Financial inclusion with mobile banking

SBI and Eko have come together to make it possible for mini savings bank account holders to deposit, withdraw, remit, and check balances using SMS, writes Nivedan Prakash

Mobile banking has taken off during the last couple of years. The widespread use of mobile phones in our country offers a platform for financial transactions that can facilitate financial inclusion of people who would otherwise be outside the purview of the financial system. A combination of technology and innovative business practices is rapidly changing the way in which people conduct financial transactions.

That’s the upside. On the downside, mobile banking services are limited to the urban and semi-urban parts of India. A major chunk of the population is mobile literate but lacks access to banking services on the mobile phone.

State Bank of India (SBI) along with Eko Aspire Foundation (Eko) has launched a program for opening SBI Mini Savings Bank Accounts on the mobile platform. This project, which aims to give a new dimension to financial inclusion, is presently available in Delhi/NCR, four districts in Bihar and one district in Jharkhand.

“Eko Aspire Foundation (Eko) is a Section 25 company established on November 27, 2007. The vision of Eko is to provide banking/financial services to the hitherto unbanked population across India on a progressive basis and its mission is to promote financial inclusion with simple and secure access, ensuring the highest levels of customer care and satisfaction,” said Abhinav Sinha, Co-founder, Eko Aspire Foundation.

How it all came about

The RBI has come out with a guideline which says that, under Section 25, non-profit companies can only become a ‘business correspondent’, akin to an outsourced bank branch. That is how Eko has been appointed as a national ‘business correspondent’ of SBI.

About a year back, the RBI came out with another regulation that allows grocery stores, petrol pumps, and similar retail outlets to be appointed as sub-agents of business correspondents. These retail outlets, after due diligence, have been appointed as sub-agents, who work on the behalf of the business correspondents.

Sinha is heartened by this announcement from the RBI pertaining to the appointment of entities such as public call offices (PCO), grocery shops and petrol pumps as banking correspondents.

He added, “The reason why RBI has come up with this concept of business correspondents is to touch areas wherein banks could not reach. Even though bank branches are in urban and semi-urban areas, there is still an under-banked population. When banking facilities are available at the grocery shop where a housewife does her daily shopping, it proves convenient for those customers.”

Eko’s inner workings

Eko is based on the fundamental premise of giving everyone, in particular the unbanked, a bank account. After being appointed as a business correspondent of SBI, Eko has appointed grocers, pharmacists, stationers and petrol pumps amongst others as sub-agents. These sub-agents are known as Eko Counters, wherein a customer can walk in and get a bank account which is enabled on the customer’s mobile phone. These customers are actually the customers of SBI, who are sourced via the business correspondents.

The primary requirement here is that the customers should have mobile phones. Once a customer walks in at a particular Eko Counter, the in-charge of that counter would ask for an ID as well as address proof and ask them to fill out a bank account opening form. Once the form is filled and the documents are collected, the in-charge of the Eko Counter is able to activate the bank account instantly on the customer’s mobile phone. The customer can, right then and there, start conducting financial transactions.

“Customers open a simple, no frills savings account called a SBI Mini Savings Bank Account that can be operated with a zero minimum balance. This means that customers can avail of banking services including opening of account, remittances, deposits and withdrawals at a SBI Eko Counter in their neighborhood by using a mobile phone,” said Sinha.

Additionally, the service has been designed in such a way that a customer can enroll at a particular Eko Counter and transact at any other. For example, if a customer has enrolled at an Eko Counter in West Delhi, he can transact either at the same counter or at any other counter, whether it’s located in Delhi, Bihar or any other part of the country. It’s like a network of Eko Counters wherein customers can walk in with a bank account and instantly conduct financial transactions.

Since the retail outlets are appointed as sub-agents of the business correspondents, it all takes place with due diligence wherein only certain retailers will be appointed as Eko Counters. Upon the selection of these stores, thorough training is given to them and, once they go live, a lot of handholding is done wherein Eko helps them in getting their first 50 to100 customers so that they can make prospective customers aware of this service. Eko is in touch with these outlets either daily or on alternate days.

Everyday banking via retail

Since customers are given a bank account, they can perform all conventional financial transactions including depositing and withdrawal, remittances, bill payment, insurance payments etc.

Also, the money a customer deposits, remains with the bank and not with Eko. Here, the money is delivered over an Eko Counter. The delivery mechanism of this bank account is different than that of a normal bank account. The reason why it is different is that it goes beyond the confines of a bank branch and is at a retail point. It’s a bank account which is delivered through a different mechanism.

It is also significant because the customers are asked to go to a retail point or Eko Counter that they visit in their day-to-day life. Customers visit those outlets and start banking. The learning curve is mild as they do not need to go to a new place or interact with a new person. It’s the same old retail outlet owner that they have to deal with for conducting banking transactions.

“Since the service is new and being delivered in a non-traditional way, we go all out in communicating to customers about the usage of banking, depositing, withdrawal, and remittances, etc. We started this project with SBI on February 23, 2009 and now the customers who have spent a year would also probably remit. It also gives them the know-how to use other products as well,” highlighted Sinha.

Moreover, this service works on all handsets and there is no requirement for downloading or installing an application. It works on both GSM and CDMA handsets. GPRS is not necessary. It is configured in a way that you dial a number and this works on all mobile handsets. The confirmation of the transaction takes place via SMS.

The underlying technology

This service is enabled through mobile phones and customers can use them to trigger transactions. The back end servers are integrated with the core banking systems of the SBI.

Like Internet banking, users can do certain transactions or trigger a transaction using mobile phones. Rather than going on to the Internet, the transactions can be done on the mobile phone.

Eko SimpliBank is the server or the application that captures all mobile transactions, processes them and then reconciles the same with the core banking systems. This middleware understands transactions done by customers at a retail point. SimpliBank is designed with the mobile phone as its primary transaction interface.

“We have partnered with VeriSign for securing transactions. We generate an ‘Okekey’ which is a new type of authentication designed by us. The ‘Okekey’ is a 10 digit number of which six digits are randomly selected and the remaining four digits are for the pin number. So, when a customer opens an account, he/she receives an Account Activation Kit containing an ‘Okekey’ booklet. Post the registration of the booklet, the customer can deposit and withdraw cash from the nearest SBI Eko Counter and conduct many other transactions,” pointed out Sinha.

Eko Counters can service customers using their mobile phones for cash transactions and do not require any additional investments in terms of Point-of-Sale (POS) devices. Since the mobile number of a person is globally unique, the account number of the customer is mapped to the mobile number.

All transactions are conducted in real time. On Eko SimpliBank, transactions are always initiated by the debiting party.

Transactions work on the following syntax:

• *Short Code*Recipient's mobile number*Amount*Signature with Pin#

Next up

By enabling banking on any mobile phone, this technology could potentially change the way the masses bank. The challenge is to get customers into the system.

“Mobile phones can bring about a paradigm shift in the way that banking transactions happen today. Since we started remittances only in November last year and with a reasonable presence in both Delhi and Bihar, we are waiting for more remittances to happen. We also believe that since lot of migrant workers move to urban areas for a better economic future, they need to send money back to their hometown. We want greater adoption of the remittance service,” concluded Sinha.

These kinds of services have great potential in our country and there have been lot of encouraging changes brought in by the RBI. Now it is up to companies such as Eko to exploit the opportunity that exists.

nivedan.prakash@expressindia.com