Fintech for Financial Inclusion: A Case Study

Session 3: Fintech for Sustainable and Inclusive Development

9:30 am – 10:05 am GMT

Keynote Talk

S. Sundararajan (CEO and Co-founder I-Exceed) – Fintech for Financial Inclusion: A Case Study

To watch the video on YouTube, click the ‘YouTube’ button above.

Transcript: –

Thankom Arun

Good morning, and good afternoon, all wherever you are. Welcome to the second day of UK i.e., the ISTE conference on a cyber risk and data science for FinTech and digital economy. And today, we have a very jam packed, and very, very energizing session, I think, because FinTech we normally talk in the technical boundaries of impact. But this session is going to discuss FinTech for sustainable and inclusive development. And we have two very well-known keynote speakers. And after the keynote speakers, we have a panel discussion as well. So I will introduce the keynote speakers in people’s, let me invite the first keynote speaker, Sundar Sundararajan. Sundar Sundararajan is co-founder and CEO I-Exceed a technology solution. Previously, he was a senior vice president of Oracle. Sundararajan was involved with Joseph John with the development of a first core banking Findex IFLEX that was acquired by Oracle Alecto. And they developed an app for Financial Inclusion, later on being rolled out for the postal Bank of India. And today, he speaks about his boss and unique experience in developing FinTech solutions for sustainable development and financial inclusion. So with this words, Let me invite Mr. Sanders in the Dragon for the keynote next.

Sundar Sundararajan

Thanks a lot Arun, thank you so much, and good morning and good afternoon to all of you. The next 30 minutes or so, what we are as a company and how we do the financial inclusion particularly in India, I will share that part and also happy to answer any questions any of you have probably towards the end of the session. So, let me now go over and then share the deck to you now. I hope this is visible, the brief introduction about us I-Exceed technology solutions as a company, we are 10 year war focusing primarily on delivering digital solutions to banks and financial institutions globally. And have about 110 Customers banks as our customers having 40 Plus partners and presence in 25 countries and of course, India is one of our key large market we have been focusing on. And in terms of the size and scale and particularly after the pandemic, month of September, we have processed on our platform across all beat through all these banks sovereign million transactions with a $5 billion plus and six months period of April to September. And we have processed 3.7 billion transactions, worth of $20 billion value and here is a list of key customers. what we offer as the digital banking platform and the solutions is globally to the large tier 1 banks starting from Citibank, Bank of America and also Barclays, TSB, Rothschild and many banks in Europe, as well as the banks in India, we have about 30 banks in India and lots of take a couple of them as a case study and they explained in detail and like including the large public sector bank like Canara Bank, and India post payment Bank, which is one of the largest I would say of financial inclusion is staying globally. And plus the small finance banks like Equitas, Surya and fincare and so on. So, what we offer is the same solution across to all these banks, and particularly when it comes to the small finance banks or the India post payments bank, it also helps enables on giving them the financial inclusion, which we’ll cover shortly. This is overall our offering in terms of the digital banking platform, what you see at the bottom and then the solutions built using the platform, like customer onboarding, consumer banking, digital branch banking, agency banking, corporate banking and so what we offer them to our bank, customers which are banks, which they in turn give it to their end users, the end consumers and customers. So with that, I will now move on to the digital journey with what we have done with India post payment back.

