Financial Inclusion

Financial Inclusion, FinTech, Open Banking

Different Ways to Bank – Digital Banking, Online Banking, Internet banking, Mobile Banking

/

“Financial Institutions must be able to deliver and easy to navigate, a seamless digital platform that goes beyond a miniaturized online banking platform.” -Jim Marous, Publisher –  Digital Banking Report How many of you have actually visited a bank in recent times? Do you remember the last time you visited a bank to transact money? Not sure, right? The reason for this can be understood better if you acknowledge the fact that you live in an era of digital banking. Your buying behavior and modes of payment have changed drastically over the last decade. Cheque and cash are old schools now, and it is more about online banking, mobile banking, and Internet banking. This cashless economy has not only made things easier for you but has also made it all instant and quick. You no longer have to carry wads of cash or wait for banking hours to receive and transact money.  While you do have quite an options when it comes to virtual banking, here, we would focus majorly on digital banking, mobile banking, open banking, and online banking. So here is the primer on different ways to bank. Online Banking You are using online banking service every time you log in to your online bank account. In other words, transactions conducted electronically using the internet as a gateway are called online banking.  “Online banking refers to banking services where depositors can manage more aspects of their accounts over the Internet, rather than visiting a branch or using the telephone. Online banking typically is comprised of a secure connection to banking information through the depositor’s home computer or another device.” – Techopedia Pros of Online Banking Almost every financial institution nowadays gives this facility to its customer to reduce the hassle of visiting their physical branch. Some banks even allow you to deposit cheque by simply taking a picture of it. No more tedious process of banking with the long queue with restricted working hours and unpredictable weather conditions with equally unpredictable mood swings in hot, sweaty and humid conditions. With the advent of online banking, a person can virtually monitor and transact money 24/7 without having to wait for the banking hours. Also, the alert messages and emails allow you tomonitor your account anytime and detect any fraudulence well in advance. Cons of Online Banking The biggest drawback of this mode of banking is that it can’t be used to deposit and withdraw money. Also, your online banking experience is dependent on your internet connectivity. Digital Banking While there is a tendency among people to confuse this term with online banking, digital banking is definitely not the same as the former. While online banking literally limits you to the services provided by your banks like NEFT transfers, automatic payment reminders, and the likes, digital banking goes beyond this. Online banking focuses on digitizing the “core” aspects of banking, but digital banking encompasses digitizing every program and activity undertaken by financial institutions and their customers. Pros of Digital Banking When you talk about digital transactions, you think of mobility, feature-laden transactions, predictive and profile-oriented banking with functions like booking tickets online and purchasing a product/service online. It is also about using e-commerce businesses for doing your day-to-day transactions and your regular online banking without any hassle on-the-go. Digital banking also means attractive cash-backs, discounts, and vouchers while transacting digitally. Cons of Digital Banking While the advantages outweigh the disadvantages, there are a few drawbacks involved in digital banking as well. You may not be very comfortable making large payments digitally. Also, you may tend to get lured into unnecessary online shopping just to use the cash back and vouchers that you get whiletransacting digitally.  But who considers shopping a drawback ever, right? Internet Banking You may say that online banking and internet banking are the same.  Yes, agreed!  However, there is a new facet of online banking that goes over and beyond the understanding and scope of online banking.  Open Banking!  Ever wonder what that means to you?  Through this concept, people can share their transaction data with third parties to boost competition in the financial market. Sounds interesting, right? Pros of Internet Banking It allows you to initiate and make payments directly from your account as a bank transfer. It also enable you to keep a check on your finances in a better way. Through open banking, you are not only transacting, but you are also streamlining your finances andmanaging it more effectively. With this, you can also get more customized services as per your spending behavior, leading to a more responsible and systematic lending process. Cons of Internet Banking This concept is relatively new, and that literally translates to many trial-and-error instances and a general mistrust related to its security and authenticity. People who are not adept at digital technology might not be able to reap its full benefits. Mobile Banking You all have used this at some time or the other. Every financial transaction you undertake using your Smartphone applications is termed as mobile banking. Apart from the commercial apps, your financial service provider would also have a mobile app with which you can transfer cash and make bill payments conveniently on your mobile. This is by far the most trending among all the banking types, and the onus is that you would only need your Smartphone and an internet connection for this kind of banking! Pros of Mobile Banking Mobile banking has a lot of scope in the virtual banking space and encompasses transactions through mobile wallets, digital payment modes, UPI transfers (like the BHIM app), etc. There are many mobile apps which offer you safe and secure transactions and much more, ‘anywhere – anytime’ with just a click. For example, SBI has SBI Yono, SBI Anywhere; ICICI Bank has iMobile. HDFC has HDFC Mobile and Pay Zapp. Kotak Mahindra’s Banking app is Kotak 811, while Axis Mobile provides Axis Mobile. We also have Payment Banks committed to the inclusion and service to the last

