Financial Inclusion and Payment Systems Conference, 24-25 October, 2013, New Delhi
FIPS 2013 – Awards
FIPS 2013 – Financial Inclusion & G2P Payments Infrastructure & Direct Benefit Transfer: Is it…
FIPS 2013 – Payment System Infrastructure, DBT & Financial Inclusion
FIPS 2013 – NBFC & The New Banks – Challenging Tasks – Exciting Future
FIPS 2013 – Technology in Banking : Changing Paradigm
Fips 2013 – Agency Banking Model for Inclusive Banking
FIPS 2013 – Inclusive Banking – Inclusion to Deepening
FIPS 2013 – Expo
FIPS 2013 – Inaugural
FIPS 2013 – Challenges of Reaching Out & Harnessing the Unbanked
FIPS 2013 – Aadhaar, eGovernance & Mobile Banking Integration
FIPS 2013 – Inclusion & Women Empowerment
FIPS 2013 – Payment System Technologies: Best Practices and Next Practices
Beginning with 2005 — the United Nations’ ‘International Year of Microcredit’, academics, think-tanks, commentators and others in large numbers started thinking and talking aloud on the need for financial inclusion programmes to be included as one of the goals in the Millennium Development Targets. Many further pointed to financial inclusion as a gap impeding the target of inclusive growth. In India, the Government has started experimenting with its Business Correspondent and Facilitator model (“BC”), in combination with the agency banking. The initial years’ policy flip-flop and the resultant lackluster impact have generally rendered the stake holders disillusioned. But taking a cue from the failures certain corrective steps have been taken, but still been tentative.
Although the no-frill accounts & the BC operated agency banking framework has undergone many changes it is still not a reasonable business proposition for the agents. This failure is especially grave because peer experience shows that a strong agent’s network is one of the strongest indicators for success.
If the agents are to be successful there has to be a robust payments infrastructure and settlement mechanism. The Department of Banking and Financial Services, and the finance ministry are both now urging the Reserve Bank of India to include financial inclusion in its plans as India’s central bank moves forward with modernization plans for the Indian payment system. India has miles to go before catching up with Brazil and BRICS partner countries.
While India continues to be a power house in its own right, the sheer size of its sub-continental neighbours are also extremely important. Pakistan and Bangladesh are not falling behind and each nation, despite their own challenges are improving their own Financial Inclusion drive significantly. Bangladesh’s record in financial inclusion is remarkable; the advent of mobile banking for the unbanked by as many as 16 Bangladeshi banks is a welcome news. Same is the recent spurt in Pakistan. And in the near future as the relations amongst the nations in the sub-continent improves in general line, more cross border trade, tourism, financial services need to stay atuned to more modern trends
In this back ground ,therefore, the Financial Inclusion and Payment Systems 2013, Delhi Conference (“FIPS 2013 Delhi) will deliberate, debate and finally set forth a strong message for the right direction & the required steps to be taken in view of the experience gathered during the past decade in detail and seek to provide a roadmap for a better and inclusive society.
The takeaway from the conference will give everyone an opportunity to showcase worldwide efforts towards greater financial inclusion at a time in which the financial inclusion programme mandated through the G20 takes on new importance. For example, the Alliance for Financial Inclusion.is devoting significant new resources and is gaining momentum as it has already enrolled more than 100 member countries throughout the world today, from a meagre 6 when it started .
FIPS 2013 Delhi will be aiming at improving the lives, destinies and opportunities of the almost one and one-half billion people living on the Indian subcontinent. Moreover, by working to improve their lives, this conference will also seek to draw from and improve global best practices, through reflective and frank discussions of the achievements, the shortcomings and the challenges on our path to achieving the financial inclusion of humanity. It thereby aims to learn from the peers and translate it in an unique way to fit the each country’s own legacy, its state of readiness and adapt it for the benefit of all the stake holders, and foremost amongst them the people who deserves it.
Potential of BFSI for financial inclusion
- For economic growth globally there is one segment, which is growing at frenetic pace everywhere – BFSI segment, and the emerging markets are driving the growth story, led by the fashionable reference point of a league of comparable nations or G10 comprising the BRICS.
