Savings = Prosperity October 2011 C Our Vision Sub-K makes - - PowerPoint PPT Presentation

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Savings = Prosperity

October 2011

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Our Vision

Sub-K makes day-to-day transactions accessible, affordable and trust-filled, to facilitate inclusive growth of the under-reached and create a more prosperous society

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What Sub-K Means

(or why we are ‘Sab kay liye’ and ‘less than 1000’)

• < 1000 m from the customer

Accessibility

• Cost of < 1000 paisa(Rs. 10) per

transaction

Affordability

• Each transaction up to Rs. 1000

Adequacy

• Each BCO to serve up to 1000

customers

Outreach

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The Evolution

BASIX Group / IGS (a Section 25 company of the group) since 2007

• Pioneer in FI; SHG-Bank linkages
• Executed Project Bhamasha – a rapid scale-up; enrolled over 4 million people
• Operated FI on a pilot scale with State Bank of India and Central Bank of India
• Currently operating a successful Business Correspondent operation with KBS Bank
• Awarded a pilot project in June 2010 with Syndicate Bank (leading Indian nationalized

bank having 2494 branches; Global Business at Rs.243,436 crore as on June 2011) to do financial inclusion in 117 villages in and around Anantapur district in Andhra Pradesh

Changes in RBI guidelines and the environment in 2010

• For-profit companies permitted entry as Business Correspondents
• Government focus on Aadhaar (UID) and Swabhimaan
• Formation of National Payments Corporation of India (NPCI) for interoperability in banking

– brining in ability to for customer to transact at any bank’s BC outlet

• Sub-K incorporated as an independent company offering full-spectrum services
• Created and patented a robust transaction engine – ViTranSP – addressing issues in all

current processes

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The Evolution - continued

Sub-K : Incubation Phase (August 2010 – March 2011)

• Built a scalable technology platform for multiple banking services extension
• Designed and established ground processes – piloted in 3 districts in India
• Established BC relationship with Ratnakar Bank (a scheduled commercial bank in India, in growth

mode aiming to double its network by setting 100 more branches in next two years)

• Continued service to IGS on Syndicate bank implementation
• Sub-K cut its teeth operationally; 47,000 customers across 216 BCOs in 5 districts across 3 States
• Inducted senior leadership team and tested systems, certified ISO 9001:2008
• Experimented with alternative revenue sharing and operating models

Sub-K : Stabilization Phase (April 2011 - July 2011)

• Syndicate Bank awarded contract for 172 additional villages based on success of pilot
• Optimized business model for being a true banking services extension for partner banks
• Launched mobile top-ups as an additional revenue for the BCSA
• Expanded customer base to approximately 65,000 across 320 BCSAs as of June 30th
• Signed up nationwide contract with Axis Bank
• Currently pursuing relationships with 12 additional banks

Sub-K launch – 1, August 2011 – 12 months from inception

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Sub-K’s Strategy

• Bring banking and other services to the under-reached

through a Sub-K Agent who connects them to the larger world using a simple mobile / Internet-based technology device

• Why the strategy works:

– There is a large a growing need in semi-urban and rural households to save… and easy banking access through Sub-K makes it possible – Sub-K appoints general stores as Agents. They are omnipresent so reach is large and a trust-relationship with customers is prebuilt – Transactions are on an online platform making them affordable. They are reconciled instantly using all-pervasive mobile connectivity and Sub-K’s patented technology, to the delight of service providers

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Mobile, Satellite Top- ups Utility Bill Payments Electronic Benefits Transfer* Saving Facilitation Subsidy Management Remittances Micro Insurance, Pensions Credit (Home loans, Edu loans)

Cater to Financial Needs++

Under- Reached HH

Sub-K

* Government employment guarantee and social payments, does electronically

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With a Customer Centric Approach

Financial Inclusion

Universally Integrated Services

• Subsidy payments
• Welfare schemes
• NREGA Payments
• Social Security

payments

• Other Social transfers

such as SGSY, Indira Awas Yojana, etc. Non Banking

• Mobile Top-ups
• Utility Payments
• Micro-Insurance

Banking

• Savings Banks

accounts

• RD, GCC, KCC, etc.

