Banks need to tweak design of products to make agent model profitable: FINO Paytech

Being a banking correspondent can be a profitable business, says technology solutions provider and agent network manager FINO PayTech. One of the key criticisms of the banking correspondent model for financial inclusion in rural areas has been low transaction volumes in no-frills accounts.

Opponents of the programme argue that due to the lack of activity, the entire strategy of providing these accounts is stressing the financials of banks and brings little profit for the last-mile connectivity agents.

But FINO says the scepticism on profitability of the model is unfounded. FINO, which services 51 million customers through 32,000 banking correspondents (BCs), says the need of the hour is for banks to offer more products to make the business profitable.

“We think if you offer two products in whatever combination, the customer becomes profitable, the business becomes profitable,” says Vice-President and Head of Business Management Growth Shweta Aprameya.

“The banks and partner BCs need to work to design and take products to market. Financial literacy is much more important than anything else. What are the products that need to be popularised? Everybody will have a savings account. Now banks need to tweak the products and work with the BCs to design products in the interest of the customers,” she adds.

“We are a profitable organisation and are working to make our customers profitable as well. We are well on our path,” says Aprameya. Founded in 2006, FINO PayTech achieved break-even in 2010. A privately held company, its revenues stood at $55 million (Rs 293.9 crore) during FY 2011-12 and it expects to register a top line of $75 million (Rs 400.6 crore) this fiscal.

While acknowledging significant attrition in the banking correspondent ranks, she said those that remained have done so because there is ample scope for profitability. “When the different banks say there are a lot of BC exits, there is bound to be. After FINO, multiple organisations have got into this business. The only reason we’re in this business is because we know it can be profitable.”

Twin pluses

“The proposition for the agents – the last mile man – is both a social and financial gain. By doing banking for the community, he derives reputational value. The second factor is earnings from the business. In rural areas, a banking correspondent earns Rs 3,000-5,000 a month from just doing simple transactions with the customers. One agent is matched to 700-1,000 customers. He is a trusted guy in the area and earns a significant income. It’s like becoming a franchisee of a bank,” Aprameya says.

Agents working in more urbanised areas earn Rs 8,000-10,000 a month, she says, adding, “32,000 points of sale is a growing number. Our vision is to have one lakh points by 2015.”

On the difference in demand for banking products among customers in rural and urban areas, Aprameya says, “Depends product by product. Some areas, there is better disbursement, which opens scope for lending, overdraft, term deposit. For example, insurance is doing very well in rural areas of UP like Varanasi.” In this regard, she pointed out that while activity in urban areas is primarily remittances and savings, lending, insurance and term deposits drive banking correspondent activity in rural areas.

“The next level that FINO is working on is making these accounts more servicable, viable. This has huge dependency on its owners, which are the financial banks. Still to be ventured out on a large scale, it’ll take some time. With 103 million local accounts opened, the country has progressed significantly,” she adds.

Arvind.jayaram@thehindu.co.in

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