- Brazil is the star amongst the nations, simply because of the democratic traditions, while China today is undisputed king amongst nations despite being number 2 to US for the next 10 odd years.
- Hence the theory propounded at the G20 meetings took upon the global challenge of spearheading Financial Inclusion-led financial deepening as infrastructure, energy, industry and agriculture, all are relatively longer gestation driving up demands and augmented supply to match the growth potential. So along with energy & climate change & emission, financial inclusion issues get equal weightage.
- But significantly enough, unlike in energy and climate-control issues here the developed and developing nations are bickering and at loggerheads, but on Financial Inclusion there is almost unanimity, although there is degree of difference in commitment level even amongst BRICS.
- Everywhere Financial Inclusion is top agenda of reform by the governments irrespective of private sector participation level. Brazil, India, South Africa, Indonesia, Mexico, Turkey, Argentina and every major G20 nations are actively pursuing Financial Inclusion mission overzealously.
Financial Inclusion and Payment Systems Conference will be a landmark event, scheduled to take place on 24-25 October, 2013. With a broader approach and explicitly defined sessions and the top participants, the Global FIPS Conference will be a unique opportunity to engage with a broad range of players in financial inclusion and payment systems space. The Conference will witness a collaborative environment among the top stakeholders, where the relevant issues will be addressed, and the road map to achieve 100 % Financial Inclusion will be put.
FIPS 2013 will take into account the very essence of inclusive growth, thereby highlighting on the achievements, shortcomings and challenges on our way to overcome.
Understanding FIPS- A Global Perspective
Achieving full financial inclusion at the intersection of social benefit and economic sustainability is at the heart of Financial Inclusion & Payment Systems, Event.
Affordable financial services have become an increasing priority and possibility worldwide. As we enter the second decade of the century, the required condition for meeting this objective seems approachable. Financial inclusion aims at benefiting the world’s poor, the vast majority of whom do not use formal financial services of the sort provided by banks, insurers, or microfinance institutions (MFIs). Over the past 30 years, MFIs have demonstrated not only that the working poor want and need formal financial services but also that they can afford them. Consequently, MFIs and other commercial organizations have been expanding these services at an accelerating pace, and recent developments suggest that full financial inclusion is within reach.
Contemplating on these very points made us realize that today exists a dire need for a platform, where national and international financial inclusion and payment systems stakeholders can meet and discuss on the factors that can result in a 100% achievement of financial inclusion worldwide.
FIPS 2013 is a discussion platform whose focus will be laid at understanding the Best Practices Worldwide and implementing them to achieve our goal of 100% Financial inclusion throughout the world. The Forum will create a dynamic opportunity for networking at a global dais.
Road-map towards Inclusive Growth
As per Census 2011, 58.7% households are availing banking services in the country. There are 102,343 branches of Scheduled Commercial Banks (SCBs) in the country, out of which 37,953 (37%) bank branches are in the rural areas and 27,219 (26%) in semi-urban areas, constituting 63 per cent of the total numbers of branches in semi-urban and rural areas of the country. However, a significant proportion of the households, especially in rural areas, are still outside the formal fold of the banking system. To extend the reach of banking to those outside the formal banking system, Government and Reserve Bank of India (RBI) are taking various initiatives from time to time.
The initiatives of the Government and those taken at the international grounds in line with achieving the goal of 100% Financial Inclusion will be discussed in detail. Key opportunities and obstacles to financial inclusion will be addressed in the Event.
The Road-map pointers will include-
• Vision of Financial Inclusion world-wide
• Actionables that can be implemented in line with the goal of 100% Financial Inclusion
• A Research Agenda, that needs to be acted upon in the near future
From Millions to Billions, the strength of Financial Included population world-wide is rapidly increasing.
The need for financial inclusion is global, and is a need for both the global North and the global South. While successes have occurred, and should be celebrated, we often learn more from failures than from success.
- Around the same time that mobile penetration crossed lmost 4 billion and mobile based value added services in remittances in Philippines, Kenya began to discuss honestly and candidly why banking services have not been growing and why 60% of mobile-carrying people do not have bank accounts.
