IBS HYDERABAD

FINO (Financial Inclusion Network and Operations Ltd.) Challenges in the distribution of financial services to the customers in rural India?

Submitted By: Piyush Prasanna Abhijeet Mishra Prashant Goel Malvika Mathur Rohan Mazumdar

This Case Study Deals With The Major Issues And Challenges Faced By FINO In Service Delivery To The End Consumer And How it Resolves These Issues

FINO (Financial Inclusion Network and Operations Ltd.) - Challenges in the distribution of financial services to the customers in rural India?
Improving the lives of the billions of people at the bottom of the pyramid is a noble endeavor. It can also be a lucrative one - C. K. Prahalad (IRDA Journal, 2009)

Q. What is the unmet need that FINO is trying to fulfill for its customers? Ans. There is a huge amount of unmet need of financial services in rural India. When our people started conducting research for FINO, they found that there were between 400 to 600 million people in India who did not have access to financial services. Globally there are 2 billion people who are excluded of the financial services. FINOs aim is to figure out how to meet the requirements of this customer segment. Q. Reaching this distributed, low-income customer base must require a highly innovative approach to the business model and cost structure. How did you go about developing this? Ans. To reach the rural unbanked, low income customers we completely redefined the banking business model. Achieving this process meant setting up a delivery chain which was far less supervised and was low skilled. The most important part was technology adaptation which was simpler and friendly and robust for the customer. This system was developed after several rounds of testing and iterations. Finally a paperless system (no deposit/withdrawal slips, no checks, etc.) was developed. To resolve the connectivity issues, we designed a bio-metric system, FINO Smart Card, which the customer can use anywhere in India, through our FINO Agent (Bandhