IT-Enabled Financial Inclusion Initiatives of Various Banks in De

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                                                        CAB CALLING | April - June, 2009

                                               IT-Enabled Financial Inclusion Initiatives of
                                                        Various Banks in Delhi:
                                                        A Comparative Analysis
                                                                                                                       Aneesha Rastogi*


                                               Providing banking facilities closer to the customer, especially in remote and unbanked
                                               areas, while keeping transaction costs low, remains a challenge. Recognizing that IT-
                                               enabled services have the potential for effectively meeting this challenge, banks have
                                               initiated pilot projects utilizing smart cards/mobile technology to increase their outreach.
                                               Biometric methods for uniquely identifying customers and telecommunication tools are also
                                               being increasingly adopted. Accordingly, banks are urged to scale up IT initiatives for
                                               financial inclusion speedily while ensuring that solutions are highly secure, amenable to
                                               audit, and follow widely-accepted open standards to ensure eventual inter-operability
                                               among the different systems. Most banks had put these operating models on a pilot basis.
                                               Multiple vendors were chosen by the banks to get the best out of their models. The following
                                               are the technology initiatives undertaken by four banks in Delhi.

                                               q    Smartcards /Biometric cards (PNB, OBC, Union bank of India)
                                               q    Mobile banking (SBI)
                                               q    Mobile ATM (PNB)
                                               q    Biometric ATM (PNB)

                                               As part of her internship project with the Reserve Bank of India, New Delhi, the author had
                                               undertaken a study to analyse the various IT enabled financial inclusion initiatives of banks
                                               in Delhi region. The objectives of the study are (i) to study the extent of financial inclusion in
                                               Delhi with the main focus on the IT enabled financial inclusion, (ii) to undertake comparative
                                               analysis of the various pilot projects being implemented in Delhi by these four banks, and (iii)
                                               to study the comfort level, ease and adaptability to technology by the customer group.

        *Summer intern from ICFAI Business School. The analysis, findings and conclusions of the study are that of the author. Usual disclaimers apply.


                                                     CAB CALLING | April - June, 2009

        Research Methodology                                                   The sample size chosen for each initiative was 30 which was
                                                                               later revised to 10.
        The area under study was NCT of Delhi. The primary
        research was conducted through questionnaires. Two sets                Limitation: (i) Since IT enabled financial inclusion is a
        of questionnaires were prepared. The one for the banks and             recent endeavour on the banks’ part not much information is
        service providers focused on (i) rationale behind the                  available. A lot of trial and error exercise had to be done, (ii)
        adoption of a technology based initiative, (ii) ground                 lack of historical experience, (iii) one of the major limitations
        /inducement for choosing the particular area of Delhi for the          at the time of interacting with beneficiaries was to put across
        pilot project, (iii) various aspects of technology being               the question to them in the same manner as it was framed.
        provided and the costs and benefits accruing to the service            To get a reply to a single question two to three additional
        providers/banks/beneficiaries, and (iv) the various services           questions had to be asked, (iv) two initiatives are very new
        and facilities being offered to the beneficiaries. Inputs were         hence locating beneficiaries who have substantially used
        taken from banks, service providers, technology providers              the facility to be able to answer the questions was not
        and customer service points or agents. Four banks were                 possible. These initiatives had to be dropped in the second
        taken up for study, and in all seven initiatives were studied.         lap i.e. while conducting the survey for beneficiaries and (v)
        Unlike the other banks one bank had four initiatives.                  the other initiatives which are relatively old, there too tracing
                                                                               customers was difficult as it is a new initiative.
        The questionnaire for the beneficiaries focused on (i) the
        benefits and advantages of the facility, (ii) usage rate, (iii)        Comparative Analysis
        ease of usage and adaptability, (iv) cost and problems, and
        (v) additional features wanted. In depth interview was                 Basic details of the IT enabled FI initiatives of the four banks
        conducted where questions were put to the beneficiaries.               are as under:

               Bank IT enabled       Area ofoperation            Base Branch              Technology provider        Business
                    Initiative                                                                                       Correspondent

               PNB     Biometric     Azadpur                   Panchwati Azadpur        FINO                         FINO Fintetech
                       cards                                                                                         (section 25 Co.)

