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R2 i Day1 a little world_team trojans


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The first PPT by team Trojans for Road 2 Ideas.
Innovation1: A Little World

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R2 i Day1 a little world_team trojans

  2. 2. Financial Inclusion – Need of the Hour <ul><li>India ranks poorly in Financial Inclusion </li></ul><ul><li>National Sample Survey Organization, </li></ul><ul><li>51.4% of the 89.3 million total farmer </li></ul><ul><li>households in the country - No access to credit </li></ul><ul><li>27% of the households - Indebted to formal sources of which 1/3 borrowed from informal sources. </li></ul><ul><li>Financial inclusion, the base of inclusive growth is integral to the inclusive growth process and sustainable development of the country. </li></ul><ul><li>Only 135 million of the 204 million households in the country come under financial inclusion </li></ul>
  3. 3. Financial Inclusion - Framework Banking-correspondent is the only model to increase financial inclusion – Usha Tharot, Financial Inclusion Portfolio, Ex-RBI Deputy Governer
  4. 4. Business Correspondents <ul><li>Business Correspondents are organizations or individuals that organize and offer one or more points of transaction outside of bank branches. The BCs organize and manage a network of such transaction points in partnership with a bank. </li></ul><ul><li>Additionally: </li></ul><ul><ul><li>Technology Vendors provide hardware and processing capacity and connectivity which can link clients to BCs and BCs to the bank. </li></ul></ul><ul><ul><li>Customer Service Points are individuals, shops or other outlet points responsible for the direct contact with the clients. CSPs open bank accounts, conduct KYC, cash out withdrawals, receive payments and in some cases, extend credit. </li></ul></ul>
  5. 5. A Little World <ul><li>Developer of ZERO, India’s first domestic payment system with specific focus on reaching out to masses with lowest available communication infrastructure. </li></ul><ul><li>Zero Microfinance and Savings Support Foundation -appointed as a Business Correspondent by 15 Banks – SBI, PNB, DENA, UBI etc. </li></ul><ul><li>Manages field force, account creation, appointment of Customer Service Points (CSPs), management of cash etc. </li></ul><ul><li>Collaborates with strongly placed local organizations, district and state administration to ensure smooth deployment and operations. </li></ul><ul><li>ZMF creates the last mile operations network in villages and front-ends the delivery of full-featured transactional services on behalf of Banks.  </li></ul>
  6. 6. <ul><li>Leverage RBI’s BC model to set up a technology driven ‘Bank-in-a-Box’ in every village, at no capital cost to the partner Bank </li></ul><ul><li>Use new generation low-cost NFC mobile phones as POS terminals for secure offline transactions using biometric authentication, Provide robust account management systems to Banks </li></ul><ul><li>Use GPRS data coverage of mobile operators for batch synchronization with bank’s back-end systems </li></ul><ul><li>Use cashless transfers, post-transaction settlements, and negotiated overdrafts to reduce handling of cash to the minimum needed cycles </li></ul><ul><li>Open no-frills free bank accounts with photo and biometric ID for every villager, minimal cost to the bank </li></ul><ul><li>A complete set of financial services in village (under brand ZERO): </li></ul><ul><ul><li>Deposits, withdrawals, transfers </li></ul></ul><ul><ul><li>Disbursal of Pensions, NREG wages, other Government benefits </li></ul></ul><ul><ul><li>Loans (via Bank / MFIs / directly as a BC) </li></ul></ul><ul><ul><li>3rd party deposits, collections (MFI loan repayments, utilities, mobile recharge, deposits for FMCG, Pharma, Fuel, Fertilizers) </li></ul></ul><ul><ul><li>Other banking products as a Business Facilitator to the partner bank. Insurance products, MFI transactions </li></ul></ul>Key Characteristics of Little World
