EKO model, an innovated financial inclusion model

India has the  second  largest  financially  excluded  poor in  the  world. Given  a rising  mobile  phone  usage  in  the  country,  M-Banking  has  a  great  potential for  reaching unbanked  population. EKO mobile  banking  is  an  early  mover  in  offering  s  basic  saving account  to  the  poor. Eko provides a low cost infrastructure powered by innovation and technology to enable instant, secure and convenient financial transactions. Eko leverages existing retail shops, telecom connectivity and banking infrastructure to extend branchless banking services to the common man. Eko also partners with institutions to offer payment, cash collection and disbursal services. Customers can walk-in to any Eko counter (retail outlet) to open a savings account, deposit & withdraw cash from the account, send money to any part of the country, receive money from any part of the world, buy mobile talk-time or pay for a host of services. A low cost mobile phone acts as the transaction device for retailers and customers.
Eko is also a Business Correspondent and Technology Service Provider to multiple banks. It has partnerships with few of the biggest banks in India like State Bank of India (SBI), ICICI Bank, Yes Bank. It leverages on existing retail shops, telecom connectivity and banking infrastructure to extend branchless banking services to a common man. Eko counter offers one stop recharge facility for all leading mobile and DTH operators in India. Eko offers cash management services, namely cash collection and cash disbursal services to Government Enterprises, Micro Finance Institutions and Large, Medium and Small Scale enterprises. Eko uses its network of Eko counters, SimpliBank platform, mobile user-interface, authentication (OkeKey) mechanism to enable these services.

                                           Technical EKO Model Description
            Eko provides a multi-modal (USSD, SMS, IVR and Application) approach to perform a transaction; hence the service works across all phones i.e. lowest to most sophisticated handsets. Eko also uses a two factor strong authentication to complete the transaction. It has created and patented a low cost One Time Password (OTP) generator called ‘OkeKey’. Performing a transaction only requires numeric literacy for number dialing. It has created a world-class transaction platform called ‘SimpliBank’ that is used by multiple partners. The SimpliBank platform is a hosted and managed, low-cost, abridged Core Banking System. SimpliBank has/supports multiple features:

§  1. A standard double entry accounting system
§  2. Multiple types of accounts- savings, current, money transfer, loan, etc.
§  3. Customer and network management modules
§  4. Definable interest accrual and posting system based on Indian banking guidelines
§  5. Configurable limits and fees as per RBI’s AML/CFT requirements
§  6. Secure signature (OkeKey) booklet
§  7. Real-time transactions through a three factor authentication system
§  8. User/system management and audit trails
§  9. Integration with multiple interfaces like mobile, internet etc.

The platform and technology services are also used by all Affiliate partners. Their banking partners have endorsed and extended the platform and technology services to other Business Correspondents.

 
Status of Progress and Strategies:

ASHA (Accredited Social Health Associate) workers have received incentives from the State Health Society by the use of Eko technology. This project is being run with support from UNOPS-NIPI (Norway India Partnership Initiative). The Chief Minister of Bihar, impressed with the positive results of the model has asked that the model be scaled up across the State. Eko has also been approached by other state governments to replicate this project in their states.
 

Eko offers its distribution network of Eko counters, SimpliBank platform and technology to Saija Finance Private Limited, a Micro Finance Institute headquartered in Patna focused on providing microfinance services for the urban and rural poor, as well as micro and small businessmen in the underserved geographies of Northern India – Bihar, Jharkhand, Delhi, Rajasthan, Chhattisgarh and parts of Uttar Pradesh and Madhya Pradesh. The solution enables easy and convenient loan repayment for Saija’s customers into their loan accounts with Saija via their nearest Eko counters. This has lowered operating costs, reduced cash handling risk and enabled better and timely MIS and transaction reporting for Saija. Eko has been approached by other MFIs to offer this service.

Eko provides loan collection using mobile money transfer to Centre for Development Orientation and Training (CDOT). CDOT is a Bihar based Micro Finance Institution. CDOT’s mission is to “To empower the underprivileged by providing a range of financial and other complementary services with a trickle down impact”. Other than credit, CDOT also provide bouquet of insurances products which includes life, accidental and cattle insurance to its clients, in collaboration with different insurance companies. CDOT customers deposit their loan installments to CDOT via Eko counters.
Key benefits realized by C-DOT are savings in operating costs, better time utilization of field staff, reduced cash risk and reduced cost of cash insurance.