               PNB     Biometric     Okhla Mandi               NSCI Branch              Cranes Software              Grameen
                       cards                                   Okhla                    International Ltd            Pragati* (section
                                                                                                                     25 Co.)

               PNB     Mobile        3 Mobile ATMs have        Jhatikra Branch          AGS Infotech for ATM         Not required
                       ATM           been deployed on 3        Sarvodaya enclave        machine
                                     routes                    Branch
                                                               Minto Road Branch

               PNB     Biometric     Deoli Village             Deoli village            AGS Infotech for ATM         Not required
                       ATM                                                              machine
                                                                                        FSS for biometric ATM
                                                                                        card registration

               SBI     Mobile        Uttam Nagar               Janakpuri                EKO Aspire Foundation        EKO Aspire
                       Banking                                                                                       Foundation
                                                                                                                     (section 25 Co.)

               OBC     Biometric     Okhla Mandi               Kalkaji Extension        FINO                         FINO Fintech
                       card                                                                                          (section 25 Co.)

               UBI     Biometric     Central Delhi, Khari      Nodal regional           FINO                         FINO Fintech
                       card          Baoli, Anand Parbat,      office (south)                                        (section 25 Co.)
                                     Keshavpuram,              manages, Khari
                                     Transyamuna               Baoli is the branch


                                                      CAB CALLING | April - June, 2009

        Four kinds of technology initiatives can be found in Delhi.              whole process. The PNB Mobile ATM is a technology on
        PNB is running the maximum number of IT enabled                          wheels which travels to the customers, and technology
        initiatives. Its two biometric cards initiatives at two different        makes way for it to reach the downtrodden. SBI’s mobile
        places are headed by two different technology providers and              banking initiative has the advantage that any medium like a
        two different Business Correspondents. The next                          card need not be specially carried around to undertake a
        diversification is in the ATMs in the form of Mobile ATM and             transaction.
        Biometric ATM. Mobile ATM is deployed in three routes. SBI
        offers mobile banking, for which the technology provider and             Target Group
        the BC is the same. OBC and UBI use biometric card
        initiative headed by the same technology provider and BC.
        With adherence to the RBI guidelines all the banks have link
        branches or base branches and all the BCs are Section 25
                                                                                 All the initiatives are for the unbanked which as on date is the
        Reason for Opting for IT enabled Financial                               low income group i.e. the lower strata of society. The long
        Inclusion                                                                term motive of these initiatives is to connect the unbanked to
                                                                                 the banking and inculcating saving habit in them.

                                                                                                    Reasons for Choosing the Area

        All the initiatives of PNB are for better coverage, but SBI and
        UBI have also seen other areas. SBI could see advantages
        like cost effectiveness, faster medium and customer
        friendliness. UBI supports this initiative because of its cost
        effectiveness and fast medium above coverage. OBC finds it
        cost effective.

                                                                                             The strongest reasons are (i) a large
                                                                                             population base, (ii) large number of unbanked
                                                                                             population, and (iii) high mobile penetration.
                                                                                             The areas where the banks are running their
                                                                                             pilots are either the workplace or the
                                                                                             residential place for the low income class.
                                                                                             Uttam Nagar has the highest number of mobile
        Majority of the banks have chosen the respective initiatives                         penetration in Delhi and has 51351 number of
        because it saves the beneficiary’s time of going to the bank.            households. Okhla, Adarsh Nagar, Anand Parbat, Shastri
        The biometric ATM of PNB is also an audio device which                   Nagar, Keshavpuram, and Deoli have a large number of
        speaks in the local language and directs how to go about the             households each.


                                                      CAB CALLING | April - June, 2009

                                          Rate of Success/Efficiency of IT Enabled Initiatives

        Account Related                                                  Rs 1000 and for SBI when the minimum balance is Rs 500.

