Digital financial inclusion on the basic feature phone

Feature phone users, who form a bulk of the user segment of the unbanked and under-banked, today have no services for Digital Financial Inclusion. And a mobile device based solution is the only way to deliver this service to them. The present smart phone stack cannot be ported there, needed was a new tech stack enabling this base for access to digital financial inclusion services. And this segment forms the bottom of the pyramid - in the emerging economies, whether it be in Africa, Indian sub-continent, the Americas or anywhere globally.

These customers will remain on a feature phone for the following reasons :

1. Affordability : USD 12-15 Vs USD 100 upwards for a new smart phone or even USD 30 for a used smart phone

2. Battery life : 48-72 hrs on a feature phone vs 8 hrs on a smart phone

3. simplicity : smart phones are complicated to use

Hence, a solution was needed that caters to the above base requirements, yet delivers a full service financial inclusion service, and thats in their local language and gives them the full service envelope.

The segment is over 70-80% of the mobile users in the emerging economies or sometimes is about 20-30% in the developed economies. The basic needs here are :

- access to banking / wallet services

- money transfers, bill and merchant payments

- micro finance and insurance services and low cost EMI payments

And without the above, a solution is incomplete for the segment.

Our solution is based on thin film chip, that is an "overlay" over a regular user SIM card, compatible across all mobile devices (past, present and future), using secure SMS as the base for the transaction transport and with adequate security built in there to ensure it takes care of their security, trust and confidence in the user to transact and use. We have it live in India, with the necessary regulatory approvals and the nation financial switch integration and can transport the stack anywhere globally.

Our delivery includes the integration with local "mobile money/banking" licence holders, cross border remittance providers and local bill/merchant service providers and integrating the same with :

1. Secure issuance to customers and integrating with their wallets / creating a wallet

2. Service enabling for the scope above including :

- requests for micro loans and insurances

- low cost EMI payments for these loans and insurances

The issuance involves mapping the user mobile# to the overlay Serial#(automatic) and then ensures the security of mis-use ( it cannot be used with another mobile#) and the user then can access his wallet/bank account and handle all the transactions.

In addition, this segment has a requirement of secure SMS text based vouchers - these can be government grants, subsidies, fund transfers etc., which are specific to a user / activity. We have this available as a platform for the E-voucher creation, specific voucher delivery to a beneficiary handset and scanning at a merchant point and the validation, to ensure its always handled for the intended purpose, with no "leakages" and at very low costs.

Our solution is focused on delivering a secure digital financial inclusion solution to the feature/non-smart mobile device users, which forms close to 70-80% of the unbanked/underbanked in the emerging economies.

A lack of digital financial services amongst them is a major hurdle holding them back from mainstream contribution to their individual and the national economic development. While they do still get access to base financial services with the "local providers", the costs and the complications there are un-economical for their growth. In addition, these are always in cash, and do not contribute to the national growth of any nation.

Enabling the full scope in financial inclusion, in a low cost, secure with an easy access will help ease their daily lives and bring them onto mainstream economic development. They have access to :

- low cost loans and insurances : help then grow and expand their local businesses

- bill payments direct from their handset and using their bank / wallet accounts : no intermediaries and lower at costs

- merchant payments : no cash involved here, secure and simpler

- money transfers : direct from/to their bank/wallet accounts, lower costs and no intermediaries

- micro loans/insurances : low costs availability and direct EMI digital payments, no intermediaries

- direct access to government loans/grants and subsidies ( SMS based E-vouchers), no intermediaries, hence, 100% fund receipt and utilisation for the intended purpose. No "losses in transit"

its a complete and a comprehensive solution for the segment, addressing their everyday needs on financial services.

We are already deploying this in India, integrated with the national switch on UPI and delivering the complete scope in partnership with :

- the bank : for fund transfers

- Billers for Bill payments

- the micro finance companies : micro loans and insurance services

- rural commerce : digital payments on goods delivery

and have a full team in place to deploy the solution anywhere globally. The current team is over 18 engineers and can be expanded anytime to deliver anywhere globally.

We have done the pilots with multiple partners in India :

- the micro finance segment

- Banks

and based on the above, we got the regulatory approvals and the certifications to integrate with the India national payment switch. We are now going live nationally in large numbers with these partners.

We want to help national economies grow and the upliftment of the unbanked/underbanked segment is a major priority for us. Starting with India, we are looking at our next expansion outside India. Africa is a major segment in need of this solution and then comes in eastern europe.

