Dr. Nachiket Mor's presentation at India-EU Workshop on Innovation & Partnerships on 14th Dec 09.

1. Presentation on Innovation in Technology & Products at
KGFS
Dr. Nachiket Mor
14-12-09

2. CONTENT
Technology – approach, application & infrastructure
Banking in rural area
Introduction of Kshetriya Gramin Financial Services
Innovation in Technology
Wealth Management
Product innovation
2

3. Banking in rural area – Some facts
• Nature of transaction in rural areas
• Low value
• Frequent transactions
• Need to customize current model to take care of:
• Several proximate touch points
• Unreliable connectivity at last mile
• Investment in local human resource
• High monitoring for some portfolios
3

4. Banking in rural area – Some facts
• Unique transactional environment
• Local language interface for customers
• No systematic way to record credit history
• Challenge to provide KYC documents
• Limited products available
• Lack of savings, remittance and other mainstream banking
products
• Lots of paperwork involved increasing turnaround time and
cost of transaction.
4

5. Technology Approach
• Offline/Online mode of operations
• Internet/Intranet- hybrid model
• Single data entry point to reduce duplication
• Connect through various connectivity channels like VSAT, broadband
and RF towers
• Verify with biometric to know your customer
• Using mobile as an alternate channel
• System Availability
5

6. Key applications of technology..
• Customer unique identification
• To record credit history
• Enables dedupe process
• Conversion of data into useful conversion
• Reduction in transaction cost
• Fixed cost of transaction irrespective of value
• Paper has a cost
6

7. Key applications of technology..
• Profiling and continuous updation of customer household data
• To build scoring models
• To develop new products
• To understand the impact of usage
• Equip frontline staff to do financial planning
• Enhance collateral management
• Building systems to scale
7

8. Technology Infrastructure
Available Not Available
•Moderate Broadband internet
connection
•Mobile connection(GSM/CDMA)
•Low cost personal computer
hardware
•Low cost mobile phones
•Reliable hardware support
•Reliable cost effective internet
connectivity
•Reliable electricity
•Reliable GPRS connectivity
•Cost effective application
model
•Cost effective
- Core systems
- Automation systems
- Analytics
- Server hardware
8

9. Kshetriya Gramin Financial Services
• To provide financial services to underserved
rural areas
• Financial services offered are:
- Loans
- Insurance
- Money market mutual fund
- Remittances
• Each KGFS to operate in two districts or cover 5
million population
• Ownership for maximising the financial
wellbeing of the clients
• Thin level branch at village level
• Strong back office with technology
infrastructure
9

10. Traditional way of collecting customer information
• Filling application forms
• Signing application forms
• Dispatching physical records
• Handling and transportation cost
• Back office data entry/BPO
• Prone to manual error
• Time consuming tracking process
• Increase in Turn around time
10

11. Enrollment process at KGFS
• Customer details
• Household members details
• Linking of household
members
• Demographic details
• Financial details
– Income
– Expenditure
– Asset
– Liability
• All ten fingerprint biometric
details
• Customer photo
11

12. Video in Next Slide
Online Enrollment process at KGFS

13. Paperless Office at KGFS
Video in Next Slide

14. * Footnote
Source: Source
Customer authentication – Biometrics capture in smart card
Customer receives
smart card
CMS
Fino Enrollment
station
•Fingerprints are stored in smart card
in PKS format
•Smart card used has URN on fascia
and chip
•Card has 20 pockets, 4-
fingerprints, 1- customer info, 15-
products
•BMP fingerprint formats are stored
to reproduce any template format as
per industry standard
All ten Fingerprints
export
Best four fingerprint
templates and chip/ card
personalization Process
Card sent to branch
FINO
Personalization
center
Card with key and
application
FINO Backup
server
Finger print upload for
dedupe
14

15. * Footnote
Source: Source
Loan disbursement/repayment via smart card
Customer receives cash
Customer A/c opening
/sanction in Flexcube
Customer A/C
information (1)
Sync
Download (2)
Loan disbursal
(3)
Loan Disbursal
information(5)
FlNO switch
Flexcube FlNO switch
Loan O/S and EWI
information(6)
Sync
Download (7)
Upload(4)
Upload (9)
Customer repayment (8)
Repayment
information(10)
•POT machine can be synched through PSTN, GPRS, PC
connected to internet
•Predefined cut off time to settle POT
•Offline Model
15

16. Software as a service(SaaS)-
• Benefits
– Pay as per usage
– Easily scalable as no. of customers grow
– Centrally managed services
– Secured and provisions for business continuity planning
• Unwanted costs
– Software licensing cost
– Hardware platform including application and database servers
– Network and connectivity
– Recurring cost of annual maintenance contract
– Hiring quality technical human resource
16

17. Technology at KGFS (Encapsulating View)
Video in Next Slide

18. Areas of Partnership
• Optimal way of using biometric to identify customers
• Low cost computing and data entry devices
• Connectivity in remote rural areas/ mountainous region
• Low cost structures for cash management services
• Mobile phones as an interface for financial services
18

19. Wealth Management tool
19

20. Innovation at Product front
Money Market Mutual Fund
• KGFS launched MMMF which gives a return of 7-8%(based on historic data)
• Technology backed automated process: no involvement of paper: customer
can invest for as low as 1 Re.
• PAN cards provided to KGFS customers - System generated PAN application
forms for faster issuance of the card
• KGFS redeems the amount required by customer and gets reimbursement
from AMC one day later (pictorial representation in the next slide)
Personal Accident Insurance
• KGFS maintains the online database Insurance Management Software in CMS
(Customer management system)
• Automated remittance of premium
20

21. * Footnote
Source: Source
Money Market Mutual Fund via smart card
MMMF Purchase
request in CMS
Customer A/C
information (1)
Folio and Units
allocation (2)
CAMS
FINO Switch
Sync
Download (4)
Folio and Units
update to card(3)
Folio and card balance
update(5)
FINO Switch CMS CAMS
Instant cash
Balance update (4)
Redemption
Request(3)
Redemption
Request(2)
Redemption Request
(1)
Sync
Balance update (5)
Balance update(6)
21

22. Enhancing collateral value (Cattle insurance)
Challenges Solution
•High transaction cost
•Lack of information
•Unfavorable coverage terms
•Poor risk reduction strategies
•RFID tagging for livestock
•Electronic registration and real
time update
•Health services with insurance
•Integration of systems
•Claim settlement process
* Footnote
Source: Source
22

23. Enhancing collateral value (cattle insurance) contd..
23

24. Thank you
440, Guna Complex | 6th Floor | Anna Salai | Teynampet | Chennai - 18
www.ifmr.co.in