FINO India

FINO designs and implements innovative technology solutions which enable financial service providers to reach the unbanked population of India. The FINO Microfinance Solution is based on BGS‘ DUET multi-purpose technology platform.

Issuer
FINO, Banks, and MFIs

System Description
Regional Microfinance System

Business Sectors
Micro-Loans, Micro-Savings, Insurance, etc.

Facts & Figures
Launch: June 2008
Projected customers until 2012: 25 million

Why Shift To Smart?

• To reach out to the under-/unbanked population of India providing them with a broad range of financial products and services at a lower cost. Almost 70 per cent of enterprises and individuals within the country have no access even to basic financial services.
• To provide a multipurpose technology solution that can manage not only credit, but savings, insurance, security-based loans, remittances and derivative products.
• To provide better processes, customized products and automated systems to MFIs so that they can overcome the constraints of manual processes and records which cannot be scaled-up once they hit certain critical mass
• To drastically reduced transactional, operational and card acceptance infrastructure cost (last-mile-delivery channel)
• To capture, manage, and analyze client and transaction data for local financial service providers

Business Context
There is a distinct lack of access to financial services in India - almost 70 per cent of enterprises and individuals within the country have no access even to basic financial services such as savings and credit and, insurance services. In a country as vast as India this translates to a very large number of (potentially over 500 million) ‚unbanked‘ people - two times the entire population of the US. While several initiatives have been taken to improve access to basic financial services, including nationalization of banks, branch licensing policy and creation of Regional Rural Banks, the availability of such services to the poorer populations is far from desired.
Even though the banking arena in India, over the last decade has undergone a substantial change with the concept of banking via the Internet, mobile phone and ATMs, these developments have still left the mass segment untouched. This gap is being filled to some extend by few MFIs (Microfinance Institutions) and NGOs which assist the rural & semi urban populace with basic banking products such as savings, loans and insurance. MFIs lend money to customers, especially since traditional banks find the cost of servicing low-income customers too high while the local moneylenders charge exorbitant interest rates. The average ticket size of such transaction varies between Rs. 20 to Rs. 50 (0.31/0.47 EUR). As MFIs cannot afford to adopt the conventional branch-based approach with such small ticket size, they employ an army of field agents to provide doorstep banking. This translates into higher cost of servicing and operational inefficiencies because of multiple manual entries and records.
The need gap is to provide better processes, customized products and automated systems to these MFIs in order to overcome the constraints of manual processes and records which cannot be scaled-up once they hit certain critical mass. Less than 10% of microfinance institutions use commercially developed management information systems. The vast majority of microfinance institutions use back-end systems that were developed internally or they use spreadsheets to manage their client and transaction history. These entities are not just marred by absence of technology, use of different technology platforms, and data collection and aggregation methods. In many of these organizations, the systems are elementary and more useful in keeping accounts rather than in comprehensively gathering and analyzing data.

Structural Overview - FINO (DUET) Microfinance System
Participants
Participants are banks seeking to offer microfinance banking products in a previously unreachable customer pool. In order to gain access to these customers, a Bank has two options:

- Either to offer these services themselves through their own web of banking
correspondents (agents, branches, etc.) using DUET Technology for last-mile servicing of consumers and their smartcards

- Or to use FINO’s established MFI & Agent infrastructure. FINO’s platform includes a web of MFI partners with their respective Agents who go out to the field and transact with cardholders. By using FINO infrastructure, Banks are able to tap on an established last-mile network equipped with state-of-the-art Biometric CAD (Card Acceptance Devices). The products offered by the Agents in the field are the participant’s proprietary product (e.g. ICICI Savings Account), managed only on a technical level by FINO. The banking parameters and business rules of the product are managed solely by the participants themselves at the CBS (Core Banking System) level.

Microfinance Institutions (MFIs)
MFIs are the local financial institutions partnering with the banks that offer their regional positioning to provide access to the rural population in their area. MFIs appoint Agents that travel to the remote areas to service cardholders. MFIs appointed Agents are trained personnel who are responsible for delivering the following main types of services to the consumers:

• distribute issued cards
• distribute loans
• collect savings (fixed deposits, recurring deposits)
• open new relationships with cardholders
• deliver back office updates to the cards

Agents collect transaction information which they upload to the FINO Host on regular intervals that can range between once per day to once per week, depending on the transaction volume and route of the Agent. Every Agent is in charge of a specific „mapping code“ which determines which clients he needs to service on a given day, as well as which backend updates are to be downloaded to his terminal for distribution. Every agent card can collect up to 400 transactions prior to requiring the data to be uploaded.

Cardholders
In order to receive a card, a consumer needs to enrol into the FINO program at any of the many enrolment stations around the country. Every card contains cardholder demographic data of the cardholder as well as biometric minutiae (fingerprints) for authentication at the time of transaction.
Cards can store up to 8 independent relationships with financial institutions. In the case of FINO cards, this means that the consumer is free to subscribe to any product offered by an agent, even if the products originate from different bank participants. For example, a card could have one slot with a savings product from ICICI, and simultaneously host a loan product from SBI in its second application slot.
All transactions are digitally signed by both the terminal card (in the terminal) and the client card, whereby the client authorizes the transactions using his fingerprint. Every card stores the last 30 transactions conducted on it, including amount and application slot used for the transaction.