The State Bank of India's (SBI) mission is to be "the banker to every Indian" and its partnership with Eko, a third-party financial service provider, is helping it to achieve that goal.
"Those who are earning less than $2 per day look beyond branch-based banking," said Anupam Varghese, vice-president of technology at Eko, at last week's card and mobile technology Cartes in Asia exhibition. Using the vendor's mobile technology platform, SBI has offered mini-savings accounts and various financial services to low-income Indians since February 2008.
To sign-up for a mini-savings account all someone needs is a basic mobile phone. Consumers need only to visit a customer service point, usually a convenience store, and request an account opening package and, according to Varghese, a user must "simply be able to switch a mobile on and off and to dial out a set of numbers" to use the service. The initial account balance is only Rs50 ($1) and customers can maintain their accounts with Eko and SBI indefinitely with no further minimum balance requirements.
Providing banking services to India's poor is tough work. According to central bank statistics, as many as 450 million people -- nearly half of India's population -- did not have a bank account in 2007. And, according to Varghese, more than 70% of the rural population and more than 50% of urban dwellers have no access to financial services. He said the 75,000 accessible bank branches providing services in India are not nearly enough to cater for the country's 1.17 billion headcount.
While bank account penetration is still relatively low in India, mobile phone usage is on the rise. Last year, the number of wireless subscribers increased 51.4% over 2008 to 562.2 million people, according to the Telecom Regulatory Authority of India.
According to Varghese, Eko's "sachet model" approach to mobile banking is what makes it successful. "Most of us when shopping for necessities such as shampoo will buy the largest bottle available because it is the best value for money and often has a discount, but the majority of Indians prefer to use small sachets of shampoo," he said. "Not because sachets are a better value, but because it is what they can afford at any given time."
The average cost of a financial transaction at a bank branch is Rs150 to Rs200 and the average cost at an ATM transaction is Rs8 to Rs50, continued Varghese. However, using the SBI mini-savings account, the cost per transaction is Rs1 to Rs2 -- much more affordable, even to someone earning under $2 a day.
Eko plans to expand services to small and medium-size enterprises. "We are essentially giving SBI mini-savings account holders a debit card," said Pooja Kumar, vice-president of product at Eko. "We intend to expand this service to a large number of small merchants, who are currently dealing largely in cash and do not have access to low cost means of accepting and making payments electronically. Through our solution we believe these merchants will not only be able to accept payments from their customers but also be able to pay their suppliers, bills and their employees, instantly and conveniently via their mobile."
Experts see mobile payments as a boon to emerging market treasuries. By adopting text message-based payments, retailers can speed up their own collections and pay distributors at the click of a phone button.
As India's economy continues to grow and banking operations expand further, Kumar believes that India's banks will still be far from being able to service every potential customer. "It is much more optimal for banks to use Eko as a third-party financial service provider rather than build new branches or service ATMs."
SBI plans to roll out more mobile services using Eko's technology platform and continue growing its mini-savings account subscriber base.