Get­ting ac­cess and then con­vert­ing it to in­clu­sion and adop­tion through ap­pro­pri­ate prod­ucts is the tar­get.


AS FINTECH PLAY­ERS start ex­pand­ing their pres­ence across the coun­try, the big is­sue re­lates to in­clu­sion. All along ma­jor banks had fo­cused largely on ur­ban In­dia. As smaller fintech play­ers in­clud­ing pay­ment banks, small fi­nance banks and non­bank fi­nan­cial com­pa­nies ex­pand their pres­ence deeper into the coun­try, they are mak­ing a dif­fer­ence to Bharat. Busi­ness To­day or­gan­ised a round­table dis­cus­sion in col­lab­o­ra­tion with global audit and con­sult­ing firm PwC. The theme of the dis­cus­sion was ‘Fintech for In­clu­sion - How Play­ers Adapt Their Play­books for Ru­ral Mar­kets; Chal­lenges and Op­por­tu­ni­ties’.

The pan­elists in­cluded Mo­han Ja­yara­man, Re­gional MD, Ex­pe­rian Asia Pa­cific; Har­jeet Toor, Head – Re­tail, In­clu­sion & Ru­ral Busi­ness, RBL Bank; J. P. Singh - Pres­i­dent & Head SME, Axis Bank; Rishi Gupta , MD and CEO, Fino Pay­ments Bank; R. Baskar Babu, MD and CEO, Sury­o­day Small Fi­nance Bank;

Ab­hishek Kothari, Co-Founder, Flex­iLoans; and Vivek Bel­gavi, Part­ner and In­dia Fintech Leader, PwC. The dis­cus­sion was mod­er­ated by Pros­en­jit Datta, Ed­i­tor, Busi­ness To­day, with Anand Adhikari, Ex­ec­u­tive Ed­i­tor, Busi­ness To­day.

Pros­en­jit Datta: What do you all see as the op­por­tu­ni­ties and chal­lenges for in­clu­sion un­der fintech?

Rishi Gupta: Over the last 12 years, the world has evolved thanks to tech­nol­ogy, reg­u­la­tion and gov­ern­ment in­ter­ven­tion. There is a big op­por­tu­nity, pro­vided we see it. Every­body is so fo­cused on ur­ban In­dia that they are ig­nor­ing Bharat. We have per­son­ally seen that in­clu­sion on ac­counts is no longer re­quired. There are al­ready about 1.8 bil­lion ac­counts in the sys­tem, which means on an av­er­age 2-3 ac­counts per per­son. The op­por­tu­nity is in build­ing ac­ces­si­bil­ity and ac­cess. So we are fo­cus­ing on it, open­ing up more points, rather than just open­ing ac­counts.

R. Baskar Babu: I agree with Rishi on ac­cess and ac­ces­si­bil­ity, but the dif­fer­ence that it has to cover Bharat or In­dia is not truly rel­e­vant be­cause they are in­ter­linked. For a remittance to go from Mum­bai to Orissa, the ac­ces­si­bil­ity has to be at both the ends. Even in a place like Mum­bai, prob­a­bly 40 per cent don’t have mean­ing­ful ac­cess to bank­ing.

Har­jeet Toor: We adopted fi­nan­cial in­clu­sion early and treat it as a busi­ness. With tech­nol­ogy, cost has come down. That en­ables us to go be­yond sim­plis­tic prod­ucts. The chal­lenge is that there is still a large be­hav­ioral change (needed) in the ru­ral space. Every­body has ac­counts, I agree. (But)

I don’t think peo­ple use ac­counts. One is ac­cess; sec­ond is lit­er­acy. I guess as pay­ment banks pen­e­trate deeper, you will have more out­lets within the vil­lage and peo­ple won’t need to travel to a branch.

Mo­han Ja­yaram: We are sit­ting on a tremen­dous op­por­tu­nity. If we take a step back and see, there are 1.3 bil­lion peo­ple of whom about 275 mil­lion have been given a loan at some time. The next 300 mil­lion is the op­por­tu­nity. We are a data-rich but fi­nan­cial in­clu­sion-light coun­try. We have a bil­lion peo­ple who have tele­com data, and pay­ments data in some form. Is there a way we can use that in­for­ma­tion to fig­ure out who to give credit to? Yes, we can. If we put to­gether tech, the data and con­sumer in­sights against the op­por­tu­nity of the next 300 mil­lion, we are sit­ting on a fair bit of op­por­tu­nity.