  7. 7. ZERO – The Application – Primary Research <ul><li>Mobile Phones act as core Bank branch </li></ul><ul><li>Mobile phones used for opening accounts on the spot by local CSP </li></ul><ul><li>Biometric Identification </li></ul><ul><li>Smart Cards not needed for biometric authentication in local service area </li></ul><ul><li>Voice prompts during enrollment and transactions </li></ul><ul><li>Printout at the end of each transaction </li></ul>
  8. 8. Pictures by Field Team <ul><li>Source: Avdhoot </li></ul><ul><li> Say, you have 100,000 locations with a population of at least 2,000. Of these, 30,000 have bank branches. You still have about 70,000 locations, with a population of at least 2,000 that is unbanked. </li></ul><ul><li>ZERO Card very efficient in covering maximum villagers in a village </li></ul><ul><li>It is easy to carry and minimum amount to open account Rs. 25/- </li></ul><ul><li>Maximum: Rs. 1000/- </li></ul>
  9. 9. Little World - Achievements <ul><li>Little. World. Pvt Ltd (ALW) raised Rs 28.5 crore in second round of financing in 2008 </li></ul><ul><li>SBI bought 20% stake in ALW for Rs.80 Cr, which valued at Rs.400 Crore in total. </li></ul><ul><li>ZERO MASS FOUNDATION crosses </li></ul><ul><ul><li>3 million mark </li></ul></ul><ul><li>A Little World among Top 10 </li></ul><ul><li>Innovative Companies of India </li></ul><ul><li>Collaborated with all major banks </li></ul><ul><li>in India </li></ul><ul><li>RBI new guidelines support ALW a lot. </li></ul><ul><li>31/01/2011 – Pranab Mukherjee , </li></ul><ul><li>Finance Minister sets a tough target to open at least 1 branch each in 72000 villages. Rest will be covered by Business Correspondents which is a big opportunity for ALW </li></ul>
  10. 10. Competitive Analysis BC Products Offered Partner Banks Customer Service Points Technology Partner Clients Reached Eko Aspire Foundation Savings, Remittances SBI Eko Financial Services Ltd. mobile phone based SMS, MIFOS for backend Basix Savings, Remittances, Micro-credit, Micro-insurance Axis Bank A Little World 8000 Drishtee Savings, Loans SBI, HDFC 450 For SBI – ALW For HDFC – Magnetic strip card and POS Swadhaar Finaccess Savings ICICI, Citi 9 FINO 6009
  11. 11. Benefit and Impact analysis
  12. 12. Prahlad Kakkar’s Sandbox Rules followed Scalable Model Cards and machines of Plastic so not biodegradable Concentration on Inclusion Malfunctioning rarely Priced nominally
  13. 13. Check Viability
  14. 14. Costs Involved <ul><li>Rent of Smart Card Device : 9000/month </li></ul><ul><li>Cost of Smart Card: Rs. 112 </li></ul><ul><li>Incentive for Business Correspondent: Rs. 4.50/smart card </li></ul><ul><li>Stipend to correspondent: Rs. 1000 + .5(each transaction) </li></ul><ul><li>RBI reimburses to Bank: Rs.50 per card </li></ul><ul><li>Customized Device: Rs. 25000 </li></ul><ul><li>Bank to Foundation: Rs. 2000/custom service provider </li></ul>
  15. 15. Revenue and Cost by Bank <ul><li>Revenues earned by reporting banks using BC model (Rs./client) </li></ul><ul><li>Total Revenue From Credit From Savings From Payments </li></ul><ul><li>16.33 11.94 1.03 3.25 </li></ul><ul><li>Costs incurred by reporting banks (Rs./client) </li></ul><ul><li>Total Cost Paid to Tech vendor Paid in Taxes Paid for Capex Paid toALW </li></ul><ul><li>62.71 33.79 8.59 6.14 5.15 </li></ul><ul><li>Cost of Capital Expenses for Staff Expenses for Operations </li></ul><ul><li> 4.37 3.61 0.64 </li></ul><ul><li>So in all the breakeven takes around 3 years for a bank but BCs like ALW reach break even sooner. So scheme is financially viable. </li></ul>
