What if you could just walk up to your good old neighborhood general store or chemist shop, spend around five minutes (a few minutes give or take), and come back opening a bank account? Opening and operating a bank account could be as easy as getting a prepaid mobile phone connection. While the idea of convenience and saving on time is exciting enough for the already financially empowered population, the ability of financial inclusion is powerful enough for millions of the countrys financially weak population who otherwise dont have access to banking systems.

Enabling profitable financial inclusion and ubiquitous banking, Eko India Financial Services, a Delhi-based start-up company, in partnership with Centurion Bank of Punjab (CBoP), has launched Abhilasha, a no frills savings account, in Uttam Nagar, New Delhi, a pilot project under Reserve Bank of Indias Business Correspondent circular; and making possible this democratization of financial services is the mobile phone. Eko is looking to extend banking facilities in the untapped/unbanked areas through the use of the mobile phone as a channel to ensure greater financial inclusion and increase the outreach of the banking sector as envisaged by RBI through the use of the Business Correspondent model.

This is one of the many emerging examples of using technology as a vital link in extending the reach of banking facilities to the unbanked low-income group in urban as well as rural areas. According to Sanjay Bhargava, chairperson, Eko and former PayPal executive, Technology is the tip of the iceberg, a very important tip. Some other companies that have emerged in this area are Financial Information Network and Operations (FINO), Zero Mass Foundation and A Little World (ALW), and Atom Technologies.

The Abhilasha branchless bank at Uttam Nagar, New Delhi

Whats on Offer?
Abhilasha customers can open their savings accounts and avail themselves of deposit and withdrawal facilities without ever having to visit the ATM or the branch, thus, enabling low-cost branchless banking using the mobile phone as a channel. All instructions include dialing of numbers and hence even a number-illiterate customer can use it.

According to Bhargava, the advantage with a mobile phone is that it lends a globally unique number, which then becomes the account number for the savings account holder. Instead of using the SMS medium, the company has chosen to use the USSD technology for doing the transaction. The system can work on both low-end and high-end handsets, and supports both the GSM and CDMA technologies.

Customers can open their accounts and transact (deposits/withdrawals) at multiple Eko Cash Points (retails points that act as customer interface points, for instance, pharmacies and general stores) in their locality. The protections are extended just like any other depositor with a bank under Reserve Bank of India regulations.

Eko extends 3-level security to customers for their financial transactions using their mobile phone, PIN number, and Signature Booklet (filed for patent). For making a transaction, the customer needs to carry the signature booklet, which has 96 signatures, with them. Their relationship is managed and serviced through Eko Relationship Officers. Even for those customers who dont have mobile phones, the Eko Cash Points (ECP) can provide them a mobile phone at the premises for conducting transactions. The security remains intact as the transaction can only be submitted and finalized once the customer provides the signature and the PIN.

"Technology is the tip of the iceberg, a very important tip. Some other companies that have emerged in this area are Financial Information Network and Operations (FINO), Zero Mass Foundation and A Little World (ALW), and Atom Technologies Sanjay Bhargava, chairperson, Eko and former PayPal executive

Being a no frills account, there are certain limitations on the maximum amount of deposits and withdrawals in order to avoid any chances of fraudulent activities.

Presently, the pilot has been rolled out in the Uttam Nagar area of New Delhi with thirty ECPs or merchants and one Eko Operations Center (EOC) in the Uttam Nagar location. The company has tied up with Airtel for the telecom operator partner for the pilot. It is presently in talks with its existing partners, Airtel and HDFC (since CBoP has been taken over by HDFC), for extending the partnership beyond the pilot.

Once the data base and track record is established, a multitude of financial services can be offeredsavings, remittance, transaction banking like receipt of salaries, pensions and payments for utilities, loan including home loans, insurance, and MF products, lending, etc.

How it works?
Once the form with basic details like name, number, address, and photograph is filled, the merchant immediately sends a request for opening an account over his mobile phone, which is immediately activated. The form is sent for processing but the customer need not wait for the processing procedure to get completed, which is a matter of days, for the account to be functional.

