Card-based remittance service by FINO

The microfinance institutions will be able to conduct remittance business which used to be conducted by post offices and major banks in India.

A new card-based remittance service has been introduced by a multi-bank promoted institution for microfinance, Financial Information Network & Operations Ltd (FINO this service would initially be provided to clients of the 121 microfinance institutions (MFIs) engaged with FINO.

“With a migrant population of 30.7 crore, domestic remittances contribute Rs 40,000-60,000 crore, while international remittance stands at Rs 1 trillion (one lakh crore) on annual basis,” said Rishi Gupta, CFO and president of sales and marketing with FINO.

Banks get more than 10% of commission on remittances whereas post office get 5%.

“We see a market worth Rs 3,000 crore as commission on remittances. Post offices do not accept money orders above Rs 5,000, while banks do not have a reach to the rural masses. With a direct access to the rural areas, we are better placed for remittances,” said Gupta.

With the introduction of card-based remittance service the person wanting to send money to his beneficiaries will have a choice, can do so via a smart card or cash. Another smart card will be available with the beneficiaries of the emigrant. “The person based in the rural area can withdraw money through the microfinance institutions’ agent who has the card reader,” said Manish Khera, CEO of FINO.

FINO will be launching kiosks which are similar to automated teller machines (ATM) called micro-deposit machines, having an in-built finger-print reader. With the launch of this machine the smart card will find another use. For commercial use the machine will be available by June 2008.

“These machines would be located at the residence of the MFIs’ agents, who cater to rural and urban poor,” Gupta said.

The micro-deposit machines do not permit direct cash withdrawal as ATMs do. In this machine one has to enter the amount to be withdrawn and collect the receipt. The receipt then has to be given to the agent, who in turn provides the cash to the smart cardholder.

“We have observed that 90% people deposit money while very few withdraw. During the past year, amount deposited per transaction improved from Rs 50 to Rs 1, 000,” Gupta said.

In the next 3-5 years FINO will be installing 10,000-15,000 machines. “The cost of this machine is lower than an ATM machine. Various banks have shown interest in setting up these machines at their rural branches as they are cost-effective,” Gupta said.

With the installment of MDM the number of agents and the work of the agents will reduce. One MDM can replace four MFI agents thus saving a total of around Rs 6 lakh as agent, savings and loan commission. The project will be funded by IFC, while NCR will be manufacturing and developing the MDMs for FINO.