(Bloomberg Businessweek) -- It may look like an ordinary watch and mobile phone shop. But for many people in its south Mumbai neighborhood, it’s basically the local bank branch. The proprietor, Rakesh Sharma, is one of hundreds of thousands of shopkeepers making money transfers, deposits, and withdrawals on behalf of customers at all hours of the day and even late into the night.
Corner shops, tailors, pharmacies, and even doctors’ offices are adding these simple financial services as a lucrative new sideline. Sharma, sitting behind his computer in the Mayuresh Watches & Trader shop founded by his father, says they’re his “mainstay income” now. He takes in so much cash from customers—a couple of million rupees every day, the equivalent of roughly $30,000—that he or his brother must make a run to an actual bank branch almost every other hour to lessen the risk of being robbed.
India’s government has been trying to get people to use digital payments instead of cash. Hundreds of millions of people have been signed up for bank accounts for the first time. And a surprise move in 2016 to invalidate some existing bank notes, forcing people to line up to exchange or deposit them, was seen as a boost for smartphone-based digital-wallet services such as Paytm. But those companies tend to target relatively affluent Indians. Another group of online financial-services providers is reaching the rest—the vast majority of the population that’s largely sticking with cash but still needs ways to make small savings deposits, pay bills, send money to family in faraway states, or pick up cash sent by relatives working abroad.
These companies, including EbixCash, Fino PayTech Ltd., and Oxigen Services India Ltd., enroll merchants who can use their software to access their networks. Customers pay fees for remittances and deposits that range from 0.6 percent to 1.5 percent. The systems also help customers purchase train and air tickets, insurance, gift cards, and even gold.
“The financial-services industry is realizing that, in this country, where more than four-fifths of the transactions are still in hard cash, somebody has to hand-hold most of the population to make the shift from physical to digital,” says Bhavik Vasa, chief growth officer for EbixCash, which has 250,000 outlets across India. The company, which was purchased in May 2017 by U.S.-based insurance software provider Ebix Inc., counted 35 million customers before the acquisition but no longer discloses its data or transaction volumes. Its rival Fino, with more than 50,000 usage points, claims more than 120 million transactions a year, for about 30 million customers.
The government says it has now provided bank accounts to almost all households in India. It’s asked state-owned lenders to open branches in or near every village. However, only 51 percent of adults in the country actively use banks, according to a survey conducted by InterMedia, a firm that provides financial inclusion data. “Lack of easy access to the bank outlets, poor service standards, and financial illiteracy remain major hurdles for transactions at a bank branch or through digital channels,” says Astha Kapoor, a Delhi-based independent consultant specializing in financial inclusion. In-store cash points “stand a better chance at bringing the people used to cash transactions into the folds of formal banking and digital channels,” Kapoor says.
Banks also have direct partnerships with mom and pop stores, especially in far-flung rural areas. More than 600,000 shop owners or designated independent bank tellers are so-called business correspondents who act as extensions for institutions such as State Bank of India and Axis Bank Ltd. But banks don’t necessarily mind the competition from the new companies. By making accounts easier to access, they can help the banks grow. “Putting branches everywhere is unviable,” says Vishwavir Ahuja, chief executive officer of Mumbai-based RBL Bank, which has 246 branches and an additional 750 business correspondents, but now has 100,000 more customer service points through partnerships with firms including Fino and Oxigen Services. “Quasi bank outlets that provide services through a tablet connected to the internet or micro-ATMs are the way forward.”
Sharma’s small watch shop, surveyed by three closed-circuit cameras, services a couple of hundred customers on busy days. At least once a week, he gets a late-night call requesting a money transfer to some remote place in India, often for medical emergencies, he says. Customers are directed to hand over the money at the counter of a nearby restaurant that’s open almost 24 hours, and Sharma then makes the transaction for them from his computer at home. He picks up the money the next day.
He doesn’t mind the sleep interruption, he says. He wants to build a reputation with his customers as someone they can always count on. “They trust me enough to hand over money even without a receipt, and I have never let them down,” he says. One customer, Jalaluddin, a 45-year-old odd jobs worker who goes by one name and comes from Faizabad city in the northern state of Uttar Pradesh, uses Mayuresh Watches to send about 2,500 rupees ($38.50) home every week to his wife, which costs him about 40 rupees. Previously, he had to take a bus to the bank and line up for an hour, losing half a day’s wage, or about 300 rupees, as well as pay a transfer fee of at least 150 rupees. The convenience and lower cost of using EbixCash changed his life. “I come here, and it’s done in a minute,” Jalaluddin says.
At Dhun Drug House in the northern Mumbai suburbs, pharmacist Pravin Nandu found online sales of discounted medicines cutting into his margins. First, he added a vibrating bed to the shop, which customers believe can shake away spine problems, diabetes, and asthma. When that wasn’t enough, he started offering EbixCash, which now earns him about 20,000 rupees a month in fees.
While the pharmacy is right below a Canara Bank branch and across the street from a Bank of Baroda outlet, customers with bank accounts still come to Nandu to deposit money and transfer funds, even though they have to pay a fee. He keeps his shop open until 11 p.m., and he says the wait is shorter. “Most of these people wouldn’t know how to fill out a form, even if they get to a bank counter,” he says. “Here, they don’t have to do anything, and we are offering ease of doing business.”
To contact the authors of this story: Anto Antony in Mumbai at aantony1@bloomberg.net, Marcus Wright in Singapore at mwright115@bloomberg.net.
To contact the editor responsible for this story: Pat Regnier at pregnier3@bloomberg.net, Sheridan Prasso
©2018 Bloomberg L.P.