So, I’m sure probably many of you are aware that traditionally the Postal Service’s the Department of post had a huge network of 150,000 post offices across the country covering each and every nook and corner of the country including the smaller villages, but with a technology coming in like Facebook and WhatsApp and also with other payment models available, no one wants using the postal services for sending me letters or the money orders or even the registered post for that is when government took a call, how do we use the postal network available within the country convert them as a payments bank make each and every postman available or the post office is available as a branch postman available as that doorstep banking agent and the government converted the postal department the entire postal services in the country as a payments bank and it is then now called as the India post payment bank. And it’s a very wise and smart move I will cover in detail in terms of how this has progressed what it has taken up for the rainbow. So, with that, of bringing him how do they can bring in on the the Postal Service and banking services to the postman to the rural villages, both things have happened as a country within India. One is the other the unique identity card identification card given to each and every citizen, we can use that to validate the biometrics and then authenticate the person authenticity. The other one is the IMPS and now it is UPI a unified payment integration kit. These two backbone help enable and do all that are required with that, what India post payment bank has done here is in terms of looking at bringing in on products like they can go to the village and then do transfers, payments, pay the bills electricity bill or telephone bill any of those charges they need to do they can even apply for insurances and more importantly, there is an innovative product brought in which is AEPS what is called as Aadhar enabled payment systems. What it does is that while the when the postman reaches the village, when they meet the customer, whether they have backbone with the India post payment bank or with any other bank, it could be State Bank of India, it could be Punjab National Bank, any bank they have again go with the Aadhar card with the bank detail given to the postman, here is where my bank account is, this is the money I need to do that transfer, this is a payment I need to make, this is a deposit I need to do, this is a bit of all I need to make they can perform all of them in a sense, the postman becomes an agent and he operates through the vehicle of India post payments bank, but offer the banking services to all the banks in the country to the villages it could be from private banks either HDFC Bank or ICICI or to the State Bank of India or it could be Punjab National Bank, all they need to do walk in with Aadhar card and the account details which bank they have been having account and they can get on to do the transaction. So today as India post payment bank 70% of the transaction happens to be AEPS these other enabled payments system. In other words, with this vehicle was the number of customers on India post payment bank is only 15 million but the postman is separately able to service the entire tier three tier four and other rural population. I will just play a short video now and it will also give you show you I mean how it looks at they do then we can come back and continue on and what are the other things has been accomplished here.

