That potential market can be huge: nearly nine out of every 10 of India’s 270 million mobile phone customers run their phone accounts through rechargable pre-paid cards and 70% of India’s 1.06 billion population does not have access to a bank. Recognizing the potential, the Reserve Bank of India announced guidelines last week for mobile banking.
India is not the first in this space. Other countries that have already shown the way: the two mobile phone firms in the Philippines offer small- scale transactions to some 5.5 million customers, according to the UK’s Department for International Development.
The ease of use is evident when Suresh Chandan Sharma, who runs a photography studio in Uttam Nagar, transacts with Gupta, the Eko distributor. While this reporter was talking to Gupta, Sharma deposited Rs400 in his account in less than five minutes, which included a message he received from Eko confirming his transaction. Withdrawing cash is as simple too.
CBoP’s bigger rivals need to be worried. “I am closing my account with ICICI Bank. Their ATM is far and I have to stand in queue. Besides, I can quickly deposit little amounts I make, without having to take the money first to my wife,” Sharma says. The maximum cash deposit limit is Rs50,000 and a customer can withdraw a maximum of Rs8,000 per day.
The modus operandi of the system has been designed simple. The mobile phone of the customer is his or her account number. To open an account, a customer needs to deposit an identity proof with an Eko retailer, who then hands over a booklet that contains a welcome letter, the product leaflet, a manual and a small “signature” booklet, that has 100 signatures, each a 10-digit number that has four blank Xs, or digits to be filled in by the customer at the time of a transaction.
For banks, the costs are compelling: according to Eko’s Sinha, each physical banking transaction costs a bank more than Rs100 a customer and each ATM transaction more than Rs15. “This model will cost the bank nothing, no capex, except for the renumeration they give us,” he said.
For Gupta, this is a profitable business as he earns a commission of Rs50 for each new account and Rs2 a transaction. Since he got into the business mid-April, he has op-ened more than 300 accounts. “In one month, I have made Rs12,000 on new accounts and around Rs600 on transactions. In a day, I do between 8-10 transactions,” he said.
The Uttam Nagar project, christened Abhilasha, a Hindi word which means ambition, will be in pilot mode for another month and will become profitable for Eko only after two or three years. “We are going to burn around $20 million (Rs86 crore) in the next two-three years and will become cash positive only after that. We visualize 50 million customers in three years with average deposits of Rs2,000 per customer per year, then we will have a significant float and the percentage we make of the float will also be much higher,” Sinha said.