- The 2008-2009 Global Financial Crisis brought out the divide very sharply even in developed countries as well as it is in the emerging and poor countries.
- It is estimated that in US there are almost 20 million unbanked Americans today
As US governmental agencies like the FDIC and many other agencies are providing better and more refined data regarding financial inclusion in the US, there is strong and vibrant competition to better serve this enormous unmet need and to seek to do so in a profitable manner, thereby creating a wide range of new products, such as prepaid cards of many types.
There has been sharp rise in prepaid and many forms of payment system integration.
In the emerging markets it has become a top policy led drive to make financial inclusion work in tandem with general, long-standing goals targeting development.
Brazil showed the way through its Bolsa Familia programme, as did Mexico through its Opportunidades, and other programmes in many Latin American countries. Kenya and Philippines have showcased their remittance services like M –Pesa, and Gcash, Smart money programmes. Closer to home in Bangladesh and Pakistan, such efforts are also underway, and although in nascent stages, these are showing signs of impressive gains, every month.
India’s drive towards financial inclusion is maturing, having gone through a roller coaster drive and achieved some 100 million no – frill accounts, a very large number of which are dormant and non-functional. So our Finance Ministry and Central Bank are beginning to consider the issues more analytically and acutely, so as to where necessary policy and practices while Indians seek to simultaneously measure up to the challenges of a trillion dollar economy.
What does financial inclusion entail then? Questions are raging as to whether current policy initiatives will actually succeed and pave the way for a better financial inclusion regime.
Will our level and distribution of financial inclusion actually and durably improve? Will there be more bank branches, more ATMS more POS machines, prepaid cards, working with a instrument like Aadhar enabled platform as contemplated in India for the benefits of the unbanked? Despite glitches and start –up hiccups could UID & Aadhar enabled platform be the game changer the world has been looking forward to?
And finally, how does financial inclusion fit with the need for all those firms providing financial services to those who are financially excluded to do so in a profitable manner, yet also a manner that avoids abuse of marginalized groups that are currently financially excluded?
This conference will seek to candidly and forthrightly discuss the real issues that concern financial inclusion without shying away from any uncomfortable truths. Globally, this is a time at which Indians are at the cross roads of all emerging markets and India is in a leadership position for potential success or failure in financial inclusion.
The ongoing efforts to streamline India’s G2P payments, the UID mission, the Aadhar enabled Rupay platform are each examples individually of gigantic efforts which could, if they actually succeed, become a huge game changer. This will enable live and vibrant discussion and the exchange of a variety of thoughtful and knowledgeable views.
For the first time a regulators, businesses, academia, reporters, activists will all informally interact and rub shoulders to find out and advise us all what lies ahead and what we have to do to achieve the thriving economy that India and the sub-continent is striving to achieve.
Ultimately, unless we achieve far higher levels of financial inclusion, all of humanity will find it difficult to grow – not just economically, but also politically, socially, culturally, and in the achievement of the fundamental human rights embodied by the UN Declaration of Universal Human Rights.
The payment system is an operational network – governed by laws, rules and standards – that links bank accounts and provides the functionality for monetary exchange using bank deposits. The payment system is the infrastructure (comprised of institutions, instruments, rules, procedures, standards, and technical means) established in effect the transfer of monetary value between parties discharging mutual obligations. Its technical efficiency determines the efficiency with which transaction money is used in the economy, and risk associated with its use. To ensure benefits of a structured modern payment and settlement systems, including innovative products, to reach out beyond the currently served target groups thereby facilitating greater financial inclusion. This is to be achieved by nurturing a payment system that adequately serves the national and international needs of the nation.
Financial inclusion or inclusive financing is the delivery of financial services, at affordable costs, to sections of where and efficient society. It is argued that as banking services are in the nature of public good; is Financial services are the economic services provided by the finance industry, which encompasses a card funds. As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States. The U.S. finance industry comprised only 10% of total non-farm business profits proportion of GDP rose from 2.5% to 7.5%, and the finance industry’s proportion of all corporate income rose from 10% to 20%.