Financial Inclusion, FinTech, FinTech Trends, Open Banking

Digital Banking: The Talk of the Town

/

Digital Banking is all about the transformation, where the consumer rather than the technology, is in the driver’s seat, and this MATTERS. It’s about digital money deposits, withdrawals and transfer of money from one account to another. It’s also about Account Management to loan management to paying all your bills digitally. Digital Banking essentially entails the leveraging of technology, where banking services are delivered over the internet, by involving high levels of process automation and web-based services. What Is Digital Banking? Digital banking, in simple words, is emulating 90% of the services provided by a conventional bank branch digitally, via a mobile app or through net banking in your computer browser. Welcome ‘Digital Banking’. Welcome to the virtual world of  banking services! Channels of Digital Banking Just as the word “virtual” is put up, you might wonder about the channels existent to avail such services. Let’s take a look at a few. Today, the main channels of digital banking are the Android and iOS apps of the respective banks and their browser-based websites. These apps are easily available in different app stores like Amazon Appstore, SlideME, Samsung Galaxy Apps, Mobile9 and so on. For example, SBI has SBI Yono, SBI Anywhere; ICICI Bank has iMobile. HDFC has HDFC Mobile and Pay Zapp. Kotak Mahindra’s Banking app is Kotak 811, while Axis Mobile provides Axis Mobile. We also have Payment Banks committed to the inclusion and service to the last mile like PayTM, Vodafone m Pesa, Airtel, Fino, Indian Post, Jio and so on. Babies on the block: Neo banks & Challenger banks In this race, we are also joined by Neo banks and Challenger banks (Read ‘Tomorrow’s Bank’)  like Revolut, N26, Monzo, Atom, Yolt, WeBank, Moven, Fidor, and MYBank to name a few. These banks are an important part of the emerging cohort of  FinTechs which puts customers at the center of everything. They are the banks which are reinventing the practices and processes associated with the traditional banking. A new type of digital bank (often working solely through a mobile app) which exists without branches. These are 100% digital banks. Neo banks don’t have the license and they rely on a partner bank to operate. On the other hand, Challenger banks have the full banking license and offer full suite of banking products. They compete independently and on equal terms with traditional banks or digitally manifested traditional banks.  They offer: Reduced costs Advanced features User friendly interfaces Customized reports Fast account openings ( between 3 to 10 minutes) International ‘Multi Currency’ Payments Instant ‘Multi Currency’ Payments 24/7 support Vaults and Expenses Analytics All these to ensure simple, secured and seamless transactions! Digital Banking Features Listing some of its many features: You can apply online for opening a savings or current account from your desktop or mobile. A manual call from a bank representative follows, who then completes verification from a remote branch.  OTP, video authentication and upload of scanned documents are proceeded with. This enables low cost zero balance account. 24/7 query solutions by chatbots are available in your app or net banking facility. Provides a highly secured, encrypted money transfer. Enables 24/7 money transfers at minimum or no extra fees, and displays their records whenever necessary. Electronic payment of bills to the pre-registered payees. Offering customized pre-approved all-purpose loans to the customer via a digital channel. Advantages of Banking Digitally Some of its many advantages will surely help you in forming a fair view of digital banking and its multi-faceted applications: Visiting a branch and spending precious work time is eliminated. Paying your bills online, keeping track of your transactions and tab on your spending has become easier. Customized approval for a loan via Artificial Intelligence using CIBIL in minutes for a customer. Avail discounts on your favorite activities right there from your banking app. Digital Banking provides with a virtual debit card, whenever you wish to generate one. Without a permanent CVV and duration of 24-48 hours, these are much safer. Real-time interbank payment is now the norm through IMPS while BHIM (Bharat Interface for Money) and UPI (United Payment Interface) enhance the interbank payment security. Multiple money applications can be synced together. Online budgeting was never so easy. Real-time figures, anytime, anywhere. Multiple sources of revenue for the bank. Cost of providing digital banking services is a fraction of branch bank services. Cons of Digital Banking Like any other novelty, digital banking also comes with its own set of disadvantages: Not possible without a stable internet connection. With scraping of Aadhaar for authentication, the model of digital verification that’s the cornerstone of digital banks is at risk. Chatbots and Robo advisors are not always the best option for the query. Unless they have the algorithm to learn from new questions, sometimes they loop back to the same answer for different queries. When products like FD, which are linked to the performance assessment of a bank employee, are done online, no particular back employee gets its credit. This leads to disinterest in that product in the bank employees of that branch where it’s registered. Few Dos and Don’ts in Digital Banking (Source: TribuneIndia.com) While banks and FinTechs take all precautions to ensure security, it’s always advisable to know the dos and don’ts of digital and online banking. Here are some of them: Always keep them password protected. Change your passwords and security settings regularly. Always visit your bank’s secure Internet Banking site directly. Always verify your domain name. Log out of your Internet Banking account the minute you complete transactions. Use dedicated/secured  WI-FI networks only. Always use, and update Antivirus software to keep your information safe. Safety tips while using a mobile app for banking transactions: Never save your mobile banking log-in and password on the phone. Never leave your handset unattended. Always lock your phone to prevent unauthorized use. Notify your bank as soon as your mobile is lost or stolen. Update the apps regularly. Keep an eye on your account balance and transaction history regularly. How FinTech

Financial Inclusion is the key
Agency Banking, Digital Financial Services Platform, Financial Inclusion, FinTech, FinTech Trends, Inclusive Banking, Open Banking, Rural Banking Solutions and Financial Inclusion

Financial Inclusion: What will it be like for years to come?

