mobile applications and financial inclusion - world...
TRANSCRIPT
8 June 2010 Dharmarajan Krishnan
Mobile Applications and Financial Inclusion
Workshop at World Bank, New Delhi
Keynote Address8th June 2010
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Dharmarajan KrishnanPrincipal Consultant and Advisor
Department of Information Technology
Government of India
8 June 2010 Dharmarajan Krishnan
Vision of the Prime Minister of India
“Soon people will start using their mobile phones for micro
payments as well. In times to come, this could emerge as a strong
tool for financial inclusion of masses in our banking sector. I
understand that the telecom sector has started experimenting with
mobile payments under the guidelines issued by the RBI and soon
mobile banking will also be a reality in our country”.
Dr. Manmohan Singh
India Telecom Summit, December 2008
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8 June 2010 Dharmarajan Krishnan
% of Un-banked Rural Households in India
59% of rural households do not have a deposit account
58% of rural commercial establishments do not have a deposit account
70% of marginal farming households do not have a bank account
Source - Rural Financial Access Survey (RFAS – 2003)3
%
Landholding
Marginal farming households < 1 acre
Small farming households = 1 to 4 acres
Large farming households > 4 acres
8 June 2010 Dharmarajan Krishnan
Penetration of Banks & ATMs
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)
India -
6,34,321
Villages
32,227 Rural Bank
Branches
1 Bank Branch for
20 Villages
Country Number Country Number Country Number Country Number
India <40 China 98 Singapore 419 South Korea 1600
Number of ATMs per million of population (Mar-2009)
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Several initiatives have been taken but
the impact has been limited
8 June 2010 Dharmarajan Krishnan
Challenges in Rural Banking & Viability
Banks and BCs unable to operate a profitable model based on large number of tiny accounts and micro-transactions
Large & Scattered Rural Population
Financial Illiteracy & Unfamiliarity with Technology
Inadequate Infrastructure – Power, Connectivity etc.
BC /BF ModelSimplified KYC Norms
“No Frills” Bank Accounts
But
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Number of Mobile Subscribers in India
has grown much faster than bank
account holders
8 June 2010 Dharmarajan Krishnan
Mobile Subscriber Growth in IndiaM
ob
ile S
ub
scri
ber
s (m
illio
ns)
Source: TRAI
0.34 0.88 1.2 1.88 3.58 6.68 1333.69
52.22
98.77
165.11
261.09
391.76
584.32
0
100
200
300
400
500
600
700
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8 June 2010 Dharmarajan Krishnan
The Indian Mobile Growth Story - Rural
12.2%
26.2%
50.0%
80.0%
1.2% 1.7%
14.2%
36.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2002 2005 2008 2011
Urban
Rural
Exponential growth from 2005
Faster growth in rural areas, though
a late starter
Rural penetration expected to reach
35% by 2011
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8 June 2010 Dharmarajan Krishnan
601 mn mobile subscribers; 17 mn subscribers added per month
More number of Mobile subscribers than bank account holders
Mobile subscribers growing many times faster than bank accounts
Low tariff & low cost of handset – Tailored for Rural Market
Mobile penetration has demonstrated the feasibility of handling and accounting for huge numbers of micro-transactions profitably
The message…
Mobiles can be an option for financial access
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8 June 2010 Dharmarajan Krishnan
Opportunity to leverage Mobile penetration to provide basic financial services to the unbanked
Overlap of several regulatory domains
* telecom, banking, payment system supervisors, anti-money laundering agencies, etc.
Enabling framework to be
* carefully coordinated across all these domains
* tailored to meet the objective of financial inclusion
Nov 2009 -- Constitution of Inter-Ministerial Group by Govt of India to help finalize an enabling framework
Enabling Framework through coordinated action
Government of India constitutes IMG
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8 June 2010 Dharmarajan Krishnan
April 2010
Government of India Accepts IMG
Framework for delivery of financial
services using mobiles
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8 June 2010 Dharmarajan Krishnan
IMG Framework for Delivery of Basic Financial Services
• Similar to the regular “No Frills” account
• Operated using a mobile device
Mobile linked No-Frills Accounts
Balance Enquiry
Cash Deposit
Transfer from regular bank a/c
and Govt. Schemes
Cash Withdrawal
Account to Account Transfer
Basic transactions
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8 June 2010 Dharmarajan Krishnan
IMG Framework for delivery of Basic Financial Services
Back End
Mobile
based using
m-PIN
Biometrics
(fingerprint)
based
through
Micro ATMs
Interoperable
repositories
for hosting
and
maintenance
of accounts
MiddlewareFront End
CBS of
Banks or
servers of
Outsourced
Partners
Regulated by RBI
Identifies
the bank &
account
associated
with a
mobile
number &
UID number
Account
Mapper
Routes the
transaction
to the
issuing &
receiving
bankCentral
Switch
Two options
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8 June 2010 Dharmarajan Krishnan
Shareable elements for optimal delivery framework
“Know Your Customer (KYC)” norms, processes and actual data
Ubiquitous infrastructure for
“cash-in” and “cash-out” operations
Additional infrastructure to
facilitate management of large number of
small-value accounts
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Principle of sharing infrastructure to reduce costs
Successfully used by MSPs Can be applied to banking
IMG Framework for delivery of Basic Financial Services
8 June 2010 Dharmarajan Krishnan
The IMG framework will enable …
Cash In/Cash Out through any BC with just a mobile phone
Without the need to visit a bank branch
Transfer of money without an intermediary (BC)
From any bank account to any bank account
Through any mobile phone
At a fraction of cost
Reduced number of cash transactions in the economy
Build up individual financial profile of the poor
A huge Leap in financial inclusion & empowerment
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8 June 2010 Dharmarajan Krishnan
Enabling Framework for Government Payments
Payments under Govt. Schemes to Mobile linked No-Frills Accounts can
Be passed on upto the “last mile”
Be easily accessed & used by beneficiaries through mobile phones
Cut down the delay in the process
Significantly reduce the indirect costs incurred by beneficiaries
Lower the dependence on the intermediaries
Enable authentication of identities involved in transactions
Enable end to end Traceability of transactions
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Governing Principles for a Sustainable framework
PeoplePromote Financial Literacy
Develop Products that meet their needs
Create Awareness
TechnologyReduce transaction cost
Ensure interoperability
Reach remote areas
ChannelScale up network of Banking Intermediaries
Engage “ for profit” companies as Intermediaries
Devise suitable compensation for channel partners
PricingProvide services at optimal cost to the consumers
Create a viable model for all stakeholders
8 June 2010 Dharmarajan Krishnan
IMG framework lays emphasis on sustainability
Roles of the various stakeholders defined
Indicative compensation for each stakeholder suggested
Committee to ensure transparency and fair play in operations and ensure viability for all stakeholders
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