The Alliance for Financial Inclusion (AFI) is global network of financial policymakers from developing and emerging countries working together to increase access to appropriate financial services for the poor. The organization was formed in 2008 as a Bill & Melinda Gates funded project. Between 2008 and 2013 AFI grew to include 100 policy making institutions from the developing and emerging world. AFI hosts its landmark, annual Global Policy Forum (GPF) as the keystone event for its membership. During the 2011 GPF, the network adopted the Maya Declaration, a set of common principles and goals for financial inclusion policy development. AFI uses a “poly lateral development” model to contrast and compare successful financial inclusion policies, focusing on a peer-to-peer system rather than a top-down or North-to-South learning model. The network has more than 100 member institutions from more than 85 countries across the globe.
Each year it is co-hosted by a different member institution in a different region of the world. As of April 2013, AFI has 100 member institutions representing more than 80 nations across the globe, making the GPF the most important and comprehensive forum for regulatory institutions with an interest in the promotion of financial inclusion policy. The forum is focused on the development and improvement of national financial inclusion strategies and policies, and is used as a platform for senior financial regulators to exchange ideas and engage in peer-to-peer learning activities.
For improving access to financial services, it is well established that the poor can be services profitably, servicing costs can be reduced, and large numbers covered rapidly, through a digital payments ecosystem that is characterized by open entry and inclusiveness. Global experience indicates that the path of digital financial inclusion has four stages of market development as the poor move towards:
Having access to basic account, Payment connectivity to individuals, governments and utility providers Payment connectivity to service providers to access savings, insurance and loan products The ideal where the majority of transactions are in digital mode.
Despite regulatory focus on achieving the goal of universal financial inclusion over several years, India stays in the first stage of market development. The move to the second
stage has to be accelerated through enabling remote payments such as remittances and government payments; however , for an effective rollout of such payments, it is important to recognize that accepting funds from public and placing 100% of those funds in pooled accounts at supervised banks does not create prudential or liquidity risks. By isolating the risks posed by payments, the strengths of non- banks with well established distribution networks into the hinterland and into excluded segments.
It is time for all stakeholders to step outside their comfort zones to test new commercial and regulatory models. The need of the hour is to openly debate the next steps needed to place India in the second stage of the path to financial inclusion by further opening up the payments space to non-banks
The rapid growth of the telecom sector in India, in last decade, has created an appropriate platform for the financial sector to ride on to solve the last mile connectivity issues in an economically viable manner. Today, we have approximately 600 million active mobile subscribers in India and counting. As per a BCG report, a bank transaction on a mobile is 99% less costly than the same done through a bank branch. There have been successful business models implemented in Africa, South-East Asia, Japan etc., where the road to financial inclusion using mobiles as a platform has yielded fine dividends. Leveraging the rapid growth of mobile telecommunications and the lack of access to formal banking channels in Africa; a number of service providers have successfully tapped the demand rising out of a large unbanked population. M-Pesa, promoted by Safaricom in Kenya, has been able to grow aggressively by acquiring 6 mn users (about 20% of Kenya’s population) in less than 5 years of operation. This also means that approximately 10% of Kenya’s GDP is flowing through m-Pesa now. India too is at its prime for a similar kind of disruption where mobile platforms can be used to work as proper delivery systems and information sharing mechanisms for promoting financial inclusion to the less privileged population.
Government bodies, banks and private players together need to build an eco-system that is largely driven by retail transactions, rather than only account-opening or remittance, so that India attains true ‘digital’ financial inclusion.
Where We stand
As far as rural areas are concerned, out of 13.83 crore rural households in India, only 4.16 crore rural households have access to basic banking services. In respect of urban areas, only 49.52 per cent of urban households have access to banking services and 34 per cent of the India’s urban population with annual income less than `50,000 have access to banking services. The latest National Sample Survey Organisation survey reports that there are over 80 million poor people living in the cities and towns of India and they lack access to the most basic banking services such as savings accounts, credit, remittances and payment services, financial advisory services, etc. Low-income groups do not have access to the formal banking systems, as they usually do not have the documents needed to open a bank account. As a result, they depend on the informal sector for their savings and loan requirements. Thus, financial inclusion is considered to be critical for achieving inclusive growth, which itself is required for ensuring overall sustainable growth. Recognising the importance of inclusive growth in India, efforts are being taken to make the financial system more inclusive. The present paper is an attempt to examine the present status of Financial Inclusion in India and issues involved in extending banking services to weaker sections of the society.