I will just go back to my slide now again. And I hope you’re able to see

Sorry for the interruption, just bringing back are you able to see my slide again now? Okay. So the approach followed here is threefold, one is on the doorstep banking what you’ve seen now, this is being ethically able to reach throw the country through the postman, across the tier three tier four towns as well as the small villages the other one is the mobile banking we have given now. And using that the consumers can directly do transactions to initiate any other like any other mobile banking. And the third one is the branch banking where the first of his network available within the country, they can also go to the branches and then do transactions. So, all three options are being used essentially, in terms of taking the banking services to the unbanked and also enabling our being part of the financial inclusion. So, this was launched in 2017. And now they have about 50 million customers done about 20 million of them actively using the mobile phones, and more than 40 million transactions per day. And it’s being essentially served by the doorstep banking by 300,000 postman and what is really fascinating here is, it just increased the financial inclusion and coding here that’s at scale in terms of what has not been expected during date, and that has suddenly increased the government taking all the direct benefit transfers to the individual. whether it is, due to COVID or any other benefits someone need to give. All of those benefits have been directed only through these accounts, the rural population has been told to go open an account, the money will come into the account and that is what they need to use. So that has certainly increased in terms of one the Benefit Transfer reaching the ultimate beneficiary without any middleman involved in the chain, they get to see it in their account, they can start using it for their own need. And beyond all in brought in on the whole lot of banking services to that what they do probably some of them not even used when they need to be part of the formal ecosystem and are being included in the financial inclusion part. They started believing they started looking at it, doing a Payment Transfer, paying bills and then access to the loan, they started seeing the mall. And beyond all it is also given access to the larger market, which I will cover in the subsequent slides as we move along. The next initiative that happened here is it’s again about five years back Government has given the 10 large microfinance institutions the small finance bank license, the only difference between the normal bank and the small finance bank is the loan size may not be more than certain amount, the deposits and the small ticket items, essentially just to enable the bottom of the pyramid, the customers with the lower end of the bone to get the banking services and so on. So, what government did the 1000s of microfinance institutions they amorphized in the country, pick the top 10 of them and given them the small finance bank license. So they have been already having like Bandhan is today having about 20 million customers Equitas is having 4 million customers, Ujjivan is having 5 million customers they’re adding together them all that’s roughly about this 10 Small finance bank is having about 50 million customers, what they used to take the small time loan, whether it is a group loan group lending, they now started becoming being part of the bank started getting the complete access to the whole banking ecosystem. So what they started as a small lending small loan to these farmers has become now a banking services whether access to the to and today, these banks are not just doing only the banking services similar to the Post Bank, they also have their own direct bank staff, agents business correspondence, they start addressing all the needs of these customers. In fact, there are banks now they are doing e-commerce services to those people. Hey, you have an account with us, you need to buy any of these on either Flipkart or Amazon or big basket. We will enable you get you buy and then take money from your account. And also they take care of the last mile delivery. So what it suddenly opened up is their huge market. And in addition, it is also in terms of offering additional products like insurance. Today, these banks are now selling crop insurance to their farmers. And then vehicle insurance to the tractors and the other equipment’s they have for their own farming. These are all the additional opportunities it started bringing in and it opened to the wider market to enable all, particularly the unbanked population, there are two categories, I would say some of them are like aged people about 70 or 80 year old, they have a phone but they don’t have a smartphone. They have a feature phone and that’s what they are comfortable with. Not more than that. And the second thing some of them got into using these phones for checking balances checking statement, but will they be able to do really the payments? answer is no. And that is one segment. The other segment is people are not well educated. And they are not well equipped to deal with the banking transactions. And this is where both from the government side as well as from the private banks, the small finance banks come out with a whole lot of innovative products and services. One of the best thing that happened is the QR code based payments to be within the country. Every small shop, even the person selling on the roadside something more they have their good side, and everybody accepts the QR code based payment, someone can scan the QR code and or give the mobile number and then transfer money to it. The mobile number is linked to that account. Again, thanks to the UPA ecosystem and they can make payments to that. And that has become now widely popular. And everyone is using that part. And the next one is in terms of the Voice banking. And this is something I will say a very innovative. And this is something I’ve been particularly I’ve seen in emerging markets very popular, someone is not comfortable in typing and then sending messages, they just open the speaker and then speak whatever they want to say and then send it to the other person and the person receives, they hear the voice. Again, they open the speaker speak whatever they want to communicate and then close and then send that out. So they don’t type only the voice exchange happens with that the banks now started offering the voice banking. So they can open and then give voice input transfer money to so and so, and then it then converts the voice into text text into action. And if you say one word transfer 10,000 rupees to Raj then it hears the name Raj, it sends the beneficiary details captured already if there are five Raj available there displays all are down which only want to do 1-2-3-4-5 option you choose that option, then ask another confirmation, this is the amount you want to transfer then confirm then it gets done. The other added advantage has been brought in here is the multilingual support, I mean as you know, I mean India is a vast Country. And there’s, so many languages spoken and there are not too many comfortable only with English they need to go to the respective state. If you take southern India it is a Tamil, Malayalam, Kannada Telugu if you go to not the Hindi or Gujarati and the various languages that are spoken. So now, here, the Voice banking the AI tool that runs on these as part of these apps, it recognize the voice so you recognize the language, even recognize the dialects because within the same language with the largest state, there is a different dialects that comes in from the different parts of the state, I need to recognize its toes a pattern or a period of three months, six months, this is the individual This is the day he speaks this is what he wants to do is the action done in the past that bringing on the Ai technology methodology into it, the machine learning captures all of them making use of that all and next time when the person comes they also know this is the way he speaks. This is what he has done in the past. This is what he’s going to do it enables and then gives the required support. And same the voice banging continues for the contextual the voice assistant. And then the speaker again it helps to capture and then do and today we offer support, in fact as part of our offering also to set up banks about 10 languages, but we keep adding on more languages and that helps in terms of taking that forward. And going further.