Ab­hishek Kothari: I prob­a­bly rep­re­sent the new­est kids on the block here in terms of try­ing to cre­ate a lend­ing en­ter­prise. Tech­nol­ogy and data are still used as an evo­lu­tion­ary mech­a­nism in in­dus­try. It’s not cre­at­ing a rev­o­lu­tion­ary as­pect. Can we cre­ate some­thing where we don’t need a phone to have a loan ap­pli­ca­tion? Can we cre­ate a so­cial scor­ing sys­tem for every­body based on the data and give them a loan? If you look at it, we are only scratch­ing the sur­face in terms of data that’s ma­chine read­able and us­able for credit as­sess­ment. One of the big­gest prob­lems I see as a data sci­en­tist is that data is in si­los.

J.P. Singh: To­day every­body is on What­sApp, and most of In­dia is on Face­book in one form or the other. That data can be used for fi­nan­cial in­clu­sion, and fi­nan­cial un­der­writ­ing. Then mar­ket crowd­ing has to stop. In­stead, we have to seg­ment the mar­ket based on ca­pa­bil­i­ties.

Vivek Bel­gavi: My ob­ser­va­tion is that avail­abil­ity doesn’t lead to adop­tion. My favourite ex­am­ple is of MDR (Mer­chant Dis­count Rate). The pay­ment ac­quir­ing was al­ways bet­ting on re­duc­ing MDR, and it be­came zero. But it made no blip in trans­ac­tions. We co­founded an in­vest­ment ad­vi­sory startup and thought why don’t we of­fer it to all folks within PwC. It was all nice and very mil­len­nial-ish. But there was no adop­tion be­cause ev­ery­one is in­grained in the cur­rent steps and pro­cesses. To shake them out will re­quire a lot of money and we don’t have ac­cess to that kind of risk cap­i­tal to re­ally make those changes hap­pen. If I am Google, I might give you scratch cards and try to drive change. Maybe all global VCs are do­ing more for in­clu­sion than many of us. We are re­ally pump­ing money to get that change hap­pen.

Gupta: Ama­zon, What­sApp, Google... are pay-

“Of 1.3 bil­lion peo­ple, about 275 mil­lion have had a loan at some time. The next 300 mil­lion is the op­por­tu­nity.“Mo­han Ja­yara­man Re­gional MD, Ex­pe­rian Asia Pa­cific “A so­lu­tion...could be bio­met­ric mi­croATM with­drawals. Hope­fully, with pay­ment banks we'll have more out­lets in vil­lages.“Har­jeet Toor Head – Re­tail, In­clu­sion & Ru­ral Busi­ness, RBL Bank

ment com­pa­nies rather than about fi­nan­cial in­clu­sion per se. Fi­nan­cial in­clu­sion re­ally means that the per­son who uses cash, be­comes dig­i­tal.

We con­tinue to see that post- de­mon­eti­sa­tion cash went down but I be­lieve some ` 20 lakh crore cash is back in the sys­tem again.

We are mov­ing from no dig­i­tal to as­sisted dig­i­tal. That as­sisted dig­i­tal will move to self-ser­vice dig­i­tal in the next few years. But cash is go­ing to be there. When de­mon­eti­sa­tion hap­pened, peo­ple al­ready in dig­i­tal ac­tu­ally started to do more trans­ac­tions. But now if you have 100 trans­ac­tions at mer­chant level, it has now come down to 10 trans­ac­tions. While there are 300 mil­lion smart­phones, only 15 mil­lion peo­ple are ac­tive users.

Bel­gavi: For an app that we are de­vel­op­ing for a client, we wanted to do a test. About 50-70 per cent of the 300 mil­lion smart phones are be­low ` 5,000. These phones do not run more than 2-3 apps at any point. Your app will per­haps come af­ter a What­sApp, YouTube or a video or mu­sic app.

