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Banking the Unbanked
The Needs & Enablers of Modern Banking People Financial Institutions Technology Save for a rainy day Advent of micro-computers Diffusion of Internet Automation in related functions of other businesses Evolution of Smart Card Technology Mobile technology Cash on the go Bank in the wallet Anywhere anytime banking Reduce operational costs High value added services Product bundling & Cross Selling  Piggy Banks Traditional Banking Modern Banking (online) Interest Protection against theft Transfer large sums of money Trade Instruments Interest Service Charges
Banking & Technology Driving further technological innovation Technology Enables Impact on Business
[object Object]
Development of Key Payment Systems - India
The Growth of ATMs - India 22110 25247 34547 44857 20 % 20 % 37 % 30 % 2005-06 2006-07 2007-08 2009-10 2010-11E > 60000 Source –  CyberMedia  Research  DQ Estimates
Adoption of CBS & RTGS - India Source – Report on Trend & Progress of Banking in India – RBI * - As of March, 2009 # - As of August, 2009
[object Object]
% of Un-banked Rural Households Source -  Rural Financial Access Survey (RFAS – 2003 ) Landholding Marginal farming households <  1 acre Small farming households =  1 to 4 acres Large farming households >  4 acres
Penetration of Banks & ATMs 1 Bank Branch for  20 Villages Number of ATMs per million of population (Mar-2009) Year Average  Population Served by a Bank Branch in India (Approx.) 2005 16000 Source: ASSOCHAM’s Report on Investment Prospects in Indian Economy (2008-09) Global ATM Market & Forecasts 2013 report published by Retail Banking Research (RBR) 6,34,321 Villages 32,227 Rural Bank Branches Country Number Country Number Country Number Country Number India <40 China 98 Singapore 419 South Korea 1600
“ No Frills” Bank Accounts Source:  Speeding Financial Inclusion – Skoch Development Foundation ( 20 th  Skoch Summit, 16-17 July 09, Mumbai – Inclusive Growth 2.0) National Seminar on Launching a National Initiative for Financial Inclusion (NABARD) – September, 09 2015 ------------------------------------------------------- Targeted “No Frills” Accounts –  111.55 mn Projected Active “No Frills” Account –  13.81 mn (at current pace) Number of No Frills Accounts (in millions) Active “No Frills” Accounts (in millions) Year Active Accounts are those with more than two transactions per year Mar,  2009  ------------------------------------------------ “ No Frills” Accounts Opened –  30 mn Active* “No Frills” Account –  3.3 mn % of Active Accounts  – 11% ,[object Object],[object Object],[object Object],[object Object],No of “No Frills” Accounts (in millions)
[object Object]
Challenges in Rural Banking & Viability But  Banks & BCs are unable to operate a profitable model based on large number of tiny accounts and micro-transactions Revenue Cost Gap Large & Scattered Rural Population Financial Illiteracy & Unfamiliarity with Technology Inadequate Infrastructure – Power, Connectivity etc. BC/BF Model Simplified KYC Norms “ No Frills” Bank Accounts
[object Object]
The Mobile Growth Story
Mobile Subscribers Vs Bank A/c Holders (Rural) Rural Mobile Subscribers  (in millions) Total Number of No Frills Accounts (in millions) 280 136 56 320 112 40
[object Object]
Policy Initiative - Constitution of Inter-Ministerial Group (IMG) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Key elements of framework  Decisions  Taken
Key elements of framework  Decisions  Taken
Additional features
Governing Principles for a Sustainable framework ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Framework for delivery of Basic Financial Services Basic transactions
Framework for delivery of Basic Financial Services Back End Once a Micro Account is opened, the  citizen can use his  mobile phone  to perform basic  transactions Alternatively, citizens who  do not  have a  mobile  phone  or  find  it inconvenient to use one, can approach a BC  to perform a transaction An Account Mapper that intelligently identifies the bank & micro account associated with a mobile number A central payments switch to route the transaction to the issuing & receiving bank A shared depository for hosting and maintenance of micro accounts Middleware Front End Micro Account s in the CBS of Banks or Outsourced Partners of Banks
This framework will enable …
Payment under Government Schemes
[object Object],[object Object],[object Object],[object Object],Source - http://www.banktech.com/payments-cards/showArticle.jhtml?articleID=222700080 by Nathan Conz
Banking the unbanked
Indicative list of issues for IMG ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Second meeting of IMG – 24 th  December 2009
Early Data on Viability of BC model for Banks Revenue per client is only one-fourth of the total Cost Source:  Business Correspondents & Facilitators  - Pathway to Financial Inclusion?  ( Retreat on the BC Model – CAB, RBI, ACCESS)

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Banking the unbanked

  • 2. The Needs & Enablers of Modern Banking People Financial Institutions Technology Save for a rainy day Advent of micro-computers Diffusion of Internet Automation in related functions of other businesses Evolution of Smart Card Technology Mobile technology Cash on the go Bank in the wallet Anywhere anytime banking Reduce operational costs High value added services Product bundling & Cross Selling Piggy Banks Traditional Banking Modern Banking (online) Interest Protection against theft Transfer large sums of money Trade Instruments Interest Service Charges
  • 3. Banking & Technology Driving further technological innovation Technology Enables Impact on Business
  • 4.
