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GameChanger
Understanding the e-cash model. We met with the management of Eko, a business
correspondent and technology enabler. Eko facilitates account opening, deposits,
withdrawals and remittances of funds by acting as a business correspondent for SBI and
ICICI Bank. With customers willing to pay (for account opening and per transaction), we
believe Eko’s (and similar) business models can quickly transform the cash nature of
Indian economy to e-cash, with consequent benefits of financial inclusion.
Bringing in financial inclusion
Eko, operating as a banking correspondent, facilitates the opening of bank accounts and
transactions of deposit, withdrawal and remittances. Their target segment currently comprises
migrant laborers who want to remit money from Delhi, NCR to Bihar/Jharkhand. With 110,000
customers already signed up and ~500 signing up each day, Eko processes around `100 mn worth
of transactions daily. Eko’s 1,200 outlets and a mobile-based banking model offer a wide reach.
Cash out, e-cash in
Eko facilitates the conversion of physical cash into electronic credit records (by making bank
accounts available on the mobile phone of the customer). This is similar to the financially included
people keeping their money in bank accounts and using cheques or electronic triggers to effect
payment, thereby reducing the need for paper cash. We note that RBI spent more than `20 bn in
FY2007 to print the bank notes in circulation. With a reduction in the use of physical cash, the
need for the authorities to invest in the physical cash infrastructure will reduce.
Understanding the distribution chain
Eko operates via super-Customer Service Points (SCSPs) and Customer Service Points (CSPs) which
are akin to wholesalers and retailers in the traditional FMCG distribution set-up. The SCSP (typically
overseeing 70-150 CSPs) deposits cash or transfers money into his current account with SBI/ICICI
and receives a credit in his mobile account (the mobile is an alias and a mechanism to reach the
bank account). When the CSP gives the SCSP cash, the CSP’s mobile account is credited and the
SCSP’s account is debited. Similar transaction brings credit to the customer’s account.
Oiling the distribution chain
The CSP and SCSP also double up as account-opening-form collection agents, which are processed
at Eko’s central processing center. A limited KYC (typically a voter card, two photographs and a
mobile number) ensures that account opening is simple and fast. The final customer pays Eko
Rs100 for an account opening and 3% of the value for remittances and every deposit and
withdrawal also attracts a charge (`1-2 per transaction). Eko offers 80% of the fees collected to
the distribution channel. It offers its SCSP an ROI of 20-25% and a CSP a similar ROI with the
caveat of offering him at least `1,500 a month to make it meaningful.
Implication for others
Many players in the financial inclusion industry work with a feet-on-street model where the person
on the ground handles cash: Eko’s system avoids the cash management risk, which it needs to
compensate by providing financial returns to the entities putting up the initial cash. Eko’s model is
replicable by entities that have large retail network: this model offers the wholesalers and retailers
with a new FMCG product: cash! As noted in our GameChanger report, M2: Mobile Money, and
our March 3 note E-cash: Momentum from the highest quarters, this is a `2 tn annual market
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
GameChanger
Understanding the e-cash model. We met with the management of Eko, a business
correspondent and technology enabler. Eko facilitates account opening, deposits,
withdrawals and remittances of funds by acting as a business correspondent for SBI and
ICICI Bank. With customers willing to pay (for account opening and per transaction), we
believe Eko’s (and similar) business models can quickly transform the cash nature of
Indian economy to e-cash, with consequent benefits of financial inclusion.
Bringing in financial inclusion
Eko, operating as a banking correspondent, facilitates the opening of bank accounts and
transactions of deposit, withdrawal and remittances. Their target segment currently comprises
migrant laborers who want to remit money from Delhi, NCR to Bihar/Jharkhand. With 110,000
customers already signed up and ~500 signing up each day, Eko processes around `100 mn worth
of transactions daily. Eko’s 1,200 outlets and a mobile-based banking model offer a wide reach.
Cash out, e-cash in
Eko facilitates the conversion of physical cash into electronic credit records (by making bank
accounts available on the mobile phone of the customer). This is similar to the financially included
people keeping their money in bank accounts and using cheques or electronic triggers to effect
payment, thereby reducing the need for paper cash. We note that RBI spent more than `20 bn in
FY2007 to print the bank notes in circulation. With a reduction in the use of physical cash, the
need for the authorities to invest in the physical cash infrastructure will reduce.
Understanding the distribution chain
Eko operates via super-Customer Service Points (SCSPs) and Customer Service Points (CSPs) which
are akin to wholesalers and retailers in the traditional FMCG distribution set-up. The SCSP (typically
overseeing 70-150 CSPs) deposits cash or transfers money into his current account with SBI/ICICI
and receives a credit in his mobile account (the mobile is an alias and a mechanism to reach the
bank account). When the CSP gives the SCSP cash, the CSP’s mobile account is credited and the
SCSP’s account is debited. Similar transaction brings credit to the customer’s account.
Oiling the distribution chain
The CSP and SCSP also double up as account-opening-form collection agents, which are processed
at Eko’s central processing center. A limited KYC (typically a voter card, two photographs and a
mobile number) ensures that account opening is simple and fast. The final customer pays Eko
Rs100 for an account opening and 3% of the value for remittances and every deposit and
withdrawal also attracts a charge (`1-2 per transaction). Eko offers 80% of the fees collected to
the distribution channel. It offers its SCSP an ROI of 20-25% and a CSP a similar ROI with the
caveat of offering him at least `1,500 a month to make it meaningful.
Implication for others
Many players in the financial inclusion industry work with a feet-on-street model where the person
on the ground handles cash: Eko’s system avoids the cash management risk, which it needs to
compensate by providing financial returns to the entities putting up the initial cash. Eko’s model is
replicable by entities that have large retail network: this model offers the wholesalers and retailers
with a new FMCG product: cash! As noted in our GameChanger report, M2: Mobile Money, and
our March 3 note E-cash: Momentum from the highest quarters, this is a `2 tn annual market
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