                                                                                       Nature and Cost of Device Used for

                                                                                       All the devices have chargeable battery. The
                                                                                       POS lasts for about 2000 transactions and
                                                                                       the Mobile ATM for 2 days with 80 – 90 hits
                                                                                       per day, so about 160 -180 transactions. The
                                                                                       mobile phones last as per individual
                                                                                       consumption. Only SBI uses such an
                                                                                       instrument for transaction where no
                                                                                       additional cost to the any of the four parties
                                                                                       viz. the bank, technology provider, service
                                                                                       provider or the customer is involved. All the
                                                                                       smartcard initiatives use different versions of
                                                                                       the SAGEM device. Only Cranes Software

        Minimum balance to be maintained in the account
        is Rs 0 for all initiatives. In SBI’s Mobile banking,
        the account can be activated only after depositing
        Rs 50. In other banks, accounts can be initiated
        with zero balance. Minimum balance to be
        maintained in the account after activation is Rs 0
        for all the initiatives. Since all are saving
        accounts, they also receive some interest on the
        balance. All the banks offer 3.5 percent on a
        monthly product basis i.e. on the minimum
        amount in account between the 10 and the last

        day of the month. For PNB, this is applicable only
        after the bare minimum balance in account is
                                                                                          *amounts could not be disclosed


                                               CAB CALLING | April - June, 2009

                                    Facilities Offered and Their Set Transaction Limits

                        PNB             PNB             PNB Mobile     PNB          SBI        OBC         UBI
                        Smartcard       Smartcard       ATM            Biometric
                        (FINO)          (Cranes)                       ATM
        People who      Everyone and    everyone        Everyone       Everyone     Everyone   Everyone    Everyone
        can open        minors > 10                     and minors >   and minors   but not    but not     and
        account                                         12             > 12         minors     minors      minors >
        Deposit         Yes             Yes             No             No           Yes        Yes         Yes
                        5000            50000                                       10000      10000

        Withdrawal      Yes             Yes             Yes            Yes          Yes        Yes         Yes
                        5000            2000            25000          25000        10000      10000
        Remittance      No              No              No             No           Yes        Yes         Yes
                                                                                    10000      10000
        ATM Card/       No              No              Yes            Yes          No         No          No
        Debit card

        Cheque book     No              No              No             No           No         No          no

        Internet        No              No              No             No           No         No          No

        Mobile phone    No              No              No             No           Yes        No          No

        Mini            Yes             Yes             Yes            Yes          Yes        Yes         Yes
        (last 10
        and balance

        Facility to     Not sure        Not sure        No             No           Yes        No          No
        open more
        than one
        account in
        own name
        Limit on        No              Not sure        No             No           No         5 per day   50 per
        number of                                                                                          quarter
        allowed per

        Effecting       Yes             No              Yes            Yes          No         No          No
        govt.           Pension, PPF,                   pension        pension
        what type
        General         Yes             No              No             No           No         No          No
        Credit Card


                                                       CAB CALLING | April - June, 2009

                             PNB                PNB               PNB Mobile     PNB         SBI   OBC   UBI
                             Smartcard          Smartcard         ATM            Biometric
                             (FINO)             (Cranes)                         ATM

          Overdraft          Yes,               Yes,               NA            No          No    No    No
                             up to Rs 2000      up to Rs 500

          Loan               Yes                No,                NA            No          No    No    Yes,
                                                facility in                                              Bhagya
                                                process                                                  and

          Minimum            No                 NA                 NA            NA          NA    NA    Written
          balance                                                                                        below
          required to
          obtain loan

          Repayment          Ye s               NA                 NA            NA          NA    NA    Yes, on
          schedule fixed                                                                                 repayment
                                                                                                         or weekly

          Experience of      Very good          NA                 NA            NA          NA    NA    Good

        International has purchased it, rest all have rented. None of
        the banks were ready to disclose the amount. The mobile
        ATM is like the normal fixed ATM. The only difference is that
        instead of being fixed in stationary place, it is placed inside a
        moving vehicle. The cost of the ATM is RS 435000 but the
        complete configuration of a mobile ATM can cost up to Rs. 30
        lakh. The biometric fixed ATM cost more because of
        additional technology of scanner.

