Mobile Applications and Financial Inclusion

Transcription

1 Mobile Applications and Financial Inclusion Workshop at World Bank, New Delhi Keynote Address 8 th June 2010 Dharmarajan Krishnan Principal Consultant and Advisor Department of Information Technology Government of India 1

2 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

3 % of Un-banked Rural Households in India % Landholding Marginal farming households < 1 acre Small farming households = 1 to 4 acres Large farming households > 4 acres 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

4 Penetration of Banks & ATMs Number of ATMs per million of population (Mar-2009) Country Number Country Number Country Number Country Number India <40 China 98 Singapore 419 South Korea 1600 Year Average Population Served by a Bank Branch in India (Approx.) India - 6,34,321 Villages 32,227 Rural Bank Branches 1 Bank Branch for 20 Villages Source: ASSOCHAM s Report on Investment Prospects in Indian Economy ( ) Global ATM Market & Forecasts 2013 report published by Retail Banking Research (RBR) 4

5 Several initiatives have been taken but the impact has been limited 5

6 Challenges in Rural Banking & Viability Large & Scattered Rural Population Financial Illiteracy & Unfamiliarity with Technology Inadequate Infrastructure Power, Connectivity etc. BC /BF Model Simplified KYC Norms No Frills Bank Accounts But Banks and BCs unable to operate a profitable model based on large number of tiny accounts and micro-transactions 6

7 Number of Mobile Subscribers in India has grown much faster than bank account holders 7

8 Mobile Subscribers (millions) Mobile Subscriber Growth in India Source: TRAI 8

9 The Indian Mobile Growth Story - Rural 90.0% 80.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 50.0% 36.0% 26.2% 12.2% 14.2% 1.2% 1.7% Urban Rural Exponential growth from 2005 Faster growth in rural areas, though a late starter Rural penetration expected to reach 35% by

10 The message 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 Mobiles can be an option for financial access 10

11 Enabling Framework through coordinated action Government of India constitutes IMG 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 Constitution of Inter-Ministerial Group by Govt of India to help finalize an enabling framework 11

12 April 2010 Government of India Accepts IMG Framework for delivery of financial services using mobiles 12

13 IMG Framework for Delivery of Basic Financial Services Mobile linked No- Frills Accounts Similar to the regular No Frills account Operated using a mobile device Account to Account Transfer Balance Enquiry Basic transactions Cash Withdrawal Cash Deposit Transfer from regular bank a/c and Govt. Schemes 13

14 IMG Framework for delivery of Basic Financial Services Mobile based using m-pin Account Mapper Identifies the bank & account associated with a mobile number & UID number Interoperable repositories for hosting and maintenance of accounts Two options Regulated by RBI Biometrics (fingerprint) based through Micro ATMs Central Switch Routes the transaction to the issuing & receiving bank CBS of Banks or servers of Outsourced Partners Front End Middleware Back End 14

15 IMG Framework for delivery of Basic Financial Services 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 Principle of sharing infrastructure to reduce costs Successfully used by MSPs Can be applied to banking 15

16 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 16

17 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 17

18 Governing Principles for a Sustainable framework People Promote Financial Literacy Develop Products that meet their needs Create Awareness Technology Reduce transaction cost Ensure interoperability Reach remote areas Channel Scale up network of Banking Intermediaries Engage for profit companies as Intermediaries Devise suitable compensation for channel partners Pricing Provide services at optimal cost to the consumers Create a viable model for all stakeholders 18

19 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 19

20 20