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Mobile based Financial Inclusion
Dewang Neralla
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Financial Inclusion
• Financial Inclusion
• Not only a local issue to any country, but a global issue
• Definition: Ability to provide access to banking, credit,
insurance and remittance services for people who don’t
have access
• Let’s look at the opposite – Financial Exclusion• Let’s look at the opposite – Financial Exclusion
• Definition: Inability to access financial services due to
problems of access, conditions, prices, marketing or self-
exclusion
• No single comprehensive measure that can be used to
indicate the extent of exclusion
• Number of bank accounts and branches provide only
partial information about level of the exclusion
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Universal Access of Financial Services: What & How?
• A large number of population in India has• no bank account
• no affordable credit
• no (access to ) financial advice
• no assets to serve as means of employment besides serving as collateral
• no access to safe money transfers
• no insurance
• Challenges• Challenges• It is estimated that by 2020 nearly 600 million new customers’ accounts will have to be opened
• Though nearly 25+ million accounts have been opened up there are hardly any transactions in these accounts
• Viability of the business model is the key for the service providers
• Given the present network capacity of formal banks, it might be difficult to include these large numbers or to have universal access of financial services without first
• building up and enlarging the network
• developing customer-centric products
• simplifying processes and
• setting up hassle free, low cost & appropriate technologies
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Financial Inclusion – Current Scenario
• Smartcard based System
• Fingerprint Biometric authentication
• Dedicated Terminals are used to carry out
transactionstransactions
• Proprietary Technology solution by
Technology Service Providers (TSP) to Banks
Confidential
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Financial Inclusion – Enrollment Process
Confidential
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Transaction Process
Confidential
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Transaction Flow
• Start of the Day Activity
- Download Positive Balance File (PBF) from CBS
• Transactions
- Validate customer offline with Smartcard & - Validate customer offline with Smartcard &
Biometrics
- Conduct offline transactions
- Print receipt
- Update terminal with Transaction Details
• End of Day Activity
- Upload Transactions to CBS
Confidential
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Bank Connectivity – Pass through
Terminal
ISO 8583
Confidential
Terminal
Terminal
Terminal Gateway
CBS maintains accounts of all the FI account holders and terminal gateway acts as a gateway between Terminal and CBS.
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Bank Connectivity – Micro A/C Host
Terminal
Offline
Confidential
Terminal
Terminal
Terminal Gateway
CBS maintains Pool account consolidated for all FI account holders. Terminal gateway maintains FI customers accounts and the transaction details.
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Issues in the existing system
• Terminals are expensive
• Customers are always associated with one BC/
Terminal
• Smartcard based• Smartcard based
• Offline transactions
• Non-Interoperable (Banks having more than
one BC)
Confidential
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Mobile based
TransactionsFinancial Inclusion
TransactionsFinancial Inclusion
through Mobile
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Some Insights
• Mobile revolution :
o Population 1.112 Billion
o Fixed Subscribers 50 Million+
o Mobile Subscribers 500 Million+
Confidential
o Mobile Subscribers 500 Million+
o Internet Subscribers 9.22 Million
o Broadband Subscribers 2.67 Million
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Why Mobile Phone ?
• Penetration – There are more than 500 million
mobile phones in this country
• Cost – Access to cheaper mobile devices
• Computing Power – Today, mobile phones are akin • Computing Power – Today, mobile phones are akin
to computers
• Development standardization - High level APIs for
application development
• Multiple channels available - SMS and GPRS
Confidential
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Why Mobile Phone ?