  16. 16. Scale of Innovation <ul><li>Scale Of Innovation : </li></ul><ul><li>Coverage of (Estimates based on various studies and Market Surveys): </li></ul><ul><ul><ul><li>Check in accounts - 40% </li></ul></ul></ul><ul><ul><ul><li>Life Insurance - 10.0% </li></ul></ul></ul><ul><ul><ul><li>Non-Life Insurance - 0.6% </li></ul></ul></ul><ul><ul><ul><li>Credit Card - 2% </li></ul></ul></ul><ul><ul><ul><li>ATM + Debit Card - 13% </li></ul></ul></ul><ul><li>Geographical coverage </li></ul><ul><ul><ul><li>5.2% villages are having a bank branch </li></ul></ul></ul><ul><li>Farmers coverage- </li></ul><ul><ul><ul><li>- Out of 119 million farmers, small and marginal farmers are 97.7 million (82.1 %) </li></ul></ul></ul><ul><li>Initially, the scale of the innovation was small but now with new RBI guidelines to include all rural parts of India without a bank branch can act as a big opportunity. </li></ul><ul><li>The Innovation is capable of being scaled up as it is easy to use, simple to understand and suits different terrains. </li></ul><ul><li>The distribution pattern shall be the most important in the case of scaling up. </li></ul>Figures by Source: Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India
  17. 17. Viability Continued
  18. 18. Scale on all parameters 0 1 2 3 4 5 Capacity to scale up Y Ensuring Social equity Y Creating new price – performance levels Y Fair & Transparent transactions & relationships Y Environmental sustainability Y Respecting rule of law and individual rights Y
  19. 19. <ul><li> ALW’s expansion strategy </li></ul><ul><ul><li>Presence in 21 states and intends to cover whole of India and also expand internationally </li></ul></ul><ul><ul><li>U se existing affiliation with Zero ZMF to create pre-eminent last mile delivery infrastructure in villages </li></ul></ul><ul><ul><li>ALW to use rural infrastructure created by ZMF for distribution of multiple products and services catering rural demand for e.g. micro insurance, mobile recharges , green goods etc. </li></ul></ul><ul><ul><li>25000 new accounts open everyday by ALW </li></ul></ul><ul><li>Continue growth strategy of deepening its penetration in current areas of operation, and broadening its national outreach </li></ul><ul><li>After the initial pilot phase in early 2007, ALW increased its presence to 21 states covering a total of 119 districts. Current customer base stands at 3.75 Mn, with over 25,000 accounts being added every day. ALW has created 6,530 points of presence till Feb 2009 </li></ul>Future Growth Goals Growth in Revenues and Enrolments FY2013 Goals Customer Base: 100 Mn CSP : 151,500
  20. 20. Way Ahead <ul><li>ALW need to give more focus and attention to the financial viability of the channel. </li></ul><ul><li>ALW and its staff to be encouraged to gain minimum banking knowledge and skills; common programmes should be instituted by the regulator or banks; support should probably be provided though govt-sponsored social programmes </li></ul><ul><li>Cross-subsidy as in case of SHG - Bank Linkage Programme is required to absorb initial investment costs </li></ul><ul><li>Improve client adoption and better meet client needs. Several thoughts and ideas emerged on the subject of adequate client education and the tailoring of services to their needs. </li></ul><ul><li>ALW and Banks should try to build client confidence by offering services such as remittances and then graduate to savings products </li></ul><ul><li>No Frills Accounts should be treated as first steps and supply-side payments like NREGA payments, old age pensions, etc should be routed through these accounts to enhance their usability. </li></ul><ul><li>Improve coordination and interoperability between banks and ALW, also in a range of channel management relationships. Invest in new low-cost technological platforms for transaction & MIS </li></ul><ul><li>The key to success of ALW lies in banks making client acquisition and business expansion a business proposition; and not treating it as a CSR activity. When ALW becomes an instrument of business expansion and profitability, banks will ask different questions and find practical answers to the many problems that exist today </li></ul>