/

Financial Inclusion helps lift people out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contributions to society. – Sri Mulyani Indrawati, Indonesian economist, Minister of Finance of Indonesia since 2016 Economic growth of a country depends on factors like national income, per capita income & per capita consumption, technological advancement and even its political structure. An equilibrium between savings and consumptions is another factor which decides economic growth. Walter Bagehot, the famous classical economist, stated long ago that a strong financial system is crucial for economic growth and that the lending should be “quickly, freely and readily”. Translated to suit modern day scenario, to strengthen financial systems you need to encourage economic activities like Financial Inclusion, Digital Banking & Fintech. Let’s explore what and how Financial Inclusion can do and what it holds in the future for developing countries like India, Nepal, Bangladesh, and other African and Asian economies. Defining Financial Inclusion Financial inclusion can be broadly defined as the process of making financial services available to people, especially the weaker sections and low-income groups of the society. It includes the timely and adequate availability of a wide range of financial products and services like:   Bank accounts for saving & transactional purpose   Equity products   Insurance   Saving products   Loans For economic growth in developing countries, this aim is furthermore towards ensuring financial inclusion to the unbanked and the underprivileged community who are either unaware of or unable to affordable financial services and products. Penetration of financial services to all sections of society at a swift pace can be achieved through Digital Banking and FinTech. Goals to achieve Financial Inclusion are: To maximize the use of the latest technologies to transform the existing traditional financial or banking service models. To better the existing products or services of the financial sector. Financial Inclusion – Impacting Economies of Developing Countries Impact of Financial Inclusion, especially via Digital Banking or FinTech, can be exponential. A survey report by McKinsey Global Institute, which has been endorsed by the World Economic Forum also, states that there are more than 2 billion individuals and 200 million businesses (small, medium and micro) with no formal access to financial services like savings or credit. Those who have access are often required to pay heavy fees or charges. It goes on to state that if through Digital Banking, financial inclusion is ensured then the following impacts are expected:   GDPs of developing countries like, India, Ethiopia, Nigeria, and similar Asian economies will increase by 6%. The absolute value of such increase may reach a whopping $3.7trillion by 2025.   This incremental GDP thus created will generate an additional 95 million new jobs across industries.   Addition of 1.6 billion unbanked individuals will create a big pool of loan borrowers. Around $2.1 trillion of the loan amount to these individuals or small sized businesses is expected.   Governments can bring down tax collection leakages and gain up to $110 billion per year.   Governments stand to gain up to $400billion every year when they convert traditional accounts to digital accounts as they can now save 80-90% of cost on managing traditional accounts.   Increase in customer base will result in an incremental revenue generation of $4.2 trillion. All these predictions sound exciting, right? Read on to know some of the many concrete benefits of financial inclusion. Concrete Benefits of Financial Inclusion The few of the many,  main benefits of financial inclusion are:   Better Penetration of Services With financial inclusion in place, reaching the rural populace will be made possible providing them easy access to bank accounts, cash payments, cash receipts, and account statements. The authentication and fulfillment of services can be done by fingerprint and online receipts respectively.   Boosting Economic Growth The banking ecosystem will be strengthened as the cash economy will be reduced and the habit of saving will be inculcated in rural masses.   Direct Subsidy Transfer The government subsidies will be directly deposited to the bank accounts of beneficiaries. The funds will thus reach the intended recipients instead of middlemen forestalling leakages and corruption.   Encourages Entrepreneurship Financial inclusion will motivate formal banking and transparent credit availability which will release people from the clutches of unofficial money lenders. Adequate credit will prompt entrepreneur initiatives which will further enhance economic outputs and prosperity of the country. Financial Inclusion – Headway The progress of financial inclusion in the context of emerging economies like India has been substantial. The same has been highlighted in the Department of Financial Services GOI reports as:   35.5% of households availed banking services in 2001 which grew to 58.7% in 2011. This growth is significant in rural India –from 30.1% in 2001 to 54.4% in 2011.   The CRISIL- Inclusix which includes branch penetration, deposit penetration, and credit penetration was 35.4 in 2009 and has grown to 40.1 in 2011 to 58.0 in 2016.   IMF ‘Financial Access Survey 2018’ reported the following- Low-income countries like- Bangladesh, Myanmar, Guyana and many African countries have successfully used mobile payments for Financial Inclusion. These countries have more than twice the number of bank accounts per 1000 adults than the developed economies. What a sky-high improvement! Additionally, the IMF Financial Access Survey 2018 also reported an increase in the number of ATMs per 100,000 adults, branches of commercial banks per 100,000 adults, deposit and loan accounts with commercial banks per 1000 adults. Mobile money transactions number per 1000 adults was the most attention-gainer with a significant rise! Financial Inclusion does not mean only access to services but how those services are useful for the user. One of the parameters which are considered by various organizations while mapping FI is the safety and convenience of the financial service or product. A survey done by the World Bank Group, measuring the Financial Inclusion and Fintech revolution, reported that globally the percentage of adults using digital payments for receiving and making payments increased by 11% between 2014-2017. In developing countries, it is higher by 1% i.e. 12%.

Open Banking Enabling Financial Inclusion
Financial Inclusion, Open Banking, Open Banking API

