Parul Agarwal Amulya K Champatiray IFMR Research, Chennai, India

1. Exploring the Nature, Scope and Feasibility of Existing Technological Infrastructure of India's National e-Governance Plan's Customer Service Scheme Towards Converting In-cash Transactions into Cashless Transactions“KIOSK BANKING” Parul Agarwal Amulya K Champatiray IFMR Research, Chennai, India

2. Agenda • Background • Model under study • Motivation • Research questions • Methodology and sample • Preliminary observations • Steps Ahead & Further Research Questions

3. Introduction IMTFI's Fifth Annual Conference for Funded Researchers, University ofCalifornia, IrvineFive researchers from IFMR, AmulyaChampatiray, DeeptiKc, Lakshmi Kumar, MuditaTiwari and ParulAgarwal attended the conference organized by Institute for Money, Technology and Financial Inclusion (IMTFI) at University of California-Irvine on Dec 4-6, 2013.  This conference brought together the institute's fifth-year award recipients who presented their preliminary findings. DeeptiKc and MuditaTiwari presented their findings on social, cultural, and commercial factors that influence the decision of using cash versus electronic transactions amongst the privately led enterprises in Dharavi, and discussed the scope for the mobile or electronic payment systems.  Lakshi Kumar presented her findings on the privacy risks that the current mobile money framework in India accounts for. AmulyaChampatiray and ParulAgarwal presented the findings of their study that focused on exploring the nature, scope and feasibility of existing technological infrastructure of India’s National e-Governance Plan’s Customer Service Centre scheme towards converting in-cash transactions into cashless transactions.

4. Background • India is the 7th largest country by area and 2nd most populous country with a diverse socio-economic culture. It is an emerging economy – 10th largest economies by GDP and 3rd by PPP.

5. Background • Recently,the Government of India has increased efforts and investment into financial inclusion. - Revisions in SHG-BLP (SHG 2), RBI’s financial inclusion drive, BC and BF, New banking licence, Women’s bank, NREGA, NRLM, NHBY etc. - The National e-Governance Plan (NeGP) to enable a greater accessibility of all government, social and private sector services to the citizens at an affordable cost.

6. Model under study Model works on PPP Framework

7. Motivation Sector based factors Model based factors Massive web-enabled infrastructure: over 100,000 internet enabled kiosks across 600,000 villages. Trust because of authentic system of government service delivery. Innovative approach: motivating enough to see if the model is promising enough to be scaled-up towards creating an impact on the financial behaviour of poor. • Emphasis on “branchless banking” – critical inputs are essential to make relevant corrective and replication measures for a greater impact. • Prior study conducted by CMF-IFMR found that the KIOSK model in rural areas is not financially viable if it just offers financial services.

8. Research Questions • To study the kiosk banking model, set up under NeGP, its financial viability and sustainability and to identify the motivation and aspirations of VLEs. • To understand the beneficiaries’ perspective regarding the significance of this kind of banking model, their acceptability of electronic/ web-based financial transactions and their further expectations. • To explore the potential of the well-equipped and established physical infrastructure of CSCs in converting villages’ major in-cash transactions (especially in case of agriculture) into cashless transactions.

9. Sample and Methodology • Partnering with AISECT, the following sample in Sagar district, Madhya Pradesh was drawn for the study: • 30 VLEs/CSCs were selected of which 10 were randomly selected for further exploration. • 5 SBI Bank Managers were also interviewed

10. Preliminary Observations • Characteristics of CSCs and VLEs • Characteristics of Clients • Factors that motivate VLEs • Branding and Marketing • Services and Footfall • Clients’ Experience with CSC • Insights form Bankers • SWOT Analysis • Scope of extending the model

11. Characteristics of CSCs and VLEs

12. Characteristics of Clients

13. Factors that motivate VLEs • About 90% of VLEs believe that their social status has improved due to their association with CSC • Further, 87% believe that it has strengthened their social networks. • Learning from other VLEs helps them address the operational issues and make them feel informed and connected.

14. Branding and Marketing • 87% of VLEs do their own marketing by using – sign boards, pamphlets, wall posters, announcements, word of mouth, demo in schools • On an average, about INR 6,800 was spent by each VLE towards marketing • 60% VLEs believe that people are aware about their services • 57% of VLEs plan to adopt a new marketing strategy in future in efforts to increase their number of clients.

15. Services and Footfall: Financial

16. Services and Footfall: Non-financial

17. Services and Footfall: Revenue Generating Products

18. Services and Footfall: Usefulness of Services

19. Clients’ experience with CSC • Most attractive feature to clients: withdrawing money • Cost incurred to open a bank account includes Rs. 5 on transportation and Rs. 13 on documentation etc. • It takes around a week to get an account opened • 91% of clients are satisfied with the services provided by CSC • Location of the CSC is a clear advantage

20. Clients’ experience with CSC: in comparison

21. Insights from Bankers Objective:Target small clients who otherwise cannot access banking services, increase SB accounts, loan recovery, sourcing new clients Challenges: • Trust building among prospect clients • Technology – knowledge and comfort • Client KYC • Larger Government payments • Political interpretations • Monopoly and discrimination at VLE level Future Plans: • Transfer of 100% SB account to Kiosk (decongestion to give more assistance to high-end clients) • Provide more services like General insurance and loan services • Target small client 45,000 - 60,000 in next 2-3 years

22. SWOT Analysis

23. Scope of extending the model: Current Status

24. Scope of extending the model: Proposition • A model that provides either the first or a combination of the following: - Scope to place (or receive) the order over phone and then transfer (or receive) money electronically through CSC - To get (or post) information on quality of produce and price offered (or demanded) through CSC • Reactions: - Farmers are willing to pay for such a service as this will reduce costs and time for them - Retailers are willing to pay for the service as this will get them more customers and will lead to a healthy competition - Bankers believe that this model has potential but needs to be well thought through before implementation

25. Steps ahead and further research questions Over the next phase of data collection (in next two weeks), researchers intend to study the following in addition to the basic research questions: • Does a child’s scholarship account motivate parents to get themselves into the formal banking system? • Does owning a savings account at an early age inculcate the habit of saving and principle of money management among kids and youth? • How can the model be extended and evolved to provide customized services to people engaged in various livelihood based transactions?

26. Thank you For further questions and discussion please write to the researchers at: parul.agarwal@ifmr.ac.in amulyakrishna.champatiray@ifmr.ac.in