The customer can start operating the account immediately. In case the application is rejected during the processing procedure, the account is cancelled and the money remitted. The customer is handed over a kit that includes the signature booklet, which holds the key to a secure transaction. Each signature has a total of 10 digits of which there are four x, placed in a random sequence. These x are to be replaced by the PIN decided by the customer. During each transaction, one signature is used. For instance, if the customer wants to deposit Rs 500, he pays Rs 500 to the merchant or the ECP and confirms the transaction using his/her 10-digit signature from the booklet. Similarly, in the case of cash withdrawal, the merchant hands over the cash withdrawn to the customer, after confirming the transaction over the mobile phone.

The key to the success of such an initiative is enlisting the support of maximum number of ECPs to provide greater reach. The merchants, herein, need to maintain balance with Eko to enable withdrawals by the customer. All the transactions that are taking place over the mobile phone are integrated into the Eko platform, which is like a stripped down version of the core banking system. The platform is linked to both the bank and the telecom operator.

A consolidation of all the days transactions is uploaded into the banks core banking system at the end of the day. Therefore, the system doesnt put an extra load on the banks systems. However, the bank also has access to each transaction for auditing purposes. The complete ecosystem is energized by a technology platform. The technology platform adopted is MIFOSthe technology that empowers microfinance. It has been developed by Grameen Foundation and has been deployed by more than eighteen MFIs across the globe.

The Genesis
The genesis of this whole new movement dates back to the RBI circular to the banks for financial inclusion by extension of banking services in January 2006. The circular reads: With the objective of ensuring greater financial inclusion and increasing the outreach of the banking sector, it has been decided in public interest to enable banks to use the services of non-governmental organizations/self help groups (NGOs/SHGs), micro finance institutions (MFIs), and other civil society organizations (CSOs) as intermediaries in providing financial and banking services through the use of business facilitator and correspondent models

Under the Business Correspondent model, the eligible entities that may act as Business Correspondent include NGOs/MFIs set up under the Societies/Trust Acts, societies registered under the Mutually Aided Cooperative Societies Acts or the Cooperative Societies Acts of States, etc. Among the scope of activities that can be undertaken by these Business Correspondents include disbursal of small value credit, recovery of principal/collection of interest, collection of small value deposits, sale of micro insurance/mutual fund products/pension products/other third party products and receipt and delivery of small value remittances/other payment instruments. The activities to be undertaken by the Business Correspondents would be within the normal course of the banks banking business, but conducted at places other than the bank premises; the objective is to extend the outreach of banks.

Concern Areas
While other alternatives were available prior to the setting up of the Business Correspondent and Business Facilitator models, they had their own set of limitations and challenges. For instance, there is the challenge of profitability for commercial banks and post offices offering no frills savings accounts. Also, while regulations have given an impetus to financial inclusion leading to a strong micro-finance institutions (MFI) movement, they have traditionally remained focused on lending to women-based groups in rural India.

However, to be fair, a similar challenge of profitability arises for Business Correspondents as well. The two key challenges are that of enabling profitable financial inclusion and ensuring win for all stakeholders involvedcustomers, banks, telecom operators, payment, and telecom gateways, explains Bhargava.

The solution that Eko envisaged strives to use the mobile technology to bring down the costs of the financial services being offered. Often financial services with the focus for financial inclusion have resulted in high transaction and servicing costs, inadequate collections and use of customer information, and a focus on credit-based services leading to the exclusion of more needed services including savings.

So, profitable financial inclusion rather than simply financial inclusion is the key. The most fundamental need is a savings account. To keep the costs low and increase profitability, the company starts off with the no frills savings account service. According to Bhargava, savings account, which is the fundamental step toward being part of the formal banking system and financial inclusion, has remained largely unaddressed. Eko tries to integrate and create an ecosystem that leverages existing infrastructure to enable a very low-cost no frills savings account.

Monetizing the Model
Since its in early stages, the revenue model for the initiative is still in a fluid stage. However, overall, it will involve the bank sharing a certain percentage with Eko for the deposits mobilized by the entire ecosystem. The percentage share could range between 7-10%. This, in turn, will be shared with the partners in the ecosystem including telecom operators and merchants or ECPs. An option in the later stages could also be charging the customer a very nominal fee.

Another monitization option will be to leverage the distribution network that the company will create. Various service providers, including financial service providers, for getting access to customer base, can then use this distribution network. The focus right now is to inculcate savings as a habit even for the low-income group and create the critical mass. The economies of scale will later play out themselves to bring down transaction costs and create profitable revenue models. Once that happens, Ill surely go down to my neighbourhood shopping complex to open my bank account.

Shipra Malhotra
shipram@cybermedia.co.in

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