'BCs Equipped With Technology Tool Kits Aid Financial Inclusion'

The regulator is coming up with scores of guidelines for banks on financial inclusion projects. One of them is about the Business Correspondent (a BC is a provider of financial inclusion services and can be either an individual or a grocery shop) – it says that the BC should be within a distance of 15 kms of the bank’s branch. IT has equipped the BC with a toolkit comprising various components that allows him to capture the customer information. In a way, for the customer it is like the branch walking down to the customer. Manish Khera, CEO – FINO (Financial Information Network Organization) explains how this experience comes to life in an interaction with Biztech2.0.

How important is the role of IT in the successful completion of the financial inclusion project?

Financial inclusion projects fall in the CIO’s domain and not that of the CTO. Taking inference of the last couple of years, we have found that IT is not an issue. Technology works, however, the real challenge is in acquiring and servicing the customer on the field. Nobody is showing up to take the initiative of appointing BCs and again the hindrance is the strict regulatory environment.

FINO decided to recruit BCs, who would individually visit the customer’s house to provide financial services apart from being the technology supplier. We engage with business teams from various banks and their CIOs to acquire customers and then service the product portfolios of those banks and turn them profitable.

As far as government-led projects are concerned, the respective state government gives the mandate to a particular bank for project implementation, who thereafter takes the onus for the project. The bank subsequently engages FINO for technology and other requirements and FINO is also asked for the entire cost of the project. The cost can be arrived at either on per transaction, per person or value of business basis, which is inclusive of the cost of technology. In fact, technology is less important; the more significant issue before banks is how to effectively acquire and service the customer.

What is the role of technology in acquiring and servicing the customer?

The key component for acquiring the customer is the Java-enabled card that stores customer information, which is provided to the customer. We can issue the card in the field and centrally as well. Blank cards are also issued that can be used after a certain time period with the help of the information stored inside the chip embedded in the card. Additionally, the BCs are equipped with a tool kit that captures customer data using devices like laptop, finger print scanner, signature capture device, bar code reader and webcam. This has also been enabled via mobile.

IT also plays an important role in cross selling. If a bank is acquiring a customer with a savings a/c, then is the same individual a potential customer for insurance or vice versa? Currently, the internal system runs the analytics to process the customer information; however, new systems will be introduced after an increase in the data volume and complexity. This makes the customer profitable to all the players involved. We also collaborate with the BC for business ideas in cross selling. They also suggest to us specific products for specific customer profiles.

Tell us about FINO’s internal IT set-up.

We started with vendor solutions; however, gradually realised that they are made for a different environment and not for the customer segment serviced by FINO. As a result, new solutions were developed in house.

Basically, there are three layers to our IT set up. Firstly, on the customer acquiring side, the BCs carry the tool kit and now we have also made this possible via mobile phones. On the customer transaction side, we have developed Java cards (smartcards) that store customer information. The transaction hits the Switch (again built in-house) before getting passed on to the back end. The back end that hosts data and runs analytics is developed in house too.

Currently, what are the challenges encountered to further the financial inclusion objective?

Firstly, financial institutions and the government are still hazy on the subject of customer profitability of the financial inclusion projects. ¾ of FINO’s business comes from two government-led financial inclusion initiatives – the one run by the government of Andhra Pradesh and the ICICI Lombard scheme run under the Rashtriya Swasthya Bima Yojna (RSBY). This establishes the fact that not many banks or insurance companies are enthusiastic about financial inclusion initiatives.

The second challenge is posed by a strict regulatory environment in the form of asking for the completion of the due diligence process even before the banks have assured themselves about the business profitability. The regulator should provide enough time for banks to evaluate the viability of large scale financial inclusion projects.

One more point from a regulatory perspective is asking banks to appoint the Business Correspondents (BC), who should be positioned within a distance of 15 kms from the respective bank’s presence. This could be a constraint.

The restrictions are coming in the way of the underlying principle of the model – to provide banking and related services to the rural masses living in areas so remote that access to any kind of financial institutions is a challenge. The role of technology becomes relative in the sense that it acts as a medium to provide services, which could till then not be offered due to the lack of physical infrastructure like a bank branch. Moreover, FINO’s model goes right up to the doorstep of rural citizens and then offers them financial services.