The approach is key

Posted: 2008-04-09 03:25:04+05:30 IST
Updated: Apr 09, 2008 at 0349 hrs IST

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They say all revolutions begin in the head. A quiet revolution is sweeping the minds of service providers. There is no gain saying the fact that the RBI’s push to bank this segment has been a crucial factor in getting people to look at it. Banks also found the millions of telephone connections as just the right medium to ride upon. Increased competition in prime markets, of course, tipped it over.

As per a BCG report, there are more than 3 billion people around the world who are affected by financial exclusion. Financial exclusion, as we are aware, causes a distinct socio-economic divide, especially in emerging markets like Brazil, India, and China. India has 135 million financially excluded households, second largest in the world, next only to China.

Seen through the usual lens, the banking infrastructure in India is not encouraging. 93% of villages don’t have a branch, 23% get no electricity, and 67% don’t have a post office. To top it up, rural literacy is only 67% and secondary school penetration is only 12%. Most people don’t even know their date of birth, as their birth was never registered in the first place.

The needs of these customers are pretty much the same: save, borrow, invest, protect, and insure. Since traditional models are not viable, ICICI Bank has already started banking using biometrics technology. The customer may not know his date of birth, but still has a unique identity in the form of the thumb print or the retina. And it works. The RBI should be entirely lauded for their path-breaking vision in permitting branch correspondents. Essentially, how the branch correspondents work is as follows. The banker (BC) goes to the customer and gets the customer to register himself or herself on the POS machine using thumb prints, based on which a card is printed and dispatched to the customer. From then on, the BC visits the customer at regular beats, or the customer visits the BC office. The next time the customer has to deposit say Rs 100, the BC identifies the customer card through the thumb print, accepts the cash, gives the customer an instant receipt, and synchronises the records at the end of the day. The system debits the BCs running account with the bank and credits the customer account. The card is then used for disbursing micro-finance loans, storing insurance details, and so on. ICICI...