Sub-K’s goal is to serve the needs of a rural household starting with Financial Inclusion, EBTs and ultimately UID Services

EBT Payments Sub-K

Banks BCOs Govt.

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… Experienced Leadership Team

• Mr. Vijay Mahajan, Co-Founder Sub-K, Chairman BASIX Group
• Vijay Mahajan is a social entrepreneur and Chairman of BASIX. He was also the Chairman of CGAP for 2010-11
• He started work in rural economic development in 1981.In 1983, he founded an NGO – Pradan. In 1996, realizing

the need to attract mainstream financial resources, he conceptualised Basix, institution devoted solely to promoting rural livelihoods

• He was a member of the Committee on Financial Sector Reforms, chaired by Raghuram Rajan and also of the C.

Rangarajan Committee on Financial Inclusion. He also serves on the board of Insurance Regulatory Development Authority (“IRDA”), and the Micro Finance Development and Equity Fund

• On numerous boards and advisor to several State Governments and Planning Commission of India
• Author and industry icon; winner of numerous awards and recognitions
• Mr. Amit Mehta, Co-Founder Sub-K, Managing Director & CEO Sub-K
• Head sales and Marketing – VAS , SDP, and Mobility at Tata Consultancy Services , In charge of promoting and

developing the VAS solutions,, was also responsible for launching and promoting RFID based solutions for various industry segments

• Founder and Conceptualizer, Intelligent Security Solutions SBU at Danlaw Technologies India Ltd
• Vice President and Co founder of Bartronics India Limited, he was a part of the founding team at Bartronics and

was responsible for identifying partners, building and promoting bar code based solutions

• Chief Technology Officer, IRIS Smart Cards, the first Smart Card Manufacturing Company in India (later acquired by

Bartronics India Ltd

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& Experienced Leadership

Sandeep Nath

Head, Marketing & Empowerment

• 22 years in Branding

& Marketing as consulting company CEO

• Engineer from IIT

Varanasi; MBA from IIM Kozhikode

Dinesh Sarvodey

Head, Projects & Quality

• 11 years in quality

management (certified black belt), six-sigma, process

• utsourcing
• Graduate in

Computer Science & Statistics

Ratnakumar M

Head, BC Acquisition

• 20 years in Sales

& Distribution, Merchant Banking & Insurance

Girish Narkhede

Head, Strategic Planning

• 13 years in FI,

Telecom VAS, Software System Products, Telecom OSS, and Retail domains

• PG in Mathematics

from IIT Mumbai

Ramesh Baswa

Head, Technology

• 15 years in IT

industry involving Telecom and Financial domains

• Electronics and

Communications Engineer from REC/NIT, Warangal

Babla Sharan

ED & Head, Transactions & Operations

• 21 years of IT

experience including as founder and head

• f Mobility Solutions

& VAS at TCS

• Engineer from BIT

Mesra

Visweswar V

Head, Bank Relations

• 30 years as Senior

Banking Executive spearheading Technology Implementation and CBS Integration

• B.Sc, B.Tech, AMIE,

Cert.Course IPR (WIPO-Geneva)

Binu Raj Pillai

Head, Human Resources

• 18 years in HR

Management and Recruitment at Airtel & TCS

Suryanarayana S

Head, Accounts

• 25 years in

Accounts, Internal Audit and Finance in BSFL and other

• rganizations

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Key Achievements

Parameters YTD 1st Quarter For the Month Since Inception till Sep-2011 Till Mar-2011 Apr – Jun 2011 Jul-2011 Aug-2011 Sep-2011 No of banks /telcos/service providers signed up 2+1 1 1 1

• 5+1

No of Districts Sub-K went active in during the given period 5 2 1 10 4 22 TRANSACTIONS No of BCSA appointed 253 85 11 43 36 428 No of BCSA transaction enabled 102 75 36 16 26 257 No of BCSA that have transacted within the given period 51 123 144 166 172 200 No of Customer applications submitted to the Bank 46,439 11,880 3,206 5,833 9,043 76,401 No of Customers registered by Sub-K 40,372 8,773 7,505 4,125 2,753 63,528 No of Transaction enabled Customers 16,014 17,571 2,486 6,464 3,772 46,307 Total Deposits