        Mode of Operation of Device and Accounting and
        Auditing Procedure

        Security Feature of Technology


                                                     CAB CALLING | April - June, 2009

        A lot of emphasis is given to the security feature. In the              In all the smartcard initiatives which involve more than one
        smartcard initiative, the finger prints are stored on the card          cost, the bank remunerates the technology provider who
        which are matched with the ones when the customer puts his              remunerates the BC (in case the two parties are different).
        finger on the scanner on the POS device. When they match,               FINO which is the technology provider for three banks has
        then only the customer is allowed to carry out the                      three different remuneration schemes. From PNB, it
        transaction. The mobile ATMs function as normal ATMs and                receives for enrolment, smartcard, POS device, per new
        the security feature is the PIN. In the biometric ATM, the              biometric card and per transaction. OBC pays quarterly for
        security feature is the finger print stored on the card which is        BC and POS device and per new account. Nothing is paid
        matched with the when the customer puts his finger on the               per transaction. UBI’s initiative managed by FINO and SBI’s
        ATM machine’s scanner. In mobile banking the customer                   managed by EKO Aspire Foundation are remunerated only
        himself sets a PIN which is known only to him.                          per account opening and per transaction by the banks. No
                                                                                extra remuneration for the device. One time cost is involved
        Remuneration / Compensation to Service Provider                         in purchase of biometric ATM. For mobile ATM, one time cost
                                                                                           for the procurement of the machine and a monthly
                                                                                           rental for the vehicle TATA 407 of Rs 50000 are

                                                                                         Not all the banks charge the customers for the loss
                                                                                         of the medium by which the transaction is
                                                                                         conducted, be it a smartcard or an ATM card. The
                                                                                         banks which charge a cost to the customers feel
                                                                                         that the customers would keep losing it otherwise.
                                                                                         Others feel that these initiatives are only for the low
                                                                                         income group and since now they are being
                                                                                         attached to the banking sector, they would be very
                                                                                         cautious and very particular about its safety. If they
                                                                                         loose it by mistake and a cost is imposed to them, it
                                                                                         will be an additional burden on them and may start
                                                                                         refraining themselves from these services and the
                                                                                         whole idea and initiative of including the financially
                                                                                         excluded may fall flat. Except the ATM cards,
                                                                                         none of the initiatives come with a expiry date,

                            BANK AND         PNB      PNB      PNB                     PNB              SBI Mobile           OBC       UBI
        * Actual
                            IT               Smartcar Smart    Mobile                  Biometric        Banking              Smart     Smart
        amount paid
                            INITIATIVE       d (FINO) card     ATM                     ATM                                   card      card
        was not
                            Charge on        Yes          No           Yes             Yes              NA                   Yes       No
                            loss of card      (to be
                                             fixed by

                            Expiry date      No           No           7 years         7 years          NA                   No        No
                            of card

                            Service          No           No           Rs 100          Rs 100           Rs 50 on loss   No             No
                            charge                                     annually        annually after   of signature
                                                                       after 1st       1st year,        booklet, PIN
                                                                       year,           exempt for       reset (on
                                                                       exempt for      students         forgotten PIN),
                                                                       students                         Rs 30 on every
                                                                                                        new booklet

                            * no cost is charged for account activation and issue of card by any bank.


                                                    CAB CALLING | April - June, 2009

                                                        Advantage to Customers

         Advantages           PNB           PNB              PNB Mobile          PNB            SBI Mobile       OBC             UBI
                              Smartcar      Smartcard        ATM                 Biometric      Banking          Smartcard       Smartc
                              d (FINO)      (Cranes)                             ATM                                             ard

         Easy hassle free         Y             Y                Y                  Y                Y               Y             Y
         Closer to home/          Y             Y                Y                  Y                Y               Y             Y
         work banking
         Safety from              Y             N                N                  N                Y               Y             N
         direct exposure
         to banks

         Free from fear of        N             N                N                  N                Y               Y             N
         being ill -treated

         Timely payment           N             N                N                  N                N               Y             N
         of pension/wages

         Operation of a/c         Y             Y                N                  Y                Y               Y             Y
         at leisure time

