Eko is building a low cost financial services infrastructure …..

I came across the company Eko (http://www.eko.co.in) recently. Eko is building a low cost financial services infrastructure to increase the reach of financial institutions to the un-banked and to democratize financial services for the un-banked in urban as well as rural areas: powered by innovation and technology. Given the penetration of mobile services and the lack of penetration of formal banking services, Mobile Banking would prima facie appear to be the solution for the masses in India.

Eko is leveraging existing distribution networks, existing behaviour and interaction mechanisms to ensure barriers for adoption are very low. The endeavour is to build a rapidly scalable model by addressing the challenges of the existing models and by using mobile technology to help bring down significantly the network cost.

State Bank of India has appointed Eko as its Business Correspondent and on  February 23rd 2009, Eko with State Bank of India launched the SBI Mini Savings Bank Account at Uttam Nagar, New Delhi . SBI Mini Savings Bank Account holders can do a host of financial transactions including deposit and withdrawal from their accounts through their mobile phones at various SBI Eko Customer Service Points.

Why is this an important project? First of all we need to recognize the fact that the norms of formal banking is a barrier to poor people, which is why the penetration of banking is so poor inspite of the deep reach of PSU banks in the country. In urban India only 50% of the households access banking services and in Rural India just about 33% of the households have at least 1 bank account. On the other hand, teledensity in rural India is nearly 15% today, which implies that number of households having access to mobile phones is somewhere around 45%. The teledensity is growing at a fast clip and one can expect at least 60-70% of rural households to have access during the next 2-3 years. In the urban segment, already about 80% of the households have access. Physical banking can never hope to match this pace.

The multiplier effects are so great that it is just not worth debating. The banks can expand their reach and the users can transact from home without having the need to travel far.

We actually did a market sizing study for Eko for the Bottom of the pyramid population with special focus on the remittance corridor for BOP migrants. The market for Eko services is large and substantial. A key component of the services is the mobile phone and a large proportion of the target population, particularly the rural segment is not only unbanked but also “un-mobiled”.

Two of our key conclusions, at the end of the study were
1) The limiting factor in the urban segment is not the market size at all. The constraint, if any, will be in terms of resources that a firm like Eko might be able to deploy to realize the opportunities. The resources required will be both cash and management talent that can be deployed.
2) mobile telephone penetration is not likely to be the constraining factor in the growth of Eko’s services in the urban segment. If anything, the penetration will be well ahead of the supply of services.

I would personally rank Eko as one of the brightest ideas targeting the mass market. My best wishes to the Eko team on their long and challenging journey.

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Tags: bop, bottom of pyramid, eko, financial services for rural areas, financial services for the poor, mobile banking

This entry was posted on Thursday, June 18th, 2009 at 6:05 pm and is filed under Consumer Markets, Indian Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.