How Open Banking can Help in Financial Inclusion

/

Jonathan a villager who supplies vegetables to the branded supermarket in the city needs to submit monthly invoices [physical copy] to get the payment.He has a bank account but still has to maintain a physical copy of the number of vegetables supplied with the offer price. Recently he got to know about a software that could do the maths, generate an invoice and submit it to the concerned vendor. Vendor on receiving the invoice can release the payment directly to his bank account, that is accessible to Jonathan on the software/app via open banking. Welcome to the World of Open Banking that is enabling Financial Inclusion. How Open Banking can Enable Financial Inclusion Financial inclusion a concept that ensures all households and businesses, irrespective of income level, have access to and can efficiently use the suitable financial services they need to enhance their living. On the other hand, Open Banking initiative assures customers get a secure, agile and rich customer experience. The two initiatives are to benefit “THE CUSTOMER” then why not let them collaborate and access manifold advantages. The Problems Faced by Individuals/Businesses in rural/remote areas Access to Banks and Banking is tough and costly Even though individuals have a bank account, they are not in an operational state or dormant as operating the bank account is like traveling to a distant town. Lack of Financial Education High-interest rates for businesses who are in need of loans Lack of transparency leads to broker/dealers conning individuals and enterprises The absence of proper banking services limits their capability while collaborating with urban clients.   Could Open Banking Help in Solving the problems? Let’s pick each case and analyze if Open Banking could resolve these problems. Accessing Banks and avoiding DORMANT status Fintech, Banking technology and government initiatives are helping individuals to open a bank account with the help of technology. With banks now equipped with digital channels, opening a bank account could be done via Bank Agents or Agent Banking. These foot soldiers’ are authenticated by respective banks to be the middlemen between the bank and the customer. With the digitization and availability of smartphone, banking apps are installed on the phone and all the services availed by the customer have a track record providing transparency to the process. Open Banking helps users to access the bank account via authorized third-party apps, assist in bill payments, funds transfer thereby keeping the account in ACTIVE status. Access to Financial Literacy Thanks to innovative fintech models and open API that you can download an app on your mobile hook it to your bank account and learn about different terminologies like what is savings account? What interest rates mean? How are interest rates calculated? Etc. All of this could be accessed in your native languages, thanks again to open API and open data. Interest Rates Offered as per Regulatory Orders If an individual applies for a personal loan to the bank, with digitization in a place, he would be offered the interest rates as approved by the regulatory authority of the country. In cases where an individual is served by different banks, he/she can use a third party app using Open API model to compare which bank/fintech firms offer the lowest interest rate? Access to Growth and Opportunity The same example of Jonathan would be the most apt here as with Open API module, and Open Banking concept applied, Jonathan now could reach out to more urban clients without the need to leave his native place. Teknospire enabling Financial Inclusion with Open Banking Teknospire growth has been a structured one, each module evolving in a planned manner, approaching digitization one at a time. With an Open API design, the salary automation platform designed for civil servants of Zimbabwe was seamlessly connected to government payrolls and corporate ERPs. Next move was to offer a platform that helps the customer to pay bills, recharge and funds transfer and Bill Automation platform or micropayments digitization birthed. Next module was to help solopreneurs or banking agents and we launched Agency and Payment Module for individuals to access the digital platform and help in last mile banking. With a stable ecosystem, rich customer base, and tested platform the small and cooperative banks saw an advantage to extend their reach. With a lean banking layer or Agent Banking solution as a new addition to our offerings. Banks trusted us as the technology provider, and started collaborating with us where they get Merchant Banking, Agent Banking, Automatic Reconciliation, Micropayments as solutions. The beauty of all these modules has been the standalone working, enabled with Open API architecture. The Banks or NBFCs or microfinance firms could either sign in for all modules as one suite or could get one module of their choice. With Open API it helps firms to integrate with their systems smoothly.

Open Banking
Digital Banking, Financial Inclusion, FinTech Trends, Open Banking, Open Banking API

Open Banking: End of Card Payments?

/

Any new technology or innovation always opens up the debate about the relevance of such models in the first place. When it comes to the Open Banking APIs (Application Programming Interfaces), the newest offering of FinTech, there are ongoing discussions on how it can bring about a revolutionary banking experience which is beneficial to the end users. The basic idea behind all these innovations remain to offer a better experience to consumers and leverage the choice of integrated systems that are widely available today. However, one of the most intriguing questions around the Open Banking model is about the potential it holds to change the payment ecosystem entirely. How Open Banking works? Taking one of its many applications, to provide assistance to you, so that you get the best of the deals available and can manage your finances efficiently, Open Banking will enable companies to give more accurate personal financial guidance, tailored to your particular circumstances and delivered securely and confidentially. To provide tailored advice, companies need to know how you use your account. At the moment, to get personal financial guidance, you have to hand over your confidential banking information to price comparison websites. Open Banking will use APIs (Application Programming Interfaces) to share customer information securely. Companies will be able to use open banking APIs to see your transaction information to tell you what you might save when considering the current account best suited to you. Or if you run a small business you could find the best deals for your business accounts and loans. No in-betweens, no interruptions, just pure and simple direct customer-to-service relations. Open Banking: End of Card Payments in Future? That’s certainly a possibility! Fundamentally, Open Banking is a concept that is all about the free flow of data. It allows third-party service providers to access financial information of the customers securely (with their consent) and in real time. An excellent example of this could be the banking payment mechanism which requires each transaction to be done manually using the payment cards. However, in an Open Banking platform, the API/app could download consumers’ transaction data directly from their accounts to process payments thus enabling cardless transactions. Although the concept is still in its nascent stage and will take some time to shape up, it will allow the third party organizations to initiate payments between the bank accounts of customers. What will probably happen, as a result, is this: Banks will no longer be required for processing the transactions/ card payments. An authorized third-party organization will be able to make payments on behalf of its customers. Customers won’t have to wait in long queues to make purchases using physical cards at stores. They will be able to easily make payments using digital wallets on their SmartPhones or Smart watches using emerging technologies such as Samsung Pay, Apple Pay, etc. Can Open Banking Change The Entire Payment Ecosystem? To be able to understand this significant shift towards cardless payments powered by Open Banking, it is important to have clarity on the working of the payment cards first. The payment card, essentially, is a token backed with a unique PIN or customer’s signature as authentication, which helps in identifying both the payer and the source to process any payment. Enter Open Banking into the picture! Open Banking replaces the payment card with the actual bank details of the customer without requiring any physical validation. By ensuring a robust authentication system in place (such as phone verification), the model can be easily used to process transactions directly. There are several benefits of saying ‘Bye-Bye’ to the cards and using Open Banking APIs to process payments. Benefits of Using Open Banking APIs for Transactions Over Cards a. Cost Saving This is perhaps one of the primary benefits of using Open Banking APIs to process payments instead of using cards. The open banking model is such that it requires no physical token leading to cost savings for card processors and savings on the infrastructure cost for managing expired/fraudulent cards. b. Ease of Setting Up The ease in setting up Open Banking products as compared to the card payment mode is another reason that makes the possibility of this phenomenal shift stronger. The open banking services are designed thoughtfully to offer solutions collaboratively with payment transfers such as allowing easy linking of the credit cards or bank details of the end-users. c. Convenience Convenience and ease of doing transactions is another attraction of the Open Banking model as a whole. Furthermore, storing bank details of customers is much easier as compared to the cumbersome credit card data, considering security & compliance as essential factors while making payment transactions. Instant purchase history, remote deactivation, and biometrics enabled virtual card provisioning are just a few of the features of cardless payments worth mentioning. Open APIs just make it easier for bank customers to transfer their bank accounts, manage payments, and perform transactions through third parties: both banks and non-banks. The concept creates new opportunities for Service Aggregators to offer better customer service from multiple service providers on a single platform. Does Open Banking Model Translate To the Cardless Payments? If you are still wondering about the Pros of moving to Cardless Payments, here is a list of some of the pros of this new way to pay for your everyday purchases using Open Banking API’s: Convenient as you don’t need your card for making payments and can do transactions without keying in a PIN or signing a receipt. Lessens the threat of hacking where the card might be scanned for stealing valuable information. Cardless payment means no reading of magnetic data strip. The verification token (OTP) is for single use only, making it perfectly safe for ‘Use and Forget’. Convenient and quick payments, which mean no hassle of queues and lining up. Cost and time-efficient without any worrying about remembering multiple cards and account details. Taking Stock of Future Possibilities As rightly said by Kristin Moyer, Vice President of Research and Distinguished Analyst at Gartner and I quote, “Open

