Mobile: Silver Bullet to Target the Non-Banked
Wednesday, January 20, 2010
After 62 years of Independence, the informal economy dominates 80% of India and half the below-poverty-line households still have no access to any kind of financial services. This will continue, unless radical steps are taken. A starting point is the bottom-of-the-pyramid people’s need for a basic financial service, viz. mobile money transfer (MMT).
While almost all wage earners carry mobiles, not all wage earners will have a bank account. The mobile is the proverbial silver bullet. Firstly, its reach is ubiquitous and provides for a low-cost point of service (PoS) for all forms of inclusive banking-be it no-frills banking, savings, credit, insurance, pensions, NREGA, social payments and fund transfer.
Secondly, it reduces the distance between the depositor /beneficiary and service point. Thirdly, it costs less than a rupee to use a mobile as the medium rather than smartcard, ATM, internet, telephone or branch. Fourthly, it plugs the holes in social sector schemes. For instance, every NREGA beneficiary, with a job card linked to a no-frills account and a mobile number, will ensure that the entire Rs 39,000 crore earmarked for NREGS would reach the 40 million households in fair and full value.
Lastly, the repudiation risk on mobile is 1/10th of what it is on the Internet, and probably many times lesser for other instruments.
The financial system, along with a whole range of PCOs, pansaris, kiranawalas, fair price shops and business agents, together with telcos and solution providers will have to collaborate to build an end-to-end mobile financial service ecosystem for the unserved and excluded.
From such a collaboration, efficient payment facilitating systems will emerge to facilitate low-value, person-to-person (P2P) transactions across the country, bringing in, over a period, accountability. It will also place a larger chunk of transactions under the ’formal’ electronic channel. A recent RBI relaxation allowing for sub-Rs 1,000 transactions without recourse to end-to-end encryption, is recognition that usage of basic mobile technology for inclusive activities is critical for mass and quick adoption.
The Corporation Bank, Tata Teleservices (TTSL) and TataTeleservices (Maharashtra) Ltd (TTML) together recently launched the first pan-India pure mobile-based financial inclusion service branded as Green. Initially, it caters to the growing need for money transfer between migrant workers living in cities and their families in Maharashtra, Karnataka and Kerala. This a bare-bone service where both the sender and the beneficiary opens no-frills account at PCOs and then are able to remit money over the mobile.
