Financial Inclusion 2.0: India’s Business Correspondents
In India, the lack of access to financial services still poses a major challenge, with 650 million people (Global Findex, 2012) still classified as “under banked." Recognizing this problem, the Reserve Bank of India introduced a regulation in 2006 allowing banks to use the services of third-party, non-bank agents to extend their services right to people’s doorsteps.
Photo Credit: Tarun Chhabra
Since that watershed regulation was introduced, the Reserve Bank of India says there are 221,341 “business correspondents” (BCs) or Customer Service Points employed by banks to help get services to people at the bottom of the income pyramid.
|Banking Infrastructure in India||Data|
|Total # of brick & mortar bank branches||99,000 +|
|# of ATMs||95,686|
|# of business correspondents engaged by banks||221,341 as of 31 March 2013|
|# of PoS machines installed||635,653|
|Source: Reserve Bank of India Publications, 2012 & 2013|
While this new delivery service is helping to address access issues, not enough attention is being paid to producing customer-centric designs for products and services. It’s all very well sending an agent to someone’s home but if the services they are offering don’t fit a client’s need, then it could ultimately be a wasted visit.
Products need to be tailored to take customer behavior into consideration. Design aspects such as product labeling, messaging and consumer education are largely missing from many of these outreach programs to lowest income customers.
The current programs also do little to provide incentives to customers above the usual basic savings and bank deposit accounts, previously called no-frill accounts, and electronic benefit transfers.
Take the case of Jai Prakash Yadav, a 45 year old migrant worker in Mumbai who has been driving an auto rickshaw for the past 15 years. Yadav, who comes from the Jaunpur district of Uttar Pradesh, earns around $12 net per day from his three wheeler vehicle. After his daily expenses, he saves a part of his income with a local safe-keeper as the risk of theft is rampant in shared accommodations - chawl as it is known popularly in Mumbai. Every month Yadav remits around $100 to his family back home in Jaunpur- mostly through informal channels like money-couriers who offer an express service at a flat cost of $4-6.
Yadav has a savings account in one of the largest banks of India, but he doesn’t use it frequently and rarely goes to a bank branch to save or remit money. He mostly relies on informal money couriers. What deters millions of people like Yadav to adopt formal banking services is not just the question of “access” but the lack of appropriately designed products and the tedious user experience with formal banking systems.
At FINO PayTech Ltd, we are trying to resolve difficulties faced by clients such as Yadav by designing a suite of products that matches his needs. Using our system, Yadav can now remit money from his account to his wife’s account by using an authenticated, registered mobile number (mobile to bank account). Commitment savings (products like a recurring deposit), customized credit products and cashless health insurance are delivered through biometric smart cards. We’ve also piloted a tele-medicine based health insurance product in rural parts of India and offer financial literacy programs to women, youth and others.
If we are intent upon reaching the doorstep of the last-mile customer, all of us have to do a better job in designing products that our clients want. Otherwise, house-calls, while well-intentioned, will have little benefit.
-----Jatinder Handoo is a senior manager of agency management at FINO PayTech Ltd.