open banking
Digital Banking, Financial Inclusion, FinTech, Open Banking, Open Banking API

Open Banking: Who will really get benefitted?

/

Banking, as a domain, has always been a competitive one. To keep up with the pace of the dynamic nature of this sector, banks & financial institutions are gradually making the shift to experiment with newer technologies, like Open Banking and innovative concepts like FinTech, designed specifically for the banking sector. The basic idea behind all these innovations remain to offer a better experience to consumers and leverage the choice of integrated systems that are widely available today. Are you OPEN to Open Banking? The impact of technology in making our lives better and smoother can’t be overemphasized enough. FinTech (an excellent combination of finance and technology!) is one such area making the traditional banking system seem redundant with each passing day. The rise of Fintech sector has been exponential in the last few years with Fintech adoption seeing a sharp rise globally from 16% in 2015 to 33% in 2017 on an average. Open Banking API (Exclusively covered as Open Banking API: A Journey, 1st part of this series of 3) is the newest offering of FinTech that holds immense potential to bring about a transformational banking experience to its end users. However, before making the switch to Open Banking, it is essential to understand what the concept is trying to achieve and who will it really benefit? So What’s the Buzz called ‘Open Banking’ All About? With Open Banking, banks are moving to Agile technologies, building strong partner networks, and creating robust mobile platforms which cater to consumer’s needs, thus enabling direct financial transactions between customers and businesses and making cross-platform payments a reality. It works as a systematically designed collaborative model. Here the customer’s banking and other financial information/data is shared to trusted third parties (with the customers’ consent, of course!) through APIs with the aim of offering enhanced capabilities to the users. Thus, Open Banking is a financial services term as part of the financial technology that refers to: The use of Open APIs that enable third-party developers to build applications and services around the financial institution. Greater financial transparency options for account holders ranging from Open Data to private data. The use of Open Source technology to achieve the above. In short, “Open Banking is the possibility of creating new digital business and ecosystems through APIs provided by the banks. This allows customers: To have a greater control over their data Have a better experience in a secure, agile, and future-proof method To generate new revenue streams, and to create a long-term sustainable service model for the industry as a whole. Who will ‘Open Banking’ Really Benefit? The benefits of an Open Banking model aren’t just limited to consumers but extend to service providers as well. It benefits, one and all, associated with it. Benefitting Consumers Among the many benefits of Open Banking to consumers, the most important include:Giving the Benefit of Choice to Customers As a service provider, banks generally offer limited options and the same services to all their customers. Open banking, on the other hand,  gives the benefit of choice to customers as they now have the freedom to select from multiple service providers available. It also empowers customers to take charge of their finances and make informed decisions to manage their accounts. Easing Payments with Smart Devices With Open Banking APIs, customers won’t have to wait in long queues to make purchases using physical wallets at stores. The concept will allow emerging technology applications such as Google Pay, Samsung Pay, Apple Pay, PayTM etc. to make payments using digital wallets using your Smartphone or smartwatch. Ease of Remittance and Currency Exchange Increased number of migrants across the globe for better economic opportunities means an increased amount of money to be sent back to their families. Banks have always found international money transfer and remittances to be a painful and expensive process.Instead of paying a large transfer fee to the ‘money transfer businesses’ or facing the lack of proper setup, especially in rural areas, FinTech companies like NDASENDA, have made this entire process extremely simple, smooth, less expensive, and much faster. Thanks to Open API, the money can be transferred, services can be bought and bills can be paid seamlessly by using one single mobile App at the comfort of your home. Various service providers such as We Swap, World Remit, mPesa etc. are offering ‘currency exchange services’, by using Open Banking, in a very secure and seamless way to transfer even minuscule amounts of money overseas. Customized Product Offerings Open banking holds the potential to offer customized and relevant product & service options to the consumers which most banking apps fail to do. Open banking APIs introduce the concept of service personalization in banking to benefit customers immensely. Customers can now have access to multiple accounts in one place. The customers will be able to enjoy the best deals available with greater transparency. An opportunity is here to see your current financial position in a single application on your Smartphone. It is just a matter of ‘single click’. All the financial data at one place gives the consumer the leverage to take quick credit decisions and avail the best deals possible. Open to better offers by credit providers and instant credit and remittance of the same. With all the accounts linked together by an app and available on a single platform, the consumer is ‘all-powerful’ to make a choice in how to pay. This will also bring in some innovative offers by the banks and the financial institutions to make new customers and retain the old ones. It’s raining Profits! Benefitting Banks and Financial Institutions Collaborative Advantage Open Banking gives an opportunity for banks to stay ahead of the competition by letting them explore data-sharing agreements with fintech and other non-financial service institutions. Allows Banks to Be Futuristic The model allows banks to be futuristic by letting them understand both data privacy mandates that exist as well as the likely changes they need to adapt for a better customer experience. Thus making decision-making foresighted and insightful.