• Comprehensive device -
• In built Camera to capture photograph during account
opening
• Built-in speaker to play localized voice over messages to
account holder during transactionsaccount holder during transactions
• Phone can also be used for voice communication
(Multipurpose)
Confidential
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Communication Cost
• SMS
- 30 Paise per SMS (someone has offered at even 1p)
- Separate SMS packs are available to reduce the cost
furtherfurther
• GPRS
- Rs. 49/- per month and 1 paise per Kilo Byte
Confidential
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Transaction Modes
• Online through GPRS
• On demand through SMS
• Offline through data storage on Mobile phone
Confidential
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Data Size Requirements
• Biometric Data
- ISO 19794 Part 2 (Minutiae Data) - 250 to
400 Bytes approx
- Proprietary Template – around 100 Bytes- Proprietary Template – around 100 Bytes
• Transaction Data
- Account Number, Date Time, Transaction
Type, Amount, Terminal ID, BC ID (around 60
Bytes)
Confidential
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Extension of the current model –
Biometrics
Confidential
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Enrollment
Confidential
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Online Transactions
• GPRS is used as communication channel
• Biometric and account details are queried
from Backend server during the transaction
• Customer fingerprint is verified• Customer fingerprint is verified
• Online transaction is carried with CBS /Micro
A/C host
• Customer is issued with printed receipt
Confidential
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Online Transaction Flow
Confidential
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Receipts
Confidential
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Semi-Online Transaction
• SMS used as communication channel
• BC mobile is stored with Account number and
associated biometric data of the customers
being dealt withbeing dealt with
• During transaction, customer account
number is captured by mobile and live
fingerprint is verified against fingerprint
stored on the mobile.
Confidential
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Semi-Online Transaction Flow
Confidential
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Semi-Online Transaction
• On successful authentication, transaction
authorization with CBS/Micro a/c host over
encrypted SMS.
• Customer is issued with printed receipt• Customer is issued with printed receipt
Note: Fingerprint can also be queried from
server over encrypted SMS for the account
holders not associated with BC.
Confidential
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Offline Mode
• Offline is carried out on the locations where
GSM/CDMA connectivity is not available
• Customer Positive balance file (PBF) and fingerprint
is downloaded into the BC mobile phone through
docking with PC at link branch or through GPRS
where connectivity is available
• During transaction, customer account number is
captured by mobile and live fingerprint is verified
against fingerprint stored on the mobile.
Confidential
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Offline Mode
• On successful authentication, transaction
authorization (Dr/Cr) is carried out locally at
the mobile phone based on PBF.
• Transaction details are stored locally in the • Transaction details are stored locally in the
mobile phone
• Customer is issued with Printed receipt
• At the end of the day, the transaction details
are sent to CBS / Micro a/c host.
Confidential
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Issues to be considered
• Agent based
• Do we really require biometrics?
• Do we really require a printer?
• Customer based• Customer based
• Can a mobile phone be given all the BoP
customers?
• Can a payments network be created, where there
is less need for actual cash, all shopkeepers can be
CSPs who can not only transact electronically but
also be points for deposit and withdrawls.Confidential
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Scalability & Robust Business Model
Terminal Mobile
Smart Cards Required Not Required. (Reduces capital
investment)
Cost of Terminal Around Rs.20,000 to Rs.25000/- Mobile phone around Rs.4000/-
Fingerprint Device with Printer
around Rs.10000/-
Confidential
Application Compatibility Not compatible with another
make of terminal
J2ME is supported across all the
mobile manufacturers
Multipurpose Only be used as transaction
terminal
Can also be used for voice
communication and other
business applications
Security Depends on terminal vendor PKI, AES, 3DES & other
cryptographic support
Communication Mode Mostly Dial-up GPRS & SMS
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Concluding Remarks
• Golden truth
• Mobile fit will create an efficacious retail
payments network akin to utility.
• We should not become subjugate to technology, • We should not become subjugate to technology,
but decide the technology that suits the
appropriate business needs
• Brings access and services component easily and
is cost effective
• Becomes an access-plus-services business model
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About atom
• Atom Technologies Limited is a subsidiary of Financial Technologies, which has created multiple national level institutions such as MCX, MCX-SX, SMX etc
• Atom is focussed on complete payment processing enabling secure payments through multiple channels like, mobile and internet, payments through multiple channels like, mobile and internet, Interactive Voice Response (IVR) as well as PoS.
• Product/Services
• Payments through Mobile application (GPRS / SMS)
• Payments through IVR
• Financial Inclusion
• Merchant acquiring using PoS
• Multi Utilities Payment Services for bill payments, top-ups through an agent network
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About Financial Technologies
Group
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Thank YouThank You
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Thank you