- The Alliance for Financial Inclusion
- Transact, National Forum for Financial Inclusion
- Financial Inclusion Taskforce, UK
- Research Unit for Financial Inclusion
- UNCDF report on Financial Inclusion
- Resources, articles and documents from Financial Inclusion Champions site, UK
- FDIC Advisory Committee on Economic Inclusion (United States)
- Financial Inclusion – An Overview (India)
- World Bank Global Financial Inclusion Database
- World Bank Global Financial Inclusion Data Portal
Building on the progress made since the Toronto Summit, the G20 has developed an Action Plan for improving Financial Inclusion, which provides a set of six concrete and pragmatic action areas to advance financial inclusion for individuals, households and MSMEs and promotes the application of the G20 Principles. It has also identified the winning proposals of the SME Finance Challenge and developed a financing framework to support the implementation of the winning proposals and to scale-up successful SME financing models.
Working with the Alliance for Financial Inclusion (AFI), the Consultative Group to Assist the Poor (CGAP), and the International Finance Corporation (IFC), the G20 will launch a Global Partnership for Financial Inclusion (GPFI) to provide a systematic coordination and implementation structure for the Financial Inclusion Action Plan. The GPFI, which builds on the strength and the process of the current G20 Financial Inclusion Experts Group (FIEG), will provide an inclusive platform for all G20 countries, and non-G20 countries – in particular developing countries- and relevant stakeholders for peer learning, knowledge-sharing, policy advocacy and coordination on financial inclusion. These efforts on financial inclusion will only be successful if they are supported by reliable data and common indicators, and the GPFI will work to improve the quality and quantity of data needed to effectively design national policies and targets and monitor progress.
The G20 also supports the strengthening of member and non-member countries’ capacities on financial inclusion policy development and implementation. Consistent with the G20 Development Framework for Strong and Balanced Growth, it recognizes the importance of enhancing the role of developing countries, including the low income countries (LICs), in the efforts to achieve balanced and sustainable economic growth and eradicate poverty. In this context, the G20 requests AFI, to facilitate the participation of the non-G20 developing countries into the activities of GPFI and global discussions on financial inclusion.
Payment and securities settlement systems are critical to the effective functioning of financial systems worldwide. They provide the channels through which funds are transferred among banks and other institutions to discharge payment obligations arising in the financial markets and across the entire economy.
This system, in contrast, if not efficient, secure and reliable can adversely affect the financial system, and can contribute to systemic crises. If the risks inherent in its design and operation are not adequately contained, a financial shock—initially in the form of a liquidity shortfall, which may be followed by default and even bank insolvency—can be passed from one participant to another. Since a bank’s liquidity problems will typically first become visible in the payment systems in which it participates, those systems are by definition vulnerable to a wide range of shocks.
An efficient payment system, promotes orderly economic development and growth. In particular, a wide and cost-effective range of payment instruments is essential for supporting customers’ needs in a market economy. Some transactions simply do not take place in absence of certain payment instruments.
A fair retail payment system has also important social implications. For example, interoperable networks for processing payments at low cost are essential to guarantee appropriate coverage of payment instruments in a country.
Close attention has been paid since the mid-1980s, initially by central banks and then by other regulators, to the design and operation of payments and securities settlement systems. This was in response to both technological developments, which reduced the cost and increased the speed of the automated processing of payment instructions.
The Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlement (BIS) has published several reports and is the standard setter in the area. Its focus has ranged from large value to retail systems, from foreign exchange transactions to securities settlement systems.
