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Field visit to FINO customer service points

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Business Correspondence (BC) model or the third-party agent banking was launched in 2006 in India, with the intent of increasing the ambit of the formal banking sector. Since its inception in 2006, various banks have promoted the BC model in all corners of the country.

In the rural areas around Bangalore, FINO has partnered with a bank towards the extension of banking services through the BC model. FINO is delivering the BC services through “FINO Fintech Foundation” which is a section 25 company.

Recently members from IFMR Finance foundation (IFF) and IFMR Rural Finance visited the FINO Customer Service Points (CSP) in the area to understand better the working of their BC model and to interact with the FINO CSPs and their clients.  The team visited the Ramanagar and Gulberga blocks near Bangalore along with the respective block-coordinators, and was guided by Mr. Sharan, District coordinator of FINO. The visit enabled us to have deeper insights into the pros and cons of the BC model.

The FINO BC model offers no-frill account services involving savings and withdrawals, few CSPs had also tried selling insurance products on a very small-scale. Each CSP at the client level reports to the Block Coordinator, who is in turn, headed by a District Coordinator. The CSP is a contract employee of FINO Fintech foundation, who is a local resident, and is given a fixed remuneration of Rs 750 plus a commission of 50ps on every transaction irrespective of the amount transacted. These CSPs work an average of 4 hours per day and have this job as either the only source of income or as a part-time business.

On an average each CSP handles around 700-800 clients in her/his service area. Each CSP is provided with a POS machine for transactions and has to deposit an initial amount of Rs 10,000 with FINO Fintech foundation (Rs 5000 for the POS and Rs 5000 for the CSP) as guarantee money. A transaction limit of Rs 5000 is imposed on the CSP and once the limit breaches, the POS machine of the CSP gets blocked. It would then require a visit by the Block Coordinator to collect the cash and unlock the machine to carry out further transactions.

The CSPs, with whom the team interacted, found it difficult to sustain the business, as the income obtained from the present BC model was difficult to cover the costs incurred; the door-to-door services provided by the CSPs added to their cost. Apart from this, only 30-40% of the clients were active which further reduced the commissions for the CSP. However it was feasible for CSPs who ran Kirana stores, as majority of their clients visited the store as part of their daily chores and also made transactions with the CSP; he made fewer door step services than other CSPs who were housewives or working in other companies.

On interactions with the clients, the team could infer that the transaction limits imposed on the CSP was a major hindrance to the clients in utilizing these services efficiently and frequently. Many a times, any client who wants to withdraw or deposit amount that is greater than the limit would have to inform the CSP prior hand, thus it would usually take around three days to complete the transaction, consequently undermining the efficiency of the system.

Currently dealing with a minimal set of services, FINO is looking to widen its base by including NREGA payments and Insurance to ensure the sustainability of the model for all the partners.

Farzana Najeeb of IFMR Finance Foundation contributed to this post.

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5 Responses

  1. Dear Farzana,

    Thanks a lot for this great piece of information. It really excites me to know about these kinds of innovative efforts, especially in the rural areas. Yes, I also feel the remunerations is not enough. The same in CSCs is probably higher @3-4%. We need to address these issues quickly.



  2. Hi,
    My thoughts on the post:

    The transaction limit on CSPs is a risk issue. The system has been designed for micro customers. They, in any case are not expected to transact more than Rs. 5000 in one go, so it is not a limitation in that sense. The CSP is supposed to carry low value of cash for his / her safety as also the risk in the system – what if the CSP absconds with cash?

    Yes, the income levels are low. So are the charges paid by the customer and product revenue to the bank. The whole chain has to make money. FINO itself has just started breaking even after 3 years and 16 million customer base!! The CSPs are expected to make money through cross-selling and higher paying products like remittance, insurance, loans, etc. which would follow now onwards when the customer has been included in the mainstream banking and a transaction channel has been set-up.


    Manish Khera
    CEO, FINO.

  3. Thanks for your note Manish. Organisations like FINO have built the CSP and payments infrastructure at scale. It will be very exciting now to see other products riding this channel leading to more "complete" access for the customer and viability for the CSP.

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