The Hindu Business Line : Bank on Big Blue

Serving about a dozen micro finance institutions (MFIs), IBM has empowered half a million users (5,00,000) with multi-purpose smart cards, helping them access funds from these MFIs.

Following the success achieved in India, Big Blue is looking at replicating this in other markets in the region, says Subrata Dasgupta, Head of Solutions, IBM India and South Asia.

“This is just the beginning of a long journey. It is estimated that about 600-700 million people in the country do not have access to formal banking services as they do not have necessary documentation and ID to open a bank account formally,” he says.

IBM has partnered with Financial Information Network and Operations Ltd (FINO), a technology solutions provider focussing on the micro-finance sector, and together they offer both online and offline transactions at affordable cost while reducing paper work, says Dasgupta.

How does this work? IBM has created a large data centre that is connected to FINO. This, in turn, empowers representatives of MFIs to reach out to people in the area of their operations. These representatives go out with their hand-held devices and offer services to people. Since the representative is from that area, he is familiar with the local people.

Once an individual is registered with an MFI, he is provided with a smart card that stores all the information about him and also offers him access to services.

The hand-held device of the MFI official has the capability to read a multi-function biometric card and record smartcard transactions, host electronic passbooks, read fingerprints, which is the unique ID, and also take printouts of transactions through a thermal printer.

“From the IBM point of view, we have created a large data centre whose potential is barely used now, given about half a million users. But it has the potential to service over 50 million customers and is a scalable platform,” explains Dasgupta.

The technology solution is based on software and hardware created by IBM. Backed by the data centre, where all the information resides, MFIs pay for the transactions they actually make. For any technology solution to work, it has to be financially supportive. Pay per transaction is the best model that provides a win-win situation for all players and MFIs don’t have to spend for technology, says Dasgupta.

As against a bank transaction that costs between Rs 50 and Rs 60, this works out to about Rs 5-10 per transaction, making it affordable. With growing volumes, there could be greater flexibility, he says.

The entire technology is structured on ‘On Demand’ access to infrastructure. This is similar to the ‘pay as you use’ utility concept. The data centre has been set up in Bangalore and currently serves about 11 MFIs. Other cooperative banks and local area banks have shown interest in joining such services, says Dasgupta. Similar services have been attempted by Sarswat Bank for cooperative banks, and another joint venture between HDFC and iFlex, for shared services.

“The on-demand transactions offered by IBM are scalable. Already, apart from services to FINO based in Hyderabad and incubated by ICICI, another FMCG company uses this data centre. We expect more companies across different verticals to use such ‘on demand’ transaction-based data centre services,” says Dasgupta.

Given the success achieved in India, IBM is in talks to offer similar services to companies in other markets in the region, he says.

vrishi@thehindu.co.in