Babu: We will have to go through the as­sisted dig­i­tal mode. Mo­bile (smart­phone) pen­e­tra­tion among low­in­come house­hold women is just 8 per cent, 26 per cent for men. It is like credit card pen­e­tra­tion. I have six cards, but the av­er­age would be less than one.

Ja­yara­man: In a month we set up about 34 mil­lion­odd small mi­cro cred­its that we give on the ba­sis of pre­paid data. What we re­alised is that when you look at the mod­els that we get out of there and those are largely based com­pletely on data, there is never been some­one who has ac­tu­ally lent to these peo­ple in the past so it’s all new to the credit and so on.

Datta: Any last thoughts or points?

Gupta: I think the gov­ern­ment has started to put money into the bank ac­counts di­rectly rather than giv­ing through the en­tire pan­chayat ecosys­tem. Some­where the gov­ern­ment is think­ing of mov­ing the food sub­sidy in a mon­e­tised man­ner. This gov­ern­ment has al­ready seen the ben­e­fits of digi­ti­sa­tion through the Aad­haar plat­form and that’s why the rea­son the Supreme Court al­lowed DBT to con­tinue on the Aad­haar plat­form. They saved some ` 70,000-80,000 crore. It also means that at least we’ll get some data. You can build up some al­go­rithms on that.

Gupta: I think food is what they want be­cause for ev­ery one-ru­pee sub­sidy they give, they spend three ru­pees in FCI. So they will save ` 2 for giv­ing the sub­sidy, but on the ` 1 also they will save money that can be dis­trib­uted bet­ter. Big­ger sub­si­dies like MNREGA have moved in. Now maybe food, power.

Bel­gavi: My last thought on this would be lit­er­acy. You hear about frauds in cities, with ed­u­cated peo­ple. It is of peo­ple shar­ing OTPs. Imag­ine that at a Bharat level. Other con­cerns are gen­der, caste or in­come driven im­bal­ance. These are the re­al­i­ties on the ground.

Datta: I’ve seen as anec­do­tal ev­i­dence that poor women might have bank ac­counts but they don’t have con­trol over it. The money might go in but some­body else ac­tu­ally with­draws it. Any so­lu­tions to that?

Gupta: My ex­pe­ri­ence is that sav­ing is done by women only. How­ever, she feels more com­fort­able giv­ing con­trol over those sav­ings to the hus­band or son be­cause she is not that lit­er­ate. So if we’re able to find a so­lu­tion, doorstep sav­ing can be pro­moted, which is quite an ex­pen­sive propo­si­tion.

Toor: You will have some man from a vil­lage who goes once to the ATM with all debit cards and with­draws. That’s very com­mon in some ru­ral ar­eas.

One of the places where we found a so­lu­tion was if you could do the bio­met­ric mi­cro-ATM with­drawals. Hope­fully with pay­ment banks com­ing in, we will have more out­lets within vil­lages. At present, it’s not the son or hus­band who goes and with­draws, it could be any­body.

Singh: I have seen cases where the lam­bar­dar or some­body has con­trol over 100 or 200 peo­ple’s ac­counts. He comes to the bank and says give me the cheque book, give me ev­ery­thing, I will op­er­ate this ac­count. So, as Har­jeet is say­ing, per­haps bio­met­ric is the so­lu­tion for this.

“You hear about frauds in cities, with ed­u­cated peo­ple. Imag­ine that at a Bharat level.“Vivek Bel­gavi Part­ner and In­dia Fintech Leader, PwC Tech­nol­ogy and data are still used as an evo­lu­tion­ary mech­a­nism. It’s not cre­at­ing a rev­o­lu­tion­ary as­pect

THE PAN­ELISTS: Ab­hishek Kothari, Co- Founder, Flex­iLoans; Rishi Gupta, MD and CEO, Fino Pay­ments Bank; J. P. Singh, Pres­i­dent & Head SME, Axis Bank; Vivek Bel­gavi, Part­ner and In­dia Fintech Leader, PwC; R. Baskar Babu, MD and CEO, Sury­o­day Small Fi­nance Bank; Har­jeet Toor, Head – Re­tail, In­clu­sion & Ru­ral Busi­ness, RBL Bank; and Mo­han Ja­yara­man, Re­gional MD, Ex­pe­rian Asia Pa­cific

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