         Saving                   Y             Y                Y                  Y                Y               Y             Y
         customer s time

        which means no additional cost of reactivation even if the           Customers Response Analysis
        account is not used. A few of the initiatives are high on
        service charges. Some of them are not even related to                The questions put to the customers were pertaining to (i) the
        whether a particular service is being utilised or not. These         benefits and advantages of the facility, (ii) usage rate, (iii)
        are recurring charges, like the ones on the ATM.                     ease of usage and adaptability, (iv) cost and problems, and
                                                                             (v) additional features wanted. The customers covered
        All the banks agree that these initiatives offer an easy and         under the study are (i) Punjab National Bank Biometric Card
        hassle free banking method to the customers. All these               in Azadpur, (ii) Punjab National Bank Biometric Card in
        initiatives have been started either near their houses or            Okhla Mandi, (iii) Punjab National Bank Mobile ATM in
        workplaces. Fear from being ill-treated is a controversial           Vishwavidyalaya, (iv) State Bank Of India Mobile Banking in
        question. Those who say no are not ready to accept that a            Uttam Nagar, and (v) Union Bank Of India Biometric card in
        person from a lower strata of society is not treated in the          Seelampur. The beneficiaries of the Punjab National bank
        same manner as any other person in the bank premises                 Biometric ATM in Deoli and Oriental Bank of Commerce
        most of the times. Since these initiatives are in their known        Biometric Card in Okhla Mandi could not be covered
        localities or areas, the CSPs also make a rapport with the           because these initiatives were very new. Finding customers
        customers. Customers also feel free to conduct transactions          who have substantially used the facility to be able to answer
        and ask queries. The fixed banking hours need not be                 the questions was not possible.
        followed for any of the initiatives except the mobile ATM
        which stands at places for limited number of hours. For the          q    54% of the respondents are of the age group 18 to 25.
        rest, the transactions can be done till the business hours of             The next major chunk belongs to 26 to 33
        the correspondent or the 24*7 ATM machine. In case of a              q    80% were found to be males and 20% were found to be
        POS device, in need of hour, the customer can also walk up                females dspite fact that females constitute only one
        to the house of the CSP and carry out the transaction. The                fourth of the customer base.
        most obvious and sought after advantage is that the                  q    14% graduates and 8% Post graduates and 46% had
        customer’s time of going to the bank, standing in long Qs is              left studies between 6th and 10 th.
        saved. In case of a daily wage earner, who may loose 3 to 4          q    38% comprise of privates salaried workers and 36% are
        hours in going to the bank and conduct the transaction may                self employed people. 14% of the respondents are
        not take more that 15 to 20 min in going to the CSP and                   students.
        conducting the transaction as the CSP is located near him.           q    34% of them earn between Rs 5,001 and Rs 10,000.
                                                                                  28% of the respondents said that their income is


                                                    CAB CALLING | April - June, 2009

            between 1000 to 5000. 18% who said that they do not               have used this facility. From the rest of the 40 beneficiaries of
            earn as they are the students                                     the other initiatives only 7 have used the withdrawal facility.
                                                                              The ones who have not availed it said that they have yet not
        Usage Rate and Behaviour                                              felt the need to withdraw. Mini statement and balance check

        50% of the respondents of the PNB Smartcard handled by                facility is offerred by all the 5 initiatives but none of the
        FINO Fintech Founadtion said that they use the service only           respondents have used it. The reason is that whenever they
        once a month. 50% of the respondents of PNB Smartcard                 carry out a transaction, a proof of the transaction is
        service handled by Grameen Pragati said that they use it              generated as a hard copy or received on their phone as a
        once a week. 40% of the respondents of PNB Mobile ATM                 message in case of Mobile banking, which also shows the
        said that they use it once in 15 days. As regards Union Bank          current amount in the account.
        service in Seelampur handled by FINO Fintech, 30%
        respondents said that they use it three times a week. 40%             The facility of overdraft is offerred only by PNB’s smartcard
        said once a week and 20% said twice a week. From among                initiatives, but none of the respondents said that they have
        all the services, the one headed by UBI in Seelampur shows            taken a overdraft. Only Union Bank of India offers loans. Out
        the best usage rate.                                                  of the respondents of UBI, 30% have applied for loans and
                                                                              rest 70% have not. The application for loan can be sent by
        On being questioned wether the ‘no frills account’ customers          only those whom the CSP offers. The CSP asks the
        had accounts before, 72% never had an account before.                 beneficiaries to apply for loans and asks only them who they
        They opened these accounts because many issues like                   feel are credit worthy. The reason is that the BC takes the
        going to the bank, depositing a minimum balance in account            responsibility of the customer in the eyes of the bank, so they
        to activate it, dealing with the formalities of the bank have         cannot promote just everyone and anyone. For the loan
        now been taken care of. Now, with the lenient KYC, closer to          application, the CSP wants a photocopy of the applicant’s
        home/ workplace banking, its convenient to be part of the             smartcard, and photographs of two gaurantors i.e. the
        banking arena. 18% of the people who already had an                   people who have conducted atleast 50 transactions in their
        account have opened ‘no frills accounts’ because it offers            account.
        closer to home /workplace banking. All responded that the
        reason they opened this account is because it is a safe place         100% of respondents indicated that they did not face any any
        for keeping money. The next reason which closely followed             kind of technical or behavioural problem. It can be observed
        is that it offers closer to home/ workplace banking. Of the 10        that none the initiatives is older than an year, so none of the
        respondents of SBI’s Mobile banking initiative, 7 said that           customers have experinced and shrtcoming in the initiatives.
        they opened this account because they trust the person who            Rather, the beneficiaries are very delighted to have become
        introduced who in this case is the CSP who is a shopkeeper            a part of the banking arena.
        in the area and people already knew him.
                                                                              The IT enabled initiatives on the whole can be rated at 6 out
        40 respondents have used the deposit facility. Since                  of 10. What pulls down the rating is the Mobile ATM. The
        withdrawal is offered by ATM, all the 10 customers of ATM             maximum number of respondents marked between 5 and 6


