A National Survey of Banking Correspondents (CSPs) in India 2012

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A National Survey of Banking Correspondents (CSPs) in India 2012

  1. 1. National Survey of Branchless BankingAgents in India:Towards high quality BC customer service pointsGregory ChenAimthy Thoumoung June 2012
  2. 2. CSP Survey: BackgroundIn 2006 India’s central bank (Reserve Bank of India) permitted banks to useBusiness Correspondents (BCs) to organize networks of customer servicepoints (CSPs) – these CSPs are the equivalent of agents in other countries.CSPs are individuals a bank’s clients can locate to transact with the bank. For thepurpose of this survey and in this PowerPoint, CSP refers to individuals managingthese service points. (In some cases there is no BC company and banks contractdirectly with CSPs.)A national survey of CSPs was undertaken jointly by CGAP and the College ofAgricultural Banking (an affiliate of the Reserve Bank of India) from March toMay of 2012. MicroSave provided technical input to the survey design and deepcase field work to complement this quantitative survey.This PowerPoint presents the summary headline findings. The survey data willbe analyzed in greater depth and the analysis shared through a full report led bythe College of Agricultural Banking due for release in August 2012. 2
  3. 3. CSP Survey: Background Estimated (all India) Business Correspondent* Customer Service Points80,000 Urban CSPs increasing and Proposed70,000 3 year shift to becoming a large part of60,000 financial electronic financial infrastructure50,000 inclusion G2P40,000 targets Rural30,000 But, it’s early20,00010,000 0 Majority are 2006 2007 2008 2009 2010 2011 2012 <24 months BC * adapted in operation Guidelines Issued *Business Correspondent (BC): regulatory category created by Reserve Bank of India which allows organizations to partner with banks to set up one or more customer services points (bank agents) 3
  4. 4. CSP Survey: Background Aggregated supply side figures most Bank   commonly analyzed; missing critical feedback on how CSPs and clients interact BC   CSPs = customer service CSP   points, individuals authorized by banks to transact remotely with the bank’s clients Client  Surveyed 860 on-  service quality-  motivations 4
  5. 5. CSP Survey: Objectives• National not anecdotal or sub-set• Focus on CSP quality• Establish baseline to track improvements over timeJoint effort of College of Agricultural Banking and CGAPLargely corroborated by in-depth field work by MicroSave 1.  This PPT summarizes findings 2.  Subsequent report more in-depth (due August 2012) 5
  6. 6. CSP Survey: ObjectivesGovernment & Policy Providers & Delivery•  Track Financial Inclusion •  Identify key risks policy outcomes •  Articulate key service•  Balance quality level indicators alongside quantitative targets •  Cull poor practices and build on positives•  Obtain market feedback on suitability of regulations 6
  7. 7. CSP Survey: National SampleSample SelectionAll 5 regions: North, South, East, West & Northeast * Financial Inclusion: villages targeted under national financial inclusion planPrioritized 11 states with higher reported FI* coverageSelected from bank lists of CSPs active as of Dec 2011 ✪ ✪  Publicly accessible lists of CSPs and locations are not widely available yet Not 170 unable to survey, of these: Tried to contact 1,030 CSPs Available 79 not reachable: wrong phone #, no response Available 91 unwilling: stopped CSP work or unhappy with CSP work Sample: 860 surveyed Survey Details 10th March to 11th May, 2012 Business hours, weekdays & weekends Local languages IMRB http://www.imrbint.com/ survey firm 7
  8. 8. CSP Survey: National Sample 214 102 CSP Sample 46 Sought 1,030 Dec ‘11 bank 14 listed CSPs 76 2 Reached & surveyed 860 68 CSPs that work for: 7 Public Sector Banks70 2 Regional Rural Banks 92 2 Private Banks 10 BC Companies* Note: added 241 customer surveys to double check some CSP responses 98 78 * BC companies are third party firms that manage networks of CSPs. 148 of the CSPs surveyed were individuals contracted directly by banks and not through BC companies. 8
  9. 9. CSP Survey: National Snapshot CSP Technology CSPs that use mobile phones 500 handsets for transactions is low. 450 400 350 •  Will this later limit self-service by # of 300 clients over their own handsets? CSPs 250 •  How might this affect product use and 200 53% 150 uptake? 100 26% 50 18% 0 3% POS+Card Personal Computer Mobile Phone None Typical CSP Profile: Individual BC Male 85% CSPs (17%) Large Corporate BC Companies (5%) 25-35 47% Specialized BC High School (Class Companies (78%) XII) or Graduate 66% 9
