Our idea of classic privilege banking is that the bank comes to the door-steps of the rich to deliver services. How would you react to the latest developments in financial inclusion where an agent comes to your door-step to deliver various financial services like credit, savings, RD, insurance, and other services like mobile, DTH recharge, rail/bus ticket bookings, payment of insurance premiums etc? And hold.. we are talking about these services in a rural backdrop, where ferrying to and from the branch would sometimes cost about the average ticket size of the transaction itself. (You should be surprised only if you don’t know about RBI’s BC initiatives). If you are not amused please proceed no further, because you will be just wasting your time 🙂
In recent times RBI has made more concrete moves towards achieving financial inclusion, one of which is introducing the BC (business correspondent) model, for places where having brick-mortar branch is unviable for banks. RBI’s aim? – is to make banks reach places having a population above 2000. Banks appoint BC agencies/service providers in these areas, who on behalf of the bank provide these services in the hinterland. This development is in economic favour of banks too- estimates show that cost of a transaction at a typical bank branch costs the bank somewhere around Rs 60, and given the small average size of transaction in rural areas it becomes unfeasible for the bank to set-up a branch at these places. Going via the BC route the bank incurs a much lower cost per transaction. For the customer, he/she gets the service at his/her doorsteps without any branch visiting costs. So naturally, it looks to be a win-win situation for the bank as well as the customer (Having said that, we have to remember that banks are being told to do so. If they had their way it would’ve still been a long time before they reached these places, but that’s what regulators are for, isn’t it?).
It sure looks like privilege banking being delivered to the bottom of the pyramid (long live Dr. Prahlad). Now, the people who make it possible- the BC service providers. It’s a market that is growing at a phenomenal rate, it already has quite a few players like FINO, Eko, ALW (Please don’t get me wrong- I’m not getting paid for this 😉 ). These players try to leverage technology to reduce the transaction costs, and the kind of technology they employ to make this happen is really impressive. Well, you might not find it as impressive if you haven’t been to any of the place where these services are being delivered; I mean it’s really a tough task to imagine its extent if you don’t have the first hand experience of being in an regular rural set-up at least once. The bouquet of services/products being offered through this model are already pretty much all the essentials, and its set to expand furthermore as these players try to leverage their existing infrastructure of agents & technology in place for maximum benefit. Seems finally something is happening somewhere..will it help invert the pyramid? Only time can answer that 🙂
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