• Rs. 587,682 Rs. 937,028 Rs. 820,343 Rs. 1,242,036 Rs. 1,536,700 Rs. 5,123,789

Total Withdrawals

• Rs. 239,252 Rs. 472,598 Rs. 340,688 Rs. 523,782 Rs. 743,650 Rs. 2,319,970

Amount of savings collected (INR) (Tot Deposits – Tot Withdrawals)

• Rs. 348,430
• Rs. 464,430 Rs. 479,655 Rs. 718,254 Rs. 793,050 Rs. 2,803,819

Total Amount of banking transactions (INR)

• Rs. 826,934 Rs. 1,409,626 Rs. 1,161,031 Rs. 1,766,138 Rs. 2,280,350 Rs. 7,443,759

Mobile Top-Up Transactions (INR)

• Rs. 424,503 Rs. 224,411
• Rs. 4,479
• Rs. 45,452
• Rs. 49,526 Rs. 748,371

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Key Achievements

Parameters YTD 1st Quarter For the Month Since Inception till Sep-2011 Till Mar-2011 Apr – Jun 2011 Jul-2011 Aug-2011 Sep-2011 FINANCIALS & HR Income for Sub-K (INR)

• Rs. 3,127,010
• Rs. 2,501,320
• Rs. 394,772
• Rs. 1,366,274
• Rs. 1,880,294
• Rs. 9,290,670

Expenditure for Sub-K (INR)

• Rs. 10,837,522 Rs. 14,831,534
• Rs. 4,325,151
• Rs. 5,652,569
• Rs. 4,963,000 Rs. 40,557,776

Net profit / (loss) for Sub- K (INR)

• Rs. -7,710,512 Rs. -12,330,214
• Rs. -3,930,379
• Rs. -4,286,295
• Rs. -2,957,706 Rs. -31,267,106

CAPEX on Sub-K (INR)

• Rs. 646,732
• Rs. 1,106,188
• Rs. 12,991
• Rs. 0
• Rs. 23,023
• Rs. 1,788,934

No of employees in Sub-K (Cumulative) 69 67 66 85 103 103

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Trends in Registered Customers Vs BCOs Appointed

40,372 45,636 47,741 49,145 56,650 60775 63528 253 288 300 338 364 392 428 100 200 300 400 500 600

• 10,000

20,000 30,000 40,000 50,000 60,000 70,000 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Registered Customers BCOs Appointed

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Trends in Transactions

26 114 643 954 499 602 921 1092 3349 6903 10925 11706 1500 3000 4500 6000 7500 9000 10500 12000 13500 150 300 450 600 750 900 1050 1200 1350 1500 1650

Cash Deposit

Transaction Amount (`000) No of Transactions 1 3 42 59 52 77 107 153 213 341 524 744 300 600 900 1200 1500 1800 2100 2400 100 200 300 400 500 600 700 800

Cash Withdrawal

Transaction Amount (`000) No of Transactions 88 291 1,507 3,503 3,999 4,457 3,673 4,466 4,444 9,281 16192 16903

• 1,500

3,000 4,500 6,000 7,500 9,000 10,500 12,000 13,500 15,000 16,500 18,000 19,500 21,000 22,500 24,000 25,500

No of Transactions

No of Transactions

• Expon. (No of Transactions)

48 83 129 88 74 87 130 106 155 126 136 165

Avg Transaction Amount

Avg Transaction Amount

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Business Plan Dashboard

Key Assumptions PAT Analysis Break-even Payback Sub-K break-even month 30 43 Sub-K break-even month name Dec-12 Jan-14 Pilot till end Jul 2011 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 Number of Operative Units Number 3 37 149 317 401 473 Number of BC Sub-agents Number 253 4,410 25,180 66,800 1,06,790 1,35,110 Number of Customers served In Millions 0.05 4 20 53 85 107 Number of Employees Number 69 470 1,897 4,381 6,312 7,831 Total Income In Millions 3 99 721 2,150 4,073 6,079 Total Expenditure In Millions 7 181 763 1,894 3,010 3,731 Profit Before Dividend and Tax (PBDT) In Millions (4) (82) (41) 256 1,062 2,348 Dividend