Financial Inclusion

Agents Enabling Financial Inclusion

/

Agents are the face of change to people’s financial security and independence. What is an Agent? What is a Business Correspondent?     Why We Need an Agent?   Modes Of Operation Of Agent   Come and signup for Teknospire Agent Banking Solution, and help in enabling financial and social inclusion. Stay Tuned as our next post would talk about various Banking services that could be availed by a rural customer via Agent Banking. Subscribe to our posts now. Also, if you would like to work as Agent, please sign up now here with NDASENDA. Teknospire is a technology partner for NDASENDA.

Corporate Social Responsibility
Financial Inclusion, FinTech, Industry Observation, Social Cause

Corporate Social Responsibility and The Impact of FinTech

/

Creating a strong business and building a better world are not conflicting goals – they are both essential ingredients for long-term success”. – William Clay Ford Jr., Executive Chairman, Ford Motor Company. With corporations becoming more responsible towards the society, this concept has evolved into what we today know as Corporate Social Responsibility (CSR). CSR has been increasingly recognized as a means for businesses to serve communities in the best possible manner. It has also made the consumers feel a sense of attachment with the business entity. What is Corporate Social Responsibility? Corporate Social Responsibility can be understood as a business model that is aimed at Corporates to become socially responsible and answerable to its stakeholders and to the public at large. Corporate Social Responsibility, on one hand, has helped businesses with better interaction with consumers and on the other hand, has had stakeholders develop loyalty towards the business. It also has enhanced overall reputation – a powerful statement of what they stand for, in an often cynical business world. Jason Potts, a senior associate with the International Institute for Sustainable Development (IISD), who is taking care of  sustainable markets and responsible trade initiative, says: “CSR is fundamentally about ensuring that companies forward broader public objectives as an integral part of their daily activities and this can only be ensured with the appropriate communication channels with stakeholders.” “CSR policies need to be considered as a core and inseparable component of the overall service or product offering”, he further adds. Importance of CSR to Corporates Companies that display their concern towards various social causes are surely better off than those that don’t. CSR has the ability to change dynamics for any given corporate. For  Klara Kozlov, head of corporate clients at the Charities Aid Foundation, “CSR allows businesses to demonstrate their values, engage their employees and communicate with the public about how they operate and the choices they make, to ensure a sustainable future. CSR helps pave the way for partnerships between businesses and civil society that are based on common goals and shared actions to deliver impact-driven outcomes.” Few of  its benefits include: Public Image Social responsibility not only improves an entity’s public image but also helps it become a consumer-favorite in no time. Enhances Engagement of Employees Companies, which show their interest in improving the society’s well being, attract and retain hardworking as well as valuable employees. Not only this, those hired demonstrate better productivity and strive for better profit margins. Retention of Stakeholders Investment in Corporate Social Responsibility indicates a company’s strong ethics and high standards. Such outlay, in the eyes of investors, prove that the company does not solely care about profits but also has a sense of duty towards citizens. Such a display of sound business policies certainly attracts and retains investors. Reduction in Operational Costs The concept of CSR also helps a business reduce its operational costs to a great extent by opting for business practices that do not affect the public adversely. For instance, by option for green technologies and reducing emissions & waste, companies save a great deal of cost. It can be said that CSR has a dual positive effect on both, the consumers as well as the business. Problems Companies Face with CSR Corporate Social Responsibility has become a complex phenomenon with companies developing holistic policies to address the demands of the public. As such, there come several problems related to the execution of initiatives such as disbursal and tracking of funds, cost-benefit issues, etc. We try to highlight the major problems that companies, the world over, face with respect to CSR. Disbursement of Money Every company indulging in CSR has an exclusive monetary account through which the company disburses money for various causes. However, due to lack of digitization, such money is disbursed in the most haphazard manner, making it practically difficult to keep track of the amount. Accountability of Money: Once disbursed, there is hardly any check on how such grants are being deployed and utilized by those concerned. This makes it almost impossible for an entity to recognize the cost benefit of their contribution. Sans any digitization of money movement, amount once paid out is nowhere to be accounted for, indicating lack of answerability and utter pecuniary wastage. Sustainability of CSR activities: More often than not, the amount spent with huge fanfare falls short of giving estimated returns to the business over time due to lack of diligence and monitoring. Initiatives become difficult to sustain owing to a deficiency in digital regularization.   Role of FinTech Companies in CSR Over time, FinTech companies have been recognized as an imperative element of business operations, especially with respect to CSR activities. FinTech companies or simply put, companies designing and developing technological and digital programs to aid financial or banking operations and services help businesses immensely in regulating the financial approach. Employing a FinTech company to CSR activities can contribute greatly to any business. Digital Payments Mobile wallets and app-regulated payment disbursal portals have made the transfer of money as smooth as ever. Corporate entities save on crucial time and money spent on such disbursal while opting for digital methods. Bridging the Gap: The core area of all CSR activity for a majority of companies are the rural and underdeveloped areas where financial exclusion is a major problem. However, FinTech companies are bridging the gap between the lender and borrower and even reaching people who do not own a bank account. They are further helping the customers by providing assistance before, during and after the financial transaction by extending the ecosystem of the banking system. Countries that have a majority of the population thriving in rural areas have finally had access to banking, thanks to the inception of FinTech. For instance, Bangladesh has about 70 % of people living in the rural areas where not even half of them own a bank account. To cover the deficiency, ‘bKash’, a FinTech initiative, allows such people to receive as well as send money through mobile phones. Crowdfunding: FinTech’s