Performance:
A study[1] brought forth several insights regarding the effects of  EKO mobile banking on the saving behavior and practices of low income users in the metropolis of Delhi. It shows that EKO mobile banking has improved the capacity of low income users to save in comparison to  keeping cash on hand and the degree of improvement in their ability was rated by a majority of the users as definitely improved. It also indicates that EKO mobile banking has become an effective, safe and trustworthy savings instrument for its users. In addition, it has become a storage device for both unbanked and banked users. Notably, dependence on risky informal methods diminished for a large percentage of users, who were earlier dependent on them for lack of a safe saving option. Most importantly, it is considered as a robust substitute to many informal  methods  as  well  as  a  bank  account; yet  at  the  same  time,  it  has  not displaced  the  usage  of other  savings  mechanisms used  prior  to  adoption  of  EKO  mobile banking because different saving methods were perceived as having their own usefulness and purpose.  Contrary  to  expectations,  while  making deposits  and withdrawals were more accessible and easier, EKO mobile money also seems to improve the efficiency and regularity of other alternative saving practices. An important value addition to the users is that the EKO mobile banking is a potential risk mitigating financial cushion in times of emergencies – especially medical emergencies and personal shocks (death).  
 An  interesting  aspect  of  EKO mobile banking is that it has become a convenient fit in instrument  among  other  forms  of  savings devices–  including  both informal  and  formal methods –depending on the purpose and nature of saving goals – short term or long term. In fact,  EKO mobile  banking  is  used  in  combination  with  other  savings  methods as  well  as adapted as a superior complementary device to an existing saving practice, thus augmenting self –discipline of users in their savings efforts.  Such behavior is an indicator of a shift in the pattern of savings to minimize the risk of failure of savings (for example, if carefully built up home savings is depleted due to its exposure to demanding relatives). Critically, EKO  mobile  banking is  valued  as  a  boon  for  small  savers / users  dependent  on risky informal saving practices due to its versatility as a money box held in users hand yet it can be held at an arm’s length. It is also considered as an enabling instrument to maintain secrecy of savings as well as a means of financial control.  Besides, EKO mobile banking is a useful tool to maintain social capital, thus building the asset base of low income users.
Another key insight from the study is that due to the negative experiences, about 1/3rd users dropped out from using the EKO mobile banking service subsequent to and mainly due to the introduction of transactions charges.  After riding the rails of EKO mobile banking happily, the poor experiences of low income users eroded their confidence in using it as a saving tool because they did not want to lose their small savings. This is because the transaction charges levied on  their  small  deposits  and  withdrawals  either  neutralized  the  interest  earned  on  the saving  balance  or  the  saved  amounts.  An  implication  of  this  finding  is  that  the  financial behavior and pain points of low income segments have not been appropriately addressed by EKO.  While  customer  acquisition  is  fairly  easy  when  the  service  is  provided  free,  midway introduction of flat transaction fees without recognizing the needs of small savers from low income segments is a step that led to a swing back effect. Therefore, it  is  important  that when the mobile money service is offered, the terms and conditions associated with it should be lucid, transparent as well as corresponding to the needs of low income clientele. However, the inactive users expressed their keenness to restart using the EKO mobile banking in future subject  to  a  reasonable  pricing  policy  by  the  business  correspondent  (EKO).    This  is indicative  of a  latent  demand  for  safe  saving services  and willingness  to  use  the  mobile banking  services  on  a  sustainable  basis  if  branchless  banking  players  offer  to  charge  a reasonable service fee on deposits.
Issues for consideration and Replication:
A  look  at EKO‟s revenue  model  indicates  that  commissions  from  remittance  transactions accounts  for  70-80%  of  its  revenue.  The  rest  of  the  revenue  includes  commissions  from account  opening,  deposit  and  withdrawal  transactions. EKO earns  a  net  commission  of  10-15% from all transactions and currently loses money on opening accounts. So most of the profits that EKO earns are from the transactions that the customers do. Since this model is more concentrating on the poor people for their needs and many customers feel that the transaction costs are too high, flexible solution on how to reduce the charges without burdening the end user would be ultimate challenge for this model to become a pan Indian model.

