Using Mobile to Reach the Unbanked in India

Reaching and serving unbanked persons in rural areas can be challenging for a financial institution. It is often too costly to build physical branches in remote areas, and, in turn, "shadow banking" services have emerged in many such areas to serve the needs of the local populace.

Adarsh Credit Co-operative Society Ltd. of India faced similar problems in serving its wide-ranging rural customers, as well as reaching new customers among the unbanked. Formed in 1999 with the stated purpose of financial inclusion, Adarsh has about a million customers. While some customers live in more populated areas where the cooperative has branches, many live in distant, agrarian parts of the country.

To serve these customers, Adarsh sends "advisors" into these areas to try and sign up new customers, as well as to perform banking services to existing customers. To accomplish this, the advisor would have to take cash from dozens or even hundreds of customers and return to the closest branch and make individual deposits for each of these customers. Adarsh employes about 100,000 advisors.

According to Adarsh chief technology officer Himanshu Shah, this was an extremely laborious, not to mention heavily paper-intensive, process. To alleviate this, Adarsh partnered with SAP on a mobile solution to help the cooperative serve its rural customers more easily.

"There are challenges to financial inclusion in rural India," notes Shah. "In rural areas, the mobile penetration is about 90 percent, but only about 45 percent are officially banked."

Now, advisors are armed with mobile devices that make their jobs easier, Shah says. The process for signing up new customers is streamlined, as information can be entered into the device, eliminating some paperwork. And when advisors collect deposits from existing customers, they can enter the amount and customer information right there on the spot. For the customers, whether they have smartphones or feature phones, they can receive SMS alerts and real-time information about their account balances.

"The process used to be very paper-based," says Shah. "The mobile app is directly connected to our core-banking system, so advisors and customers can have real-time information." The amount of time an advisor spends doing the deposits has also been greatly reduced, as the amount of paperwork they take back to them to a branch has been drastically lessened.

Adarsh hopes to introduce a mobile money transfer service by the end of the year. This is important, notes Shah, because many rural Indians use remittance services to send and receive money, and these services often come with large fees.

This is all part of building trust with those who live in rural areas, which helps Adarsh in its purpose of financial inclusion, says Shah.

"They don't really trust banks in rural India," he notes. "But when we have our advisors there and they have day-to-day interaction with the customers, it helps build that trust."

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio