More than half of India's
rural population still has little or limited access to banking services,
even though the government has been pushing banks to expand beyond
cities and towns since 2006. Part of the problem was that banks found it
financially unsustainable to set up accounts for rural citizens because
of the limited transactions and money in such accounts. But the direct
transfer scheme now addresses some of those concerns.
"With
direct benefit transfer, there will be a float, there will be
transactions and possible products will take off. It is beginning to
start happening," said HCL Infosystems chief executive officer Harsh
Chitale. He estimated his revenues projects related to financial
inclusion were currently between Rs 25 and 30 crore, but expects the
transaction fees paid out on direct transfer to create a
multi-thousand-crore banking processing market.
The
Indian market with opportunitiese-governance, financial inclusion and
the plan to connectIndian villages to a broadband network is creating
more opportunities for IT firms, currently struggling with weak demand
in its main markets and the increasing probability of restrictive visa
laws in the US.
HCL Infosystems is gunning for
a share of the financial inclusion-related business and has tied up
with 26 banks to provide technology such as handheld devices that
banking representatives will carry to ensure last-mile connectivity in
villages. Wipro, India's third largest IT services provider, is working
with banks to implement core banking solutions and creating software
interfaces to manage such handheld devices, said Anuj Vaid of Wipro
Infotech, the India and Middle East arm.
Technology
market researcher Gartner estimated that Indian financial services
companies will spend approximately Rs 42,200 crore on IT products and
services this year, a 13% increase over 2012. Gartner attributed part of
the rise to the Reserve Bank of India's push for financial inclusion.
"We do see this as the biggest opportunity for us," said Rajashekara
Maiya, who is the lead product manager for Infosys' banking platform
Finacle. "Not just in India because the potential for these services is
there in some countries in southeast Asia and Africa."
Maiya
said Infosys' technology is being used by more than half the regional
rural banks in the country. The company is also working with India Post
to connect and manage more than 1,30,000 handheld devices used by rural
postal workers for distribution of benefits under the National Rural
Employment Guarantee Act and to process money orders.
Software
services companies are also making it easier for banks by offering
flexible payment models. Infosys, for instance, lets banks pay for its
software based on the number of branches, number of customers, number of
accounts or number of transactions and allows banks to buy some
features as a utility, and paid for on the basis of usage. HCL
Infosystems is also offering similar flexible payment options.
Smaller
companies are also increasingly targeting this space. Prepaid payment
card processor ElectraCard Services said it already working with
'several' banks to provide prepaid cards tied to the accounts which can
be used at micro-ATMs. Atos India, the Indian unit of a French IT
solutions provider, is pitching its 'voice biometric' solution to help
banks easily validate the authentication of new customers through voice.
Atos is in early talks with five banks, India CEO Milind Kamat told ET.
But as with any new market, there are significant challenges for
technology providers.
"If you look at it a
technology perspective, it is important to emphasise that this is not
just about software. The technology and service providers will have to
design products scratch. If they just tweak existing products to fit
this market, they will fail," said Piyush Singh, managing director of
Accenture's Financial Services Group.
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