  10. 10. CSP Survey: National Snapshot Length of time operating as CSPs 350 300 # 250 Recent fast expansion means many new CSPs. of 200 Survey could not estimate CSP churn which CSPs 150 36% requires data from Banks and BC Companies. 31% 100 20% 50 6% 5% 0 1% 1% 1% <3 4-6 6-12 12-24 24-36 36-48 48-60 >60 Months in operation Most CSPs openedIndia has Urban by banks as meansunusually wide Moving 13% of meeting nationaluse of CSPs that Point Non-FI (FI) financialare roaming or 30% Village Fixed inclusion targets:on the move 18% Point villages >2,000 70% FI Village people without bank 69% presence 10
  11. 11. CSP Survey: National Snapshot Sole Other Income Income Kirana Self Moving 18% Shop Agriculture Salaried Other Employed Point 4% 4% 2% 1% 1% Fixed 8% 5% 3% 8% 12% Point 33% Survey asked individuals about individual CSP income; not household income 11
  12. 12. CSP Survey: National Snapshot Low CSP transaction levels in India are a sign that BC/Bank/CSPs arrangements are still under-developed. Offerings need to become more attractive to clients to drive more transactions. 300 Transaction Volumes 250 CSP Transactions Per Day 200 National Average #     Brazil * 157 of   150CSPs   Kenya * 87 100 India 25 50 *CGAP research 2010 0 CSP Transactions Per Day 12
  13. 13. PartCSP Survey: Outline IPart I Are Customers Receiving Value?Part II Will CSPs Remain Motivated?Part III Summary Observations 13
  14. 14. PartPart I – Are Customers Receiving Value? I Reliability Convenience •  Availability •  Fixed point •  Ability to •  Moving point Transact •  Choice of CSP Efficiency Products •  Account opening •  Payments •  Account •  Savings activation •  Insurance •  Credit 14
  15. 15. RELIABILITY: significant portions of CSPs are unavailable and face technology failureCSP Tried to contact 1,030availability Significant pockets 860 surveyed 170 not possible where CSPs are to survey probably not available to clients 45 no transactions yet MicroSave’s work 99 no cash on hand estimates CSP 95 no income from CSP activities dormancy of 22-43%CSP ability 25% unable to transact at moment of survey (215/860)to transact Technology is the main barrier: • Connectivity • Defective cards or POS 15
  16. 16. Part CONVENIENCE: differences between fixed and I moving point; limited choice for many clientsAccess to CSP 70% fixed point CSPs (602/860) of these: 93% at the correct address (590/602) 69% open 7 days a week (415/602) 86% easy to find (518/602) 30% moving point (258/860) Advantage: can move closer to customers Disadvantage: not always readily availableChoice of CSP 35% of customers tied to one CSP (301/860) Regulatory change allowing clients to use CSPs of multiple banks approved in March 2012; this change has not affected client choice yet 16
  17. 17. Part EFFICIENCY: CSPs open accounts quickly; I account activation time by BC/Banks too slow 40% 35% Account Opening Time - MINUTES 30% 25% CSPs Perception %     20% Of   Customers Perceptionrespondents   15% 10% 5% 0% 1-5 5-10 10-15 15-20 20-25 25-30 30-60 60-90 >90 45% 40% Account Activation Time - DAYS Activation beyond 7 days indicative of inadequate back- 35% end synchronization between 30% BC Company and Bank CSPs Perception Customers Perception 25% %     Clients who can transact Of   20%respondents   immediately are more likely to 15% become active users in the 10% future 5% 0% 1 2 4 7 15 30 45 60 >60 17
  18. 18. Part PRODUCTS: most CSPs offer only single payment I product; more cross-sell of other products criticalNo Frills Accounts (NFAs) are basic low balance bank accounts offered by nearly all CSPs.NFAs are not categorized here as a separate product and graph below only includes non-NFAproducts. NFAs are basic “gateway” transactional accounts enabling use of multiple products. 500 Payments prioritized. CSPs # CSPs Offering primarily payment points; more 450 like ATMs, less like branches 400 # CSPs Priority 350 Credit is least available and prioritized #     300 of   250CSPs   200 29% CSPs offer only one product 150 category & risk becoming single- purpose 100 23% offer 2 products 50 14% offer 3 products 0 18% offer 4 or more products G2P P2P Savings Insurance Credit Product Categories 16% offer only NFA 18
  19. 19. PartCSP Survey: Outline IIPart I Are Customers Receiving Value?Part II Will CSPs Remain Motivated?Part III Summary Observations 19
  20. 20. PartPart II – CSP Motivations II Income Liquidity •  Earnings from Costs CSP work •  Liquidity held by CSPs Balance with BC/Bank Other Work Support •  Sole Income •  Training •  Partial Income & •  Visits from BC/ Other Activities Bank •  Timelines of pay 20
