A report released by the World Bank reveals astonishing data on the poor state of financial inclusion in India.
Less than 400 million people in the country had an account in 2013, according to the report.
In August 2014, the Indian government launched the Pradhan Mantri Jan-DhanYojana scheme for comprehensive financial inclusion with the goal of opening a bank account for every household. According to the World Bank report, by the end of January 2015, the scheme led to the opening of 125 million bank accounts.
However, there is a lot that’s not known to the public.
Under the scheme, more than 97 percent of accounts were opened with public banks, but around 72 percent show zero balances.
Dormancy rate is another challenge. As per the report, thedormancy rate in India— at 43 percent — is quite high and accounts for about 195 million of the 460 million adults who have a dormant account around the world.
Experts say that though the number of account holders has increasedgreatly, financial inclusionin the real sense is yet to take place.
Neha Jetly, 33, CEO andFounder of EZspend, says: “Our aim is to provide financial services at affordable costs to the underprivileged, who might not otherwise be aware of or able to afford these services.”
While working as an investment banker at Oppenheimer & Co.in New York, Neha worked on the IPO of a company that sold prepaid cash cards to the unbanked and underbanked. During this time, she stumbled upon the financial fact that 80 million people in America were unbanked.
This led her to think about the condition in India, where the number of unbanked people was far higher, and where there were 250 million people who had bank accounts with high dormancy rates. She decided then that this was the segment of population she wanted to work with.
In 2012, she launched EZspend, a company that provides prepaid payment solutions. In association with Yes Bank, it launched a prepaid card on the MasterCard platform.
Also read: Understanding the fintech landscape in India
The prepaid cards can be used to make purchases at point-of-sale terminals and even for online shopping across India on the MasterCard network. Each card holder’s account is linked to an online card tracking system which monitors and helps the holder in tracking each transaction and provides a detailed statement every month.
The card can be loaded for any value between Rs 500 and Rs50,000 at onetime and can be bought for an initial registration fee of Rs 100.
Now, under the brand, it offers four othersolutions such as EZsend, EZloan, EZbeemaand EZcharge.
TheEZsendsolution provides the facility of transferring money to Yes Bank account holders without using any bank accounts.
“We provide a portal for retailers to remit money through. However, they must maintain a pre-funded wallet balance with us and through that, when customers walk in, they can remit money for them through our system,” says Neha.
The EZcharge solution provides the facility to recharge mobile, DTH, and data cards.
Inclusive business model
The EZdhan solution, the flagship model, involves five parties in the process — EZspend, bank, retailer, distributor, and customer.
On each transaction, the customer has to pay 1.5 percent of the total remittance to the retailer who transfers the money. Of the total percentage, 0.75 percent goes to the retailer, 0.2 percent to the distributor — who has been assigned to bring customers to retailers — and the rest is divided between the bank and the platform.
Neha spent around Rs 2 crore to build the platform. This sum was invested in building front-end technology and a chain of retailers in Delhi, Punjab, UP, and Haryana.
She now claims to have served 3,00,000 customers per month and each remits an average of Rs 4,000 using the EZdhan service. “We had revenues of Rs 11 crore in FY16 and are looking at a topline of Rs 19 crore in FY17.”
According to Neha, the market was estimated to be $16 billion in 2015 and is growing by roughly eight percent year-on-year.
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“Low entry barriers and high commissions are being given to customers by companies with deep pockets. We are staying true to our mantra of being profitable on a per-unit transaction level and offering excellent customer service to both retailers and end-customer.We are looking at a two-percent market share by the end of FY17 which we hope to take up to five percent by FY 2018.”
The company believes retail outletscan be scaled up to sell multiple financial products such as insurance, wealth management, and credit to the same set of consumers. It is planning to bring these services to this segment.
It also plans to expand to Mumbai and other big urban cities in the country and is simultaneously looking for funding to achieve its expansion goal.
Biggies in the market
EZspend is not the only solution provider; there are other big players who capture a larger share of the market.
Oxigen, Suvidhaa, and ItzCash are some of the known names in this segment.
Oxigen Services has been offering services across categories for many years in India. Its business involves service aggregation and distribution, utilising mobile, PoS, and money transfer services.
Oxigen has a retail footprint of 2,00,000 outlets and claims to have processed over two billion transactions till date with a current transaction volume rate of 600 million transactions per annum. It has a customer base of over 150 million.
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