become dangerous.
India can take a lesson from China, as the northern neighbours too witnessed similar growth in its EdTech sector. Before 2020, the Chinese EdTech industry was booming fast and there too complaints poured in about misleading advertisements and predatory practices. Following that, in July 2020, the Chinese government imposed a slew of measures that prohibits the EdTech companies from making a profit, raising capital and even teaching high-school curriculum. A similar method can be taken in India, but relying on that for a long time may end up hindering innovations, which would create a counterproductive environment. But, these measures can buy a much needed time before a full-proof system is incorporated.
Over-regulation of the EdTech sector too can give birth to a counterproductive situation and may strengthen the monopoly of existing large players while keeping away newer entrants. Overall, it’s a tough situation for policymakers. In such a scenario, a few steps can be taken which include stopping EdTech companies from taking a large amount of money from the subscribers for year-long courses. Also, subscribers should be allowed to pay fees on an easy monthly or quarterly basis. This would give parents the flexibility to opt out of the course if they feel their purposes are not being served.
Also, the EdTech firms should stop their current marketing strategy of being a solution to an ailing schooling system, as that idea is contrary to the principles of a good education.