                                                      CAB CALLING | April - June, 2009

                        Rating of Technology Initiative on a scale of 1 to 10                          •    Facilities like loans, overdrafts,
                                                                                                           etc. are being extended by only
                                                                                                           few banks. Since these are no
                                                                                                           frills accounts nothing more than
                                                                                                           the basic facilities are provided.
                                                                                                         •  The biometric ATM in spite of the
                                                                                                           advantage of operability by
                                                                                                           illiterates has its share of
                                                                                                           problems; customer shall have
                                                                                                           to walk in to a bank branch, to
                                                                                                           get their card updated.
                                                                                                         •  All the initiatives conform to the
                                                                                                           security related aspects.
                                                                                                         •  SBI’s mobile banking does out
                                                                                                           involve a major cost component
                                                                                                           i.e. the device used for
        on the scale. The reason for respondents giving low scores
                                                                                 •    The initiatives where the medium of transaction is a
        is the bare facility of withdrawal that is available and a annual
                                                                                      card, most of the people want it not only because of its
        charge is also levied. The initiative which gets the heighest
                                                                                      usability but a major motivating factor is the
        mark is of UBI with 50% of the respondent giving it 10. The
                                                                                      possession. The beneficiaries want to own it when
        reason is that the services are offered in a immensely
                                                                                      they see somebody else having it. They feel that with
        backward area with the highest number of illitrates who are
                                                                                      the procurement of the card, they have an established
        experiencing the banking services for the first time.
                                                                                 •    The technology based initiative is very new and it is a
        Facilities Required in Future
                                                                                                                        known fact that
                                                                                                                        younger generation is
                                                                                                                        more experimenting.
                                                                                                                        The majority of the
                                                                                                                        beneficiaries are the
                                                                                                                        early twenties. As far
                                                                                                                        a s t h e a g e d
                                                                                                                        population is
                                                                                                                        concerned they felt
                                                                                                                        out of place in the
                                                                                                                        technological arena.
                                                                                                                 •     No official training or
                                                                                                                        demo was provided to
                                                                                                                        the customers nor
                                                                                                                        they are explained the
        Finding and Conclusions                                                       features of the technology. Customers who ask for it
                                                                                      are given a brief.
        •    All the initiatives are not even a year old. The last one
             (SBI) in late Feb ‘09 with 324 accounts on date. The rest           All these initiatives have increased the banking habit among
             which are older have opened more number of                          the unprivileged, saved their time, and given freedom to
             accounts. Hence, we can say that these initiatives                  operate account at their convenience. This may help build a
             have been accepted by the public.                                   bond of trust and comfort among the customers for the
        •    The accounts are primarily offering simple deposit/                 banks. In the long run, it will be advantageous for the
             withdrawal transactions. The ATM initiative offers only             customers as they shall develop a habit of saving for the
             withdrawal option and also entails a fixed cost for the             future. Later on these customers may become the regular
             customers, in the form of yearly charge. This initiative            customers of the banks and start generating revenue for
             has more cost and less advantages to the customers.                 them.