• - - - - -

Provision for Tax

• - - 45 372 822

Profit After Tax (PAT) In Millions (4) (82) (41) 211 691 1,526 Cumulative PAT In Millions (4) (87) (128) 83 774 2,300 Profit After Tax (PAT) %

• 134%
• 83%
• 6%

10% 17% 25% Fund Requirement Equity from BASICS In Millions 31 20 Equity In Millions 55 60 - - - Debt In Millions 0 35 30 6

• -

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Current Operations

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Bank Relationships

The foundation for scale

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Bank’s Point of View on FI

• Public Sector

– Primarily looking to meet government mandate to reach out to all citizens – Account opening key agenda to provide coverage – Support Government payments through the network setup – Some of them are looking at building business models around the same – Is compensating TSPs and BCs on a fixed price basis to sustain the mandatory criteria

• Private Sector

– Has understood the business opportunity in villages – Is looking at providing services in villages, thereby also charging customers for the same – Multi-product crosssell/upsell being looked at for each micro-transaction – Profitability is key – but building the network at the moment is most critical – Eventually are looking at creating presence and outreach – Incentive is purely service based

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S.No Charge – Parameter: FI Frequency Public Sector Pvt Sector

1 BCSA – Appointment One Time No Yes 2 Account Opening One Time Yes Yes 3 Monthly Maintenance Per BCSA Monthly Yes No 4 Fee for maintaining Monthly Average Balance Per Account Monthly No Yes 5 Fee for Transaction Per Transaction Yes Yes 6 Remittance Per Transaction Yes Yes

S.No Charge – Parameter: EBT Frequency Public Sector Pvt Sector

1 BCSA – Appointment One Time No Yes 2 Account Opening One Time Yes Yes 3 Customer Transfer – For Existing Customers Only One time Yes Yes 4 % Money Disbursed Monthly Yes Yes

Pricing for FI & EBT

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S. No Bank Financial Inclusion Remi- ttance Asset Generation Micro Products TSP Only EBT/Social Payments

1 Syndicate Bank Yes No IIP IIP No No 2 Ratnakar Bank Yes No IIP IIP No No 3 AXIS Bank Yes Yes IIP IIP Yes Proposed 4 ING Vysya Yes No No No No Proposed 5 Citibank Yes

• New Relationships Being Pursued

1. ICICI Bank: Countrywide partnership for FI + NPI + EBT 2. Bank of Maharashtra: PSU Bank. Looking at alternate technology for FI implementation in Maharashtra 3. IndusInd Bank: Integrated banking services rollout. Potential in UP, Rajasthan and Tamil Nadu 4. Allahabad Bank: PSU Bank looking at urban FI in Hindi belt 5. Punjab National Bank: FI implementation partnership for Punjab

Current Bank Relationships

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Sub-K Approach for Banks

• Identify best suited Kirana outlets in a village to act as Human ATMs (BCOs)

– in Urban, Semi-urban and Rural Areas – Outreach, local area trust, “business-savvy”, and convenient access

• Enable, Equip and m-Power BCOs to provide hassle free service

– Micro-ATM kit is “invested” by BCOs – Prefunding by Sub-K and BCOs against which all transactions are settled; no cash management and reconciliation by Banks – Train the BCOs to position various banking services

• Sub-K is a Full Services provider for BC model

– Technical Integration between CBS, Sub-K system, & Micro-ATM kit – BCO Identification & setup, Training and Go-live – Customer Acquisition, Savings Promotions

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Sub-K Approach for Banks

• Low-cost Transactions using any real-time online connectivity

– Vernacular Voice based user-friendly mobile interface – GSM/GPRS connectivity on mobile – No cards, no wallet, no bike, no rentals, no cash-carrying

