Financial Inclusion Through Wireless Technology
Wednesday, August 29, 2007
One of the more popular seminars at the The Economic Times Banking Technology Conclave 2007 was titled “Banking Sector Next Frontier – Serving the Under Banked Profitably. Can technology, especially wireless enabled serve the un-served market?” The panel was a mix of technologists, bankers and a micro-financer with extensive experience at the rural level. The session was chaired by MBN Rao, the CMD of Canara Bank.
One of the more popular seminars at the The Economic Times Banking Technology Conclave 2007 was titled “Banking Sector Next Frontier – Serving the Under Banked Profitably. Can technology, especially wireless enabled serve the un-served market?” The panel was a mix of technologists, bankers and a micro-financer with extensive experience at the rural level. The session was chaired by MBN Rao, the CMD of Canara Bank.
The direction of the discourse was set with a presentation made by Janmejaya Sinha, the managing director of Boston Consulting Group (India). He said, “I am going to talk about banking the middle of the pyramid. To cater to the bottom of the pyramid would need government assistance.”
Mr Sinha referred to this broad segment as the ’The Next Billion’ and presented a character sketch. He said that this category craves for banking inclusion but are hesitant to take the initiative to start banking as they are fearful of making mistakes with their money. What would drive them, he said, would be a consistent desire for a better future for the next generation.
According to Mr Sinha there are only 180 million Indians with a bank account, in comparison with the 220 million people who have a cell phone. “We can’t think about banking through PCs like in the rest of the world. We cannot follow the western model.” Mobile banking could be the solution for India.
Mr Sinha pointed out that mobile operators can remind customers to settle a bill, or the fact that a mobile phone user’s location can be tracked. And most importantly, he said that mobile banking allows inclusion for the group in the ’middle of the pyramid’. He ended on the note that, “we need to think of new business models and not try to craft old ones.”
Yogesh Agarwal, the CMD of IDBI highlighted that only 25% of the Indian population is served by the formal banking sector, while another 25% are tied to the informal banking sector- the moneylenders. He asked whether the technology providers are capable of supporting this half a billion people, assuming they all came under the umbrella of the formal banking sector. He said, “It (financial inclusion) is not about obligation but about opportunities.”
Summing up his thoughts into three precise points MR Rao, the COO of SKS Microfinance said, “The below poverty line segment is commercially viable. Mobile-banking can radically change micro-financing. And as an NBFC we are not allowed to do savings. The people we reach out to want a place to park their money. The regulator needs to consider this.”
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