Access to basic financial services remains a big challenge to a large section of the population in India, with more than 65% of the population classified as under banked or unbanked. While banks are continuing to invest in expanding their reach through brick-and-mortar branches and other delivery channels, there are a host of impediments that prevent the success of these initiatives, both from the perspective of the bank as well as its customers.

The Challenges of Brick-and-Mortar Expansion

Opening a branch in a remote, rural or underserved area is not a financially viable option for banks. Besides the high administrative costs, it is challenging to find staff and hire security, utilities such as electricity, telephone and internet might not be reliable and putting in place backups would again increase the costs. Furthermore, business generated by the branch would be relatively low because people in the region would use the bank for deposits and withdrawals of small amounts. Typically, a bank does not open a branch below a district headquarters or tehsil level so that the business of running the branch is cost effective. However, since customers live in remote villages, they are forced to travel long distances and spend money on transport for their regular financial transactions. This does not serve their best interests since it might involve forgoing a day’s work which leads to losing a day’s income. Also, many of the customers from the region might be illiterate or lack the knowledge to fill up bank slips and do other paperwork. This is not just a big hindrance, it also translates to them being treated as second-class citizens, not given good customer service and being shuttled from one department to another. This is why people in remote villages turn to moneylenders in their own village who lend them money without a lot of paperwork. Often, this causes the farmers or customers in these remote villages to be trapped in a cycle of debt and repayment of loans with hefty interest rates.

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The Potential of Agency Banking

To combat this, there have been a plethora of efforts to move the country towards greater financial inclusion and most of the directives in this regard have come from RBI (Reserve Bank of India) regulations, recommendations for banks and government policies and initiatives. In 2006, the RBI introduced a regulation that allowed banks to provide bring their services to the doorstep of their customers through the use of third party services. These third party services were allowed in two categories— business correspondents or banking correspondents (BCs) and banking facilitators (BFs). In this model, BCs are permitted to carry out transactions on behalf of the bank as agents, while the BFs can refer clients, pursue the clients’ applications and facilitate the bank’s transactions, but cannot transact on behalf of the bank. While initially, the government only allowed non-profit entities to function as banking correspondents, the norms have been eased and now even for-profit entities can function as business correspondents. This form of banking, also known as agency banking is aimed at helping customers in rural areas access banking services such as cash deposits, withdrawals, remittances and balance enquiries from anywhere in the country just as customers in urban areas do using ATM facilities.

As of March 2013, banks have deployed as many as 1.95 lakh business correspondents (BCs) covering 2.21 lakh villages across the country. This brings customer a number of benefits including instant access to banking services, relaxed KYC norms for small accounts which allow them to open a bank account, lower costs as well as lesser time required to access banking services.

The Role of Technology – Digital is the way!

As banks further their reach and services across the country, the ultimate goal of banking has to be enabling banking in any location or place with transparency and convenience. Bringing together all elements of banking requires the right technology that can identify opportunities by looking at customer data and preferences, focusing on improving the customer experience and enabling banks to provide brilliant customer service. To enhance customer loyalty and deliver great customer experiences and service, banks have to shift from a multichannel to an omnichannel way of functioning. An agile digitalization platform such as Enterprise Tiger that is nimble, secure and mobile, ensures that the business needs of financial institutions are met in the most reliable and efficient manner possible. It allows for seamless cross-channel integration and the best kind of banking business data management.

It is only the right technology, know-how and the latest tools that can take banking and financial inclusion in India to the next level. By adopting the best digital technology for their needs, banks can easily ride the digitalization wave and become increasingly agile, soar ahead of their competitors and make their business processes seamless and digitally enabled.

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How This Works – Digital Agency Banking

Take for instance, Ram Singh who operates a kirana store in Sirka village[1]. All the villagers know him because they buy small knick-knacks and basic necessities from him. He often gives them credit for the goods that they buy and he is well-known and well-liked in the village. Having opened an account with Bharatiya Bank two years ago, Ram Singh is one of the few villagers in the region who is internet savvy. One day when he was scrolling through Bharatiya Bank’s page on Facebook, he was prompted to download the bank’s mobile app. On doing so, he soon realised that he could track his account through the app in his language. Very quickly he comfortable keeping track of his account on the app. Soon, he received a notification message on his banking app that spoke about the possibility of becoming an agent for the bank. He also saw a video on the bank’s Facebook page explaining the process and the advantages that the role would give him. Since he had clicked on the links related to the bank agent message, the bank’s analytics tool singled out Ram Singh because of his high credibility score. Following this, a Bharatiya Bank telecaller called Ram Singh and discussed the formalities needed to become an agent for the bank. The very next day, a banking field agent (located by the omnichannel digital system) arrived at Ram Singh’s door and verified all his details using their bank-issued tablet. They authenticated his Aadhar ID and took his thumbprint. Instantly, Ram Singh received an SMS confirming the first level of verification. Very soon, his application was vetted and approved, and he became authorized to offer selected products and services on behalf of the bank.

[1] This is just an illustrative example

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The villagers from Sirka are now serviced by Bharatiya Bank and don’t have to go to the district headquarters. Ram Singh carries out their transactions using just his mobile phone. The app allows him to accept deposits and withdraw money within a certain limit. Certain villagers have also downloaded the app so that they can track their bank accounts. Ram Singh now functions just like a branch and even opens accounts for the villagers. Furthermore, they can apply for loans— group or individual, invest in mutual funds and also buy insurance from him.

Conclusion

Closing the digital delivery gap requires agile technology that is secure and that can provide real-time synchronization, location driven services, customer analytics, multi-channel integration, assistance with personal recommendations and advisory services, as well as comparison services based on the financial profile of the customer.

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