The other two things are the government has recently introduced offline payment up to certain limit on the UPI transfer. So what is happening today, they’re part of that payment transfer any account through the country happening. It does online real time validation with account balance if debits account takes the money and then handing over to the individual. But there are pockets there are areas that connectivity is not up to the mark. So to enable to increase the use of the entire ecosystem and especially when they go to the rural area where the connectivity is not really good. There is a feature available in terms of offering limit for a given day up to certain amount. It will not do any validation someone does and then go ahead and do because probably there is a risk but it is a limited one. Then there is a next credit comes in it gets adjusted but that’s a call taken by the government. It’s getting introduced now. The other important feature is on the feature phone banking, only smartphone people can use that will not increase the adoption. There are still people especially those who are about 75 or 80 year old. They are not comfortable with the smartphone all the time. And the feature phone, the USSD for based banking, if there are some other innovative ones, they are done, banks are given call this number, it’s called Mr. Call banking. The moment you call that number, it recognizes, I just need this the registered mobile number there is a call from this number, it just pick the Account link, take the balance available and send an SMS to the mobile device saying this is the account linked to your mobile phone here is a current available balance. And same with another number they have given which is to just pull the last five transaction. So with the feature phone one, how do we enable on simple Payment Transfer transaction do using the USSD. The other option is like Mr. Call, there are other options features even so then it is easy for them to adapt. Ultimately, the ability is here on how do we increase the usage of the mobile banking the ecosystem, even in the rural area, and also bringing the monitor the formal economy, making them as part of the overall financial inclusion. So with that, I mean, I’d like to summarize here, and I mean, this is true, in my video, what we have seen, even when you’ve gone across across the globe, the overall the people available, but how many of them are able to use really the technology being part of the banking ecosystem, Premium Bond bank, bringing them onto the formal economy, there is a challenge. But I think with the technology with the kind of facilities the products and services will be able to bring them on. And more importantly, I think it is to offer the wide array of services which otherwise they don’t get, and bring them on on to those services. So that did make some also motivated attractive to be on the banking ecosystem. Start availing all the features that are required needed and to more importantly, make the case be there to be the water supply and electricity bill, the bill for the utilities like gas, they need to travel physically to do today, this can be done sitting there they are using the devices, that’s the kind of services, educate them, enable them bring them on to do and beyond all this, it brings access to the whole population, the wider access to the market. And in terms of whether it is for insurance or investment, and any of those products that are available, they can make use of it. Like the insurance we have seen the crop insurance, the vehicle insurance, which is not available, accessible, or somebody’s even not aware, that gives them now the opportunity option to take them through. So it is a journey well started. But yes, increased adoption, increase the usage, bring them on board, bring them also the financial literacy that are needed for them to be enabled and be aware. And that is what the focus has been. And we as a digital partner, digital solution provider, we work along with the banks to primarily work on bringing the financial inclusion giving solution that are easy to use, even those who are not comfortable with the smartphone, even those who are not fully equipped unable to deal with all the settings that are needed. So with that, I will end my session here and open to happy to answer any questions any of you might have.

Thankom Arun

Thank you, thank you for such an illuminating lecture about India’s changing landscape of financial inclusion. So you may remember in 19, early 1980s And later, when banks started KYC they that was considered as the ultimatum to reach out to the customers. But over the years FinTech actually got into and fintech actually revolutionize the kind of services which you can offer to the general public. And what I see most striking here is that context, because when we talk about FinTech and the role of financial inclusion in a western economy context, many of these things are not needed to be placed there. For instance, they feature banking the feature phone banking and make everyone has a, you know, the kind of digital phone. And then the kind of feature for which you which you highlighted, which is very valid in the context of emerging economies like India, is not placed there. But FinTech actually looked into that particular issue and provided a solution to that pertinent problem, because about 500 million customers have in countries like India, who are still using these types of phones. So in a way that context actually challenges challenge FinTech to produce some kind of news that new trends, and that actually opens the horizons of FinTech in terms of addressing the issues of financial inclusion. So, we will continue with our next lecture and then during the panel discussions. We will take up question But in between, I can see sheri raised her hand, sheri, you want to say something? Thank you?. Yes.

Sheri Markose

Sundar, that that was very interesting. That was a great tour de force of what your company does, of course, as tandem says In view of time, I’ll leave my questions because I need more details about the apps that you’ve created. You mentioned machine learning and so on, do you take out patents? Are they using existing technology or you develop new technology? And, of course, the point that we discussed when I met you about the postal Indian postal bank is not yet in the black. As you know, there are problems with regard to National Inclusion. There is a cost involved and he said there are we don’t we haven’t yet covered the cost. And that is a point of interest to us, because that entanglement if we have a paper on financial inclusion, at what cost because there is a deficit involved in spreading the last mile service services to the poor. So we would like to examine that great detail when we come to the round table. Thank you.

Thankom Arun

Thank you. Thank you, Sheri. I think I just want to support that particular point, because when I met sundar a couple of days back also, what I saw was, he is some kind of a passionate innovator, passionate innovator in terms of he truly believes in the spirit of impact in transforming the society