The resounding success of M-Pesa demonstrated that the ubiquitous mobile technology offers considerable potential for lowering transaction costs and providing  secure  banking  services  to  vast  numbers of  poor  in  the  developing  world. RBI estimates say that there are still many households that are to be banked. The  burgeoning mobile  money  models  in  India target  precisely  this  widespread  need  for alternative  forms  of  saving  for  people  who  are  unbanked. Among various  such  initiatives, EKO  is  an  early  mover. Understanding the culture of people and their absolute requirements would make EKO also a successful model like M-Pesa.
Recent efforts by the Government of India and the Reserve Bank of India has increased the pace of financial  inclusion,  which  as  a  policy  objective  seeks  to  ensure  that  its  population  joins  the mainstream  of  economic  development.  EKO should take every opportunity that comes in its way, moving ahead along with the government objectives and also using the available government resources. M-Pesa in Kenya, could make it that big since it was using all existing resource potential  and post offices and then scaling up from there. All the daily needs of the people were successfully taken care through their mobile as single point of transaction instead of cash. Over a period of time they have built trust and reliability with their customers. EKO model also has to build up all its advantages and add to make easier the life of poor to become an all India model.
This Model of using mobile services based savings, credit, insurance model is very suitable for India as India has the largest market for mobiles and also it is growing at a very huge pace throws many opportunities as well as challenges for both the businesses and also policy makers.

Proper vision and policy environment with investments in right direction can replicate the use of mobile services for every small transaction in the country as shown by EKO and some other innovative models. These have proved that cost is not a major factor but only one factor in bringing the unbanked to savings.
Conclusion:
Given that the users  were  blending  EKO  mobile  banking  in  their  existing  assortment  of  informal saving methods and  bank accounts,  a  key  learning  is  that  there  is need  for  developing  saving products that incorporate design principles based on informal mechanisms (for example, like Gulak) to suit the needs of low income users who have low, irregular incomes and low levels of savings. The effect of EKO mobile banking, as seen through many experiences of a number of users underscore its potential as a device that can help a vast majority of the poor not only to gain financial arms but other assets (human and social capital) that are useful to uplift them out of their present low economic status. 
As a Business Correspondent, EKO can play a key role in enabling financial inclusion of low income population it targets to serve. However, EKO‟s sharper focus and greater interest on its  remittance  product  (Tatkal) during its  current  stage  of  business  growth  seems  to  be piggybacking  on  the  initial  success  of  its  mini  savings  product.  This  might  augur  well  for EKO as a business entity but from the angle of provision of a safe saving option for a large base of low income users through mobile banking models, this is an issue of concern because achieving  both  outreach  and  faster  uptake  and  usage  of  EKO‟s  mobile  saving  account depends on the priorities of the players in branchless banking initiatives.
Overall,  the  positive  perceptions  about  the  effects of  mobile  banking  in  the  daily  lives  of EKO mobile banking users is an encouraging sign about its potential for financial inclusion of large numbers of the underserved and unbanked low income households in both rural and urban India. The insight of the study about the negative views held by non users with regard to  their  saving  capacity  due  to  irregular  incomes and  lack  of  awareness  of the  potential  of mobile  banking  needs  to  be  changed  using  suitable  strategies  to  reach  out  to  the  poor segments  of  population  in  India  and  elsewhere.  This  alone  will  ensure  their  financial inclusion.
References:
http://eko.co.in/  accessed 01/10/2013, 03.48 pm
Impact of EKO‟s SimpliBank on  The Saving Behaviour and Practices of Low Income Customers:  The Indian Experience, Study by Center for MicroFinance.
Venugopalan Puhazhendhi (2012).Microfinance India - State of the Sector Report 2012, Sage Publications, New Delhi.
Garg, Nitin, Thacker, Krishna, Veknata, N.A, Bansal, Sachin and Wright, Graham A.N. (2009). Potential for E-M-Banking Enabled Migrant Remittances, MicroSave  India Focus Note 29.

[1]Impact of EKO‟s SimpliBank on  The Saving Behaviour and Practices of Low Income Customers: The Indian Experience