Govt advisory on edtech firms: Is it moment of reckoning for sector?

With several allegations against a leading ed-tech company, the education ministry released an advisory for parents. It said some ed-tech companies were luring parents under the garb of offering free services. It asked them to avoid the automatic debit option for payment of subscription fee and also to read the terms and conditions carefully before making any move.

The advisory added that success stories advertised by these edtech companies could be a trap to acquire users.

During the recently concluded Winter session of Parliament, Congress MP Karti Chidambaram talked about what he called 'predatory sales tactics' of edtech companies. 

This outrage against ed-tech companies is not recent. In fact, ed-tech firms such as BYJU’s have been pulled to consumer courts on several occasions by disgruntled parents, who have alleged cheating by the company’s sales agents.

Last week, a consumer court in Pune ordered BYJU’s to pay Rs 50,000 as compensation after a customer had complained that she didn’t receive the promised refund of course fees from the company. The customer also claimed that BYJU’s had got a Rs 1.1 lakh loan sanctioned in her name, without her consent. 

We reached out to BYJU’s last week for their stance on these recent allegations, but didn’t receive a response till the time of publishing this video. 

On consumer complaint forums and social media, several users have given a template of what the typical sales call for an ed-tech company looks like. 

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If it is an in-person visit, the salesperson will belittle the child’s intellect and urge the parents to take the ed-tech subscription to secure his future. Most sales persons also express apprehension about the child’s education because of the condition of government schools.

Parents, some from the lower strata of the society, usually take loans to fund the cost of the course.

While there is usually the clause for free cancellation during the 15 to 30 days of trial period, once that expires, there is usually a lock-in period that runs into years. Several families look to cancel their subscription if they feel that the quality of the course is subpar. But they cannot due to the lock-in.  

Families also face hurdles in getting their promised refund during the trial period, and discover that their accounts are being debited for EMIs of loans that they didn’t sign up for. Several such cases have reached consumer courts.

Such sales tactics have gained prominence because the pricing of these courses, of around Rs 20,000 to 30,000 for say Math for Class 6, and over Rs 1 lakh for say Math from classes 6-12, is often unaffordable for people from lower income groups. 

On the condition of anonymity, a startup investor told Business Standard that while most allegations about a “toxic sales culture” have come up against BYJU’s, it’s in fact a standard playbook across all Indian ed-tech companies with offerings for the K-12 or school learning segment.

This is because most of these companies share the same VC investors. These investors then ask their portfolio companies to follow the market leader to increase sales.

The Indian ed-tech space has seen phenomenal growth since last year. While startups in this sector had raised over $500 Mn in funding in 2019, since last year, Indian ed-tech startups have raised over $4 Bn. We also have five ed-tech unicorns now as opposed to just one before the pandemic. 

However, there are justifiable concerns about the quality of these ed-tech courses, and whether these new-age startups have the best interests of their customers in mind. 

Experts have suggested that the Indian ed-tech sector is due for a regulatory intervention by the government. They have suggested a 'Netflix-like' monthly subscription model, with no minimum lock-in period. This would force ed-tech companies to come up with quality products for user retention.

We spoke to Gouri Gupta, director for ed-tech at Central Square Foundation to understand more about how the ed-tech sector can be regulated, without stifling innovation in the space. 

Even the staunchest critics of Indian ed-tech would admit that the sector has tremendous potential in a country with a largely poor quality of education in its schools and universities. The government’s advisory may lead to some soul-searching in the sector. Perhaps ed-tech companies will now temper their growth ambitions to prioritise customer concerns above everything else.

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