  • 5. Development of Key Payment Systems - India
  • 6. The Growth of ATMs - India 22110 25247 34547 44857 20 % 20 % 37 % 30 % 2005-06 2006-07 2007-08 2009-10 2010-11E > 60000 Source – CyberMedia Research DQ Estimates
  • 7. Adoption of CBS & RTGS - India Source – Report on Trend & Progress of Banking in India – RBI * - As of March, 2009 # - As of August, 2009
  • 8.
  • 9. % of Un-banked Rural Households Source - Rural Financial Access Survey (RFAS – 2003 ) Landholding Marginal farming households < 1 acre Small farming households = 1 to 4 acres Large farming households > 4 acres
  • 10. Penetration of Banks & ATMs 1 Bank Branch for 20 Villages Number of ATMs per million of population (Mar-2009) Year Average Population Served by a Bank Branch in India (Approx.) 2005 16000 Source: ASSOCHAM’s Report on Investment Prospects in Indian Economy (2008-09) Global ATM Market & Forecasts 2013 report published by Retail Banking Research (RBR) 6,34,321 Villages 32,227 Rural Bank Branches Country Number Country Number Country Number Country Number India <40 China 98 Singapore 419 South Korea 1600
  • 11.
  • 12.
  • 13. Challenges in Rural Banking & Viability But Banks & BCs are unable to operate a profitable model based on large number of tiny accounts and micro-transactions Revenue Cost Gap Large & Scattered Rural Population Financial Illiteracy & Unfamiliarity with Technology Inadequate Infrastructure – Power, Connectivity etc. BC/BF Model Simplified KYC Norms “ No Frills” Bank Accounts
  • 14.
  • 16. Mobile Subscribers Vs Bank A/c Holders (Rural) Rural Mobile Subscribers (in millions) Total Number of No Frills Accounts (in millions) 280 136 56 320 112 40
  • 17.
  • 18.
  • 19. Key elements of framework Decisions Taken
  • 20. Key elements of framework Decisions Taken
  • 22.
  • 23. Framework for delivery of Basic Financial Services Basic transactions
  • 24. Framework for delivery of Basic Financial Services Back End Once a Micro Account is opened, the citizen can use his mobile phone to perform basic transactions Alternatively, citizens who do not have a mobile phone or find it inconvenient to use one, can approach a BC to perform a transaction An Account Mapper that intelligently identifies the bank & micro account associated with a mobile number A central payments switch to route the transaction to the issuing & receiving bank A shared depository for hosting and maintenance of micro accounts Middleware Front End Micro Account s in the CBS of Banks or Outsourced Partners of Banks
  • 25. This framework will enable …
  • 27.
  • 29.
  • 30. Second meeting of IMG – 24 th December 2009
  • 31. Early Data on Viability of BC model for Banks Revenue per client is only one-fourth of the total Cost Source: Business Correspondents & Facilitators - Pathway to Financial Inclusion? ( Retreat on the BC Model – CAB, RBI, ACCESS)