Bringing this segment into the mainstream digital financial inclusion rails will help everyone : the beneficiaries, the MSME segment, the government and go a long way to the GDP growth of any nation.

We can "stitch" together the whole ecosystem of payments :

- billers and merchants

- banks and wallet providers

- government grants and subsidy disbursements

- international remittances 

to give a complete solution to any country.   

A solution requirement for a feature/non-smart phone on financial services is totally different from that on a smart phone. The current smart phone technology stack cannot be ported to these devices, and hence a totally new stack was needed. While it starts with enabling basic financial inclusion services on these devices, the extensions to this base core technology is :

- handling offline transactions

- handling digital currencies

- handling national ID's and health certificates

These are the next steps on our delivery to the nation (India) and can be ported to any other nation.

The core here is :

- simplicity and security

- ease of use

and this is what matters the most for the intended user segment.

Building a nation by helping the unbanked/underbanked come onto mainstream digital services for their everyday needs on financial services. 

This is our driver for the project and we are getting there and the reason behind the Govt of India support by way of a grant equivalent to USD 300,000 to fine tune the technology for the micro finance user segment. They will be the major beneficiaries of this solution and are a major contributor to the GDP growth in a nation.

The measurement of success on our solution is based on :

1. # of users on-boarded

2. # of transacting users

and this has to grow every week/measuring cycle. This segment needs a lot of handholding to :

- introduce the solution to them, how it works and what can they do with it

- then continue to use and support them on queries/errors coming up at their end.

- and a major area of accomplishment will be to wean them away from "cash" to digital. Cash today is "frictionless" for them, but has a number of associated costs to it. Bringing them on a digital platform eases and reduces their costs of operations/daily lives, but these need to be communicated, a demo given to them and getting them to use and see for themselves the benefits here. Building their trust and confidence on the solution is imperative to the success here.

Theory of change : in our understanding will come about with :

- education on the base environment / ecosystem around them today : what and how it works for them, and how can it be improved for them

- finding a catalyst in their local ecosystem who understands the above, is convinced on the need to change and becomes a leader in the group

- he then builds the confidence amongst his group members, brings in a few to adapt to the change, shows them the results of this change and gets them on board.

- then expands on the group and brings about this change across a wider strata of society.

A large contributor here is the regulator, the government and the larger ecosystem who also contribute towards communication / policies and the framework needed for this change. And this is where in India, we have the government and the regulator working towards this at all levels to bring about this change and its happening today. 

The core technology resides on a few base principles :

- the SIM card standards and the SIM Tool Kit (STK) capability available within the core specifications to build external applications and services

- extending these to an external medium to host the same and integrate with the base SIM card for communication with the mobile network available in the device

and then the regular banking technologies of :

- encryption/decryption and secure data hosting

 - understanding and integrating the same with core banking interfaces

- remote service management over SMS as this is the only channel available in these devices for communication

and then building this into a usable product for the target audience and solving their everyday problems.

At this stage, we are more focused on the solution/product delivery to meet the exacting requirements of our customers, the regulator and the government who have placed their confidence in us for the solution delivery.

Once we are live and generating traffic with the beneficiaries on-board, we would look at the diversity here in terms of focusing on deprived sections, specific groups needing special attention etc., 

Our business model is a combination of :

1. the SIM overlay hardware paid for by the customer in full and supplied by our vendor in Taiwan

2. there is a small integration cost to our account for the service setup and partner integrations in each country of deployment.

3. and then we ask for a small monthly support fees per customer to help us operate and support the services including customer support, customer care, reporting and account settlement between the multiple partners on board and bringing in additional services as may be required in the country. This includes local adaptations to our service envelope for the local environment

This is working well in india with our partners and will be the same for us anywhere globally. 

After having bootstrapped the company to the tune of USD 3 mill, we raised some external funding, starting in August 2022. Our first round is a total of USD 1.0 mill and we are actively working to the closure here. Post this, we are raising another USD 6 mill to help us into the growth phase.

And since we have a +ve business model, our service revenues will take care of our growth post the 1st year of operations. We are then hopefully on our growth path using our business generated profits.

We have a grant of USD 300,000 from the government of India and are in the midst of our commercial agreements with customers who are paying for the services. 

We are helping them reduce their costs of operations and they appreciate and understand the same.