Finance, Financial Inclusion, FinTech, Fintegration, Payment Banks

PAYMENT BANKS: BANKING, THE CASHLESS WAY

/

Payment Banks is the concluding part of the series. As a prelude, may I suggest, to read part one of this series, ‘How wallet helps in Last Mile Banking’. There has been a surge in the number of digital wallet service providers which have started offering their own Payment banks. It is the right pursuit for India to bring around 300 million unbanked individuals to the mainstream monetary flow. Being hailed as a major push for financial inclusion in the country, the RBI granted ‘in-principle’ approval of setting up Payment Banks. Speaking at the launch event of the PayTM Payments Bank the Union Finance Minister Mr. Arun Jaitley said and I quote: “This expands the horizon of financial inclusion in the country. The chain reaction is visible now and the habit of dealing only in cash is gradually changing. We are all nudged into a system where convenience and security require switchover”. “Payment banks will change the way people think, change the way they keep the money, where they keep the money, the way they pay.” These are the new entities formed by the RBI keeping in mind the needs of small-scale businesses, low-income households, and vast migrant labor population. They are mostly like the traditional banks, with few key differences. The main difference is that they have a current deposit limit of 1 lakh per customer, unlike normal banking which holds no limit on deposits. Payment Banks caters to the customer’s banking needs through mobile/SmartPhones rather than traditional ‘brick and mortar’ branches. One can avail services such as net banking, mobile banking or getting an ATM or a debit card. They cannot, however, provide their users with credit cards or give loans. ‘Banking on each other’ these payment banks have collaborations with large-scale banks, allowing their users to make transactions via their ATMs and offer other financial services. They also offer interest on the deposits made in the savings account, with the mandatory minimum being 4% as per RBI guidelines. RBI issued licenses for opening these payment banks to only 11 out of 41 applicants. Bharti Airtel was the first one to open live payment bank in March 2017 followed by PayTM and India Post. RBI ensured that this initiative serves it’s intended purpose by making a rule that 25% of the total branches of payment banks must be in rural, unbanked areas. Why are Payment Banks in vogue? Despite the strict guidelines issued by RBI and the limit on earning model due to no lending, payment bank’s licenses are still being sought out by the biggest names in the industry. With India being on the verge of being a digital country, payment banks offer the reach that traditional banks cannot. Almost everyone keeps a Smartphone nowadays, which are becoming a one-stop solution to all needs of a person, this was bound to happen. Payment banks are taking further what digital wallets started, i.e., cashless economy. Why should you welcome Payment Banks? Ever since mobile set and data became affordable and the government started taking up more initiatives for providing financial inclusion to the last mile, the way people handle their financial transactions has started to evolve. With Payment Bank entities giving a further boost to ensure better financial inclusion, it’s a step forward to include ‘one and all’. Going by the likely adoption pattern of the key market segments and the key driving factors like: The rise of usage of Smart Phones Increased mobile internet user base The tremendous growth in e-commerce market in India Easy and Convenient, ‘while on the go’, ‘wherever you go’ Enhanced security features Providing more than ‘core services’ anytime – anyplace, payment banks are hailed as a much-needed step in the direction of financial inclusion for the last mile. Major Payment Banks in India Source: Payment Banks: What’s on a platter Each of the Payment Banks had a distinguished advantage prior to opening their respective payment banks. They are now, trying to make it to the top in this race by drawing the best out of their already established resources, and reach amongst people. Airtel Payment Bank The first to open its payment bank, Bharti Airtel was also the one to provide the largest interest rate on deposits in its initial days. Airtel has about 1.5 million retailers across the country which can serve as banking points too, in future. At present, there are about 4 lakhs of such banking points which is more than the number of total ATMs in India. It has UPI transfer feature in it for transfer of funds between various bank accounts. Along with a MasterCard, it also provides a digital debit card without any charges. Opening an account is very easy and happens almost instantly. You can do so with the help of your Aadhaar card and fingerprints only. It provides free accidental insurance of 1 lakh to all its account holders and 5.5% interest rate per annum. When you open an account with Airtel Payment Bank, your mobile number becomes your account number. PayTM Payment Bank PayTM has the largest customer base for digital banking via its wallet.  It gives an interest rate of 4% and targets having 1 lakh outlets all over the country by the end of 2018. With PayTM payment bank, you can open a zero balance account. It also provides fixed deposit facility along with a free digital Rupay debit card. You can also get a physical card for an applying fee of 125/- with 100/- maintenance per year afterward. With PayTM Payment Bank, you get a free insurance cover of 2 lakhs when you open an account. You can open an account by simply downloading the app. But to be able to use all the features completely, you have to get your KYC done. India Post Payment Bank India has more than 1.5 million post offices all over the country, about 90% of which are in the rural areas. This puts India Post payment banks at an upfront as compared to others. It is also