Why it is important
The technical efficiency of payment system is important for a development of economy. Real time gross settlement systems (RTGS) are funds transfer systems where transfer of money or securities takes place from one bank to another on a “real time” and on “gross” basis. Settlement in “real time” means that payment transaction does not require any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable.
Developed vis vis Developing Economy
A weak payment system may severely drag on the stability and developmental capacity of a national economy; its failures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of confidence in the financial system and in the very use of money .The technical efficiency of payment system is important for a development of economy.
Pillars of Payment Systems
With the advent of computers and electronic communications a large number of alternative electronic payment systems have emerged. These include debit cards, credit cards, transfers, direct, direct debits, internet banking, ATMs ,Micro-ATMs, PoS ,and e-commerce payment systems
|Financial Inclusion & Development of Payment Systems & Infrastructure –
The Payment system Vision Document: 2012-15 of RBI envisages to proactively encourage electronic payment systems for ushering in a less-cash society in India. The conference will highlight on the role of Payment Systems as a catalyst on the supply side of financial inclusion.
|Financial Inclusion & G2P Payments Infrastructure & Direct Benefit Transfer (DBT) –
DBT has been called a game-changer. The conference will debate on the intent and implementation of DBT and other G2P Payments.
|Technology in Banking: Changing Paradigm –
The FIPS 2013 conference will focus on the role of technology in bringing a complete paradigm shift in the functioning of banks and delivery of banking services.
|Agency Banking Framework –
The agency banking model involves a process where retail outlets are contracted by a financial institution or mobile network operator to process clients’ transactions.
|Payment Systems Framework –
The conference will discuss on different approaches towards delivery of payment services to the unbanked and under-banked customers using innovative methods.
|How to manage with less Cash –
This theme addresses the issue of Indian payments industry to scale up and become more vibrant to manage with less cash.
|Remittances: Mobile Financial Services –
The conference will carry out the essential debate in laying the groundwork for the development of remittance services.
|Payment Channels –
The conference will disucss on innovations payment services, such as, special bank accounts or pre-paid accounts.
|Cash Management –
The conference will address the challenge for any commercial enterprise, that its core competency is not managing cash but running business.
|Prepaid cards –
There will be a discussion over the prepaid payment instruments (PPIs). PPI while being a new product was also thought of as a substitute for paper/ cash.
|Political Dialogue –
This theme will try to bring a Political Consensus for financial inclusion and the way it could be expanded in India.
|Banking without Boundaries –
The session on this particular issue will discuss the era of banking without boundaries.The recent financial crisis has redefined the broad contours of regulation of the banking sector globally.
|Financial Inclusion leading to Deepening –
The session on this issue will discuss on the improvements in rural infrastructure in terms of enhancing productivity of physical resources in the rural areas and greater addition in agriculture.
|Other Financial Services –
The conference will discuss on the importance of other financial services in enhancing Financial Inclusion.
|MFIs as New Avatars –
Microfinance has occupied centre stage as a promising conduit for extending financial services to unbanked sections of population.
|NBFC Challenges –
The conference will throw light on challanges and opportunities for NBFCs in India.
|Agriculture & Delivery of Financial Services –
The Government of India places high priority on reducing poverty by raising agricultural productivity. The conference will focus on challenges in agriculture and delivery of financial services.
|Identity Management & Food Security –
The Targeted Public Distribution System (TPDS) in India is intended to provide food grains & essential commodities at subsidised prices to the poor. The conference will focus on ensuring food security.
|Banking the Women –
The Union Cabinet has approved the setting up of the Bharatiya Mahila Bank. The conference will highlight many such initiatives that are playing role of a catalyst in bringing Indian women in the purview of banking.
|FI & New Banking Licenses –
The conference will discuss prospective contribution of new bank licenses by RBI in expanding financial inclusion.
|e-Commerce & Finance Deepening –
The conference will highlisgt on the role of e-commerce and Financial deepening in reducing risk and vulnerability for disadvantaged groups.
|Aadhaar & other Prepaid Cards –
A session on Aadhaar will touch upon the Aadhaar-enabled unified payment infrastructure, direct transfer of subsidies (DTS) and electronic benefit transfer (EBT).