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No more unbanked areas

Technology and the payment bank licence look all set to expand and intensify financial inclusion as never before

If you thought financial inclusion reached a new high with Jan Dhan, think again. Technology and the payments bank licence look all set to expand and intensify financial inclusion as never before.
Let me start with what technology is doing. Meet KK Jain of Vote4cash. Jain has developed a proprietary algorithm which analyses Facebook and other social media information of a person to arrive at her social respectfulness score. Jain argues that a person’s social interactions can be analysed successfully to arrive at whether the person will prefer self respect over cash. His company has already dispensed Rs 13.6 crore by way of loans, each loan being of a ticket size between Rs 1,000 and Rs 50,000. The company dispenses loans in a minute for a tenure of one day to 90 days. But the most fascinating factoid is that his NPL or default rate is 1.82 percent!  Jain also has a company called vote4edu.in which gives loans to parents of school going children up to Class 12, to help them pay fees. What happens if the parent does not have a Facebook or Linkedin account? Jain’s company seeks the borrower’s permission to use the data in her smart phone and this, he says is adequate to gauge the borrower’s social emotional score. And here’s more. His next venture is a company called smebank.in, which will  give loans to SME s again without looking at the company’s income tax returns. The social media and smart phone data of the borrower will suffice for Jain to arrive at a social-emotional score, which according to him works as well as or even better than a CIBIL score.
Payments banks and legacy banks have been meeting Jain to partner with him or to buy his algorithms. Payments bank licence winners with a telecom company and an NBFC in their group are close to cracking their business models with the help of persons like Jain or with proprietarily developed algorithms. There are still some niggling worries about whether they will be able to use their telecom retail outlets as their bank outlets or will arms length rules  require them to have separate outlets. Jain’s technology should help them solve some of their problems.
Payments banks are still working on how to dispense cash to their future account holders. They will probably see microfinance companies as potential  business correspondents. In any case, MFIs who have not got bank licences are looking to tie up with payments banks so that they can reduce the amount of cash that they currently handle. MFIs who have won small bank licences, meanwhile, can also look at algorithms developed by the likes of Jain to dispense both personal and SME loans.
PayTM, the online payments company, which has won a payments bank licence is hoping to start its bank by March. Telecom players say they may take until September next to start their banks. Meanwhile, Jain is all set to launch his SME loan product by this Diwali. The inclusion puzzle looks set to be cracked. In the next one year or may be two, there may be no more unbanked areas, with or without Jandhan.