Finance, Financial Inclusion, FinTech Trends, Payment Banks

How wallet Helps in Last Mile Banking?

/

You might have been using your ATM card as an easy substitute for checkbook, but did you know then, that it was just the start of an era? As more time passed, more and more alternatives for traditional banking arose, changing the scenario forever. Not to mention the lack of traditional banking infrastructure which also promoted the growth of digital banking methods. As per the official data, even as of today, only 27% of villages in India have a bank in 5 km radius. A large mass of India’s population lives on the environs of the formal economy. Living in far-flung corners of the country, Illiteracy, lack of financial education, not being aware of the availability and/or value of financial services and lack of connectivity are few of the many reasons why consumers in these areas remain unbanked. Moreover, banks in rural areas are few and far in-between, making the reach difficult for many during working hours. To address these obstacles and to broaden financial inclusion, Indian government came up with solutions to help in reach built out for last mile banking which aimed to give every household access to banking facilities by offering them zero-balance accounts across all commercial banks. After the prime minister of India launched Jan Dhan Yojna, we saw a world record number of bank accounts opening in a single day and things seemed promising. But, a study done 3 months after the scheme was launched, revealed more than 75% of accounts to be dormant. Neither banks nor ATMs are located within reach of all. Opening an account was way easier than to actually keep it rolling on regular basis and encouraging them to have some savings too. People living in remote areas and the people at the base of the economic pyramid, the ones who are underbanked and unbanked, are in true need to be financially included. But then did JDY, despite having the genuine concern and the intention of solving it, actually served its purpose? The answer is NO, well not completely. This was further trodden by the demonetization move and the impact it had on traditional currency and transactional methods. In an interview with CNN two weeks after demonetization move, India’s key player in digital wallet industry Paytm CEO Vijay Shekhar Sharma said and I quote, “I Don’t Need to Sleep, I am Living a Dream.” Paytm saw an increase in traffic as much as 4x times, app downloads increasing by 200%  and an overall increase in transactions by 250%. Mobile-wallets-adoption-in-India The Indian government is emphasizing on making India digital, a major example of which is roping e-wallets to digitize rural economy. With the government realizing the potential of digital wallets in helping built out for last mile banking and taking major official steps for it, India is a promising hub. Treading along with the Government are the entrepreneurs and VC backed FinTech companies who have come up with solutions to help in reach built out for last mile banking, thanks to the feasibility and accessibility of digital wallets through the country. At present just about 300 million Indians have a Smartphone and 66% of Indian population still don’t have access to the internet. FYI:  (On a lighter note) India has nearly as many Smartphone users as the U.S. has people, and it’s about to get many millions more. This, however, is bound to change after the Digital India initiative of the Indian government with India being a sweet spot in terms of Smartphone market growth in the upcoming years. Another example of how digital wallets are helping make last mile banking a feasible reality is that of Zimbabwe, located in the African continent. Zimbabwe has shown tremendous growth in terms of mobile banking. In the year 2017, almost 96% of total banking transactions which amounted to a total of 98$ billion were carried out via digital methods such as e-wallets, net banking etc. Further data shows that out of around 18 million people of Zimbabwe, 6 million of them are registered on the leading digital wallet in their country i.e. EcoCash and about 1.5 million being highly active on it, total transactions carried out via this app reaches to 30 million per month. Oracle Statistics_Customer Paying Behaviour The above statistics clearly depict the changing scenario in ‘customer’s paying behavior’, as people are preferring to become cashless. In the UK, cash withdrawals reached the lowest number of transactions in 2016 after 2010 (which was after the economic depression). In the same year, plastic transactions overtook cash-based transactions. Supporting this ongoing ‘cashless’ trend less than half of the population (about 43%) thinks cash still will be used in 2022 about 54% think they will be using cash very less in the upcoming years 47% expect to use more mobile payments and digital wallets. The emerging and developing economies are successfully making the last mile banking a reality with the help of digital wallets due to the benefits and feasibility of it which allows even the poorest and scarcely located people to avail banking benefits. First, it was the plastic money that slowly started to banish cash from transactions, now it is the turn of digital wallets. With ATM’s further making banking within everyone’s reach, it’s still not possible to open an ATM within walking distance of everyone. Digital wallets solve this problem by being accessible to each and everyone at a whim. However, it’s not all apples and oranges, they have their own sets of downsides and challenges like: Fear of adoption among users due to transacting online Unearned Interest on money sitting in the wallet as opposed to a bank a/c Lack ‘brand recall’ among the rural population Inadequate merchant tie-ups As per the new upcoming scenario, mobile penetration is very high in urban as well as in rural areas. This tremendous penetration of the mobiles could be used to bring financial inclusion to the last mile. With almost every mobile carrier in India now offering its own digital wallet, you need not even

Scroll to Top