Innovations in Remittance Products to Increase Access to Formal Channels. London, November 2006

Transcription

1 Innovations in Remittance Products to Increase Access to Formal Channels London, November 2006

2 The India remittance market operates across multiple corridors today North America $ 8 bn Market Banks Share Send 55-60% Receive 95% UK and Europe $ 5 bn MTO s ExHs Online 35% 10-15% 5% S. E. Asia GCC $ 3 bn $ 7 bn The total market size through formal channels is estimated to be about USD 25 bn. ICICI Bank currently holds about 25% market share Source: Reserve Bank of India, Market estimates 2

3 Migration patterns: Increasing Complexity and Diversity Migration of manual labourers Migration of knowledge workers Multi corridor multi-segment pattern The challenge was hence to create an economically viable business model which straddles both these diverse customer segments 3

4 We hence profiled customers and built products & business models around them Post graduates, mid-high income category White collar migrant Technology, bio-tech, medicine, education & engineering industry verticals Is open to technology initiatives Larger ticket size & relationship value, Urban & highly banked Blue collar migrant High school, bottom of the pyramid, borrows locally to meet immigration expenses Maids, contract labourers, technicians, drivers Prefers traditional branch banking Small ticket size & relationship value, small towns, under banked 4

5 by leveraging technology for product innovation US / UK Identified Service Gaps Tedious documentation. Need to visit bank /agent High charges Uncertain fulfillment Product Innovation Online transfers through ACH with transaction tracking Free remittances alerts GCC Inconvenient (No account transfer option) High fulfillment time frame - posting of checks to India Launch of Credit to account two hour remittances Improvised to Instant transfers from ICICI branches Leveraging Technology Automated centralised payment processing linked to all payment systems in India Proprietary online remittance platform Tech costs at 5%-10% of global majors Remittance Volumes >75% CAGR FY03 FY04 FY05 FY06 5

6 Serving the bottom of the pyramid profitably, however, has its challenges High cost of acquisition Low transaction value but higher transaction frequency Lack of income proof & consistency, credit quality Low fee based product consumption such as Insurance Building an economically viable business requires addressing these challenges while creating a strong customer proposition 6

7 M2I Remittance Account: A bundled offering for blue collared workers Underlying Problem Remitter receives salary in cash Prefers to remain unbanked Perception that bank based remittances are costly, time consuming & inconvenient Regulatory compliance Cost Income economics Designed Offering M2I Remittance Account Zero balance twin a/c (Bahrain & India) Bundled with direct salary credit Multi channel access to remit (Branch, door step, multi-lingual call centre & internet) Convenient & compliant account opening process Dinar Rupee float+ remittances First mover advantage has helped us reach critical mass in a very short time.. 7

8 The financial needs of blue collared workers extend beyond remittances Current technology initiatives largely address only this through instant transfers, paperless transactions, multi-channel access, card based products etc. Prior Prior to to migration migration needs needs overseas overseas Remittance Remittance Requirements Requirements of of beneficiaries beneficiaries at at home home The larger opportunity is in creating a broader service proposition around the core remittance offering 8

9 The financial needs of blue collared workers extend beyond remittances Acquiring the customer by extending loans to meet pre-migration expenses. Remittance card bundled along Prior Prior to to migration migration needs needs overseas overseas Remittance Remittance Requirements Requirements of of beneficiaries beneficiaries at at home home The larger opportunity is in creating a broader service proposition around the core remittance offering 9

10 The financial needs of blue collared workers extend beyond remittances Low-cost insurance protection bundled with Remittance cards. Zero balance payroll checking accounts Prior Prior to to migration migration needs needs overseas overseas Remittance Remittance Requirements Requirements of of beneficiaries beneficiaries at at home home The the larger focus opportunity today is on is making creating finance a broader available service rather proposition than to drastically around reduce the core their remittance cost of borrowing offering 10

11 The financial needs of blue collared workers extend beyond remittances Low cost distribution - MFIs & NGOs using bio metric cards, rural kiosks. Loans to beneficiaries guaranteed by the NRIs Prior Prior to to migration migration needs needs overseas overseas Remittance Remittance Requirements Requirements of of beneficiaries beneficiaries at at home home The larger Bank s opportunity rural No White is in creating Space strategy a broader is expected service proposition to give the remittances business around the the distribution core remittance reach offering at ideal cost points 11

12 In summary, the key pieces of the strategy Low cost tech enabled channels Build Market Share and Improve Profitability Bottom of the pyramid migrants Innovation Non-bank Product partnerships Product bundling Access to finance is a hygiene component of a successful bundled offering 12

13 Thank You 13