• Provide a broad spectrum of services with BCO as a one-stop shop with

simple point-of-sale device

Deposits Withdrawals RDs / FDs Remittances Funds Transfer Bill Payments EBT / NREGA

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Key Differentiators

Sub-K

• High Customer Service in Village

– “24X7” accessibility – the Agent lives in the village/nearby

• Zero Risk for Bank

– Pre-funding (e.g., float management) by BCOs and Sub-K

• Hassle Free Operations

– Online real-time transaction & settlement; no cash management by Bank

• Low cost of Transaction, Infrastructure and Operations

– No cards, no wallet, no bike, no rentals, no cash-carrying

• One stop shop for multiple Services to Consumer

– Ensures loyalty and lasting customer relationship

Traditional FI

• “Agent” not available

every day, when needed

• Bulk cash of Bank handled

by mobile agent - high risk

• Offline operations, no view
• n current status of floats

with agents

• High cost of smart card

and service delivery. High failure rate of cards

• Only Cash in/Cash out

services available; limited use investment

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Sub-K Transaction Platform - ViTranSP

• ViTran means distribution in Hindi. Patent in progress for ViTranSP
• Patent in progress for “Integrated Transaction Fund Management”

C Help Desk in 5 Languages 1. English 2. Hindi 3. Telugu 4. Kannada 5. Marathi

 3 Banks Integrated

• Syndicate Bank
• Ratnakar Bank
• Axis Bank

 Services Supported

• Cash Deposit
• Cash Withdrawal
• Balance Enquiry
• Mini Statement
• Fund Transfer
• Mobile Topups

 95% ViTranSP Availability  95% Reconciled Transactions

Enhancing User Options

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Tech-Delivery Matrix

Channel GSM GPRS Internet Authentication Voice Fingerprint PIN Txn Guidance Method Server Resident IVRS Mobile Resident IVRS Server Resident GUI Physical Outlet Kirana Shop IT Kiosk Self (Consumer) Legal Status BCO CSC Non-BCO, Non-CSC Kiosk

Txns from home

(under development)

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Financial

Savings accounts Deposits/Withdrawals Remittances/Transfers Micro credit Micro pensions Micro insurance Cash / Credit cards

Social

Mobile / DTH top-ups Weather updates M-agriculture M-health M-education

Emotional

(the dependency factor)

Utility / Tax payments DEMAT / Investments Travel reservations EBT Payments like NREGA Pension disbursement G2C Services

The services in GREEN are currently on offer. Services in BLUE will be provided shortly. PURPLE are at CSCs only

Service Portfolio: BCO/CSC

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Collects cash and walks away

Transaction Process

Sub-K User visits BCO / CSC to transact (make a withdrawal)

OR

Equipment at Outlet

Time: 90 secs

Outlet invokes Sub-K application

• n his phone or

desktop Sub-K Txn Engine ViTranSP Authen- tication Database Bank CBS and / or

• ther

service provider server Vernacular IVR comm SMS ping confirms txn. Bluetooth triggers receipt Signs Outlet ledger book Customer takes signed receipt Seeks FP/Voice Authentication 1.Verifies Sub-K pool 2.Checks BCO float 3.Validates cust a/c

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• Our Platform ‘ViTranSP’ is recognized amongst the Top 100 ICT

innovations of the year by SKOCH at SKOCH Digital Inclusion 2011

• Sub-K has an ISO audit and it has been recommended for ISO

9001:2008 certification for our processes

• Sub-K also had undergone a pre-assessment of Information

Security Standards confirming to ISO 27001

• Planning for SAS 70 audit towards financial reconciliations and

settlement processes

Awards and Accolades

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BCO as the Go-To Point

Train the BCO – at store and

• n field

Educate the customer

• n hows

and whys

Audit both audiences and understand community needs

Help the BCO earn more and become the apex

Create promotions and incentivize desired behavior

Develop and launch products that consumers need

1 2 3 6 4 5

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Let’s Work Together…

SAMRUDHHI KE LIYE Towards prosperity for all