  21. 21. Part INCOME: CSP earnings from CSP work are II dangerously low Monthly CSP Revenue from CSP Work 100 90 80 70 # 60 CSP Primarily fixed point CSPs at of ExpectationsCSPs 50 urban locations (median) 40 30 20 10 0 Revenue (INR 000s) 21
  22. 22. Part LIQUIDITY COSTS: required amount of CSP II liquidity not a major cost yet 250 CSP Liquidity 200 150 CSPs Cash # ofCSPs 100 CSPs Settlement Account * 50 0 Balances (INR 000s) Most CSPs keep small amounts of liquidity and have limited ability to respond quickly to immediate client needs. Low liquidity limits CSP costs but may inhibit client uptake of more products. * electronic float account some CSPs keep to transact with clients 22
  23. 23. PartBALANCE: less than half of CSPs earn income IIelsewhere; raises regulatory and labor union questions CSP work as sole income source raises questions: •  Bank unions may question CSP employment status •  Business Correspondent design was to leverage existing organizations Little other •  Only 5% of CSPs are sourced by large work corporates such as fast-moving-consumer goods (FMCG) companies or mobile operators 23
  24. 24. Part SUPPORT: training and visits from BC/Banks II inadequate in too many casesCSPs unable to distinguish BC staff from Bank staff. Survey therefore combined BC andBank staff into single category.Training 10% never received training (89/860)Visits from BC/Bank 18% no visit in > 1 month (158/860) 40% no visit in > 1 week (350/860)Timeliness of Payment 50% are paid slowly (428/860) 9% pay has not arrived (77/860)Opinions on Support 36% say its “not adequate” (313/860) 24
  25. 25. PartCSP Survey: Outline IIIPart I Are Customers Receiving Value?Part II Will CSPs Remain Motivated?Part III Summary Observations 25
  26. 26. Part Summary Observations III •  Reliability: significant portions of CSPs unavailable and face technology failure •  Convenience: differences between fixed and moving point; limited choice for manyValue to clientsCustomers •  Efficiency: CSPs open accounts quickly; account activation time by BC/Banks too slow •  Products most CSPs offer only single payment product; more cross-sell of other products critical •  Income: CSP earnings from CSP work are dangerously low •  Liquidity costs: required amount of CSP liquidity not a major cost yetCSPMotivations •  Balance: less than half of CSPs earn income elsewhere; raises regulatory and labor union questions •  Support: training and visits from BC/Banks inadequate in too many casesIn the next stage, improving the quality of CSPs will be more important than growth.Quality will determine whether clients benefit, whether costs can be covered andwhether confidence can be built. Higher quality CSP networks should provide a moresolid foundation for Banks, BC companies and customers to build on. 26
  27. 27. Part Initial Recommendations IIIGovernment Providers (Banks, BCs)•  Set smart and meaningful •  Ensure well crafted SLAs inservice quality minimums commercial agreements.in financial inclusion targets. •  Incentivize service quality,•  Ensure public sector banks cross sell and transactions.include precise qualitycriteria in tendering & •  Invest to synchronizecontracts. products, technology and service quality across Banks,•  Monitor closely client BCs & CSPs.uptake as a lead indicator. 27
  28. 28. Part Initial Recommendations IIIFocus on increasing client demand driven use of CSPs tracked by transactionvolumes. One leading Indicator to track is # transactions per CSP. %     of   CSPs   CSP Transactions Per Day 28
  29. 29. PartOther Big Picture Questions IIISo far… More testing of …18% of CSPs use Scaled mobile phonemobile phone as deployments?transaction deviceMostly a single Multiple products availablepayments product through CSPs and incentives to cross-sell?5% CSPs from Bank partnerships with largespecialized large co–equal FMCG or mobilecorporates operators? 29
  30. 30. Other Resources•  CGAP, “Building Viable Agent Networks in India”, 2010 ▫  http://www.cgap.org/gm/document-1.9.49702/Building_viable_agent_networks_in_India.pdf•  CGAP, “Agent Network Management Toolkit”, 2011 ▫  http://www.cgap.org/gm/document-1.9.49831/AgentManagement_TG.pdf•  MicroSave, “The State of Business Correspondence: Agent Networks in India” 2012 http://www.microsave.net/sites/files/technicalBriefs/policybrief/PB_2_The_State_of_Business_Correspondence_Agent_Networks_in_India.pdf•  MicroSave, “State of BCNM Industry in India-The Supply Side Story” 2012 ▫  http://www.microsave.org/sites/default/files/research_papers/State_of_BCNM_Industry_in_India-The_Supply_Side_Story.pdf 30
  31. 31. Advancing financial access for the world’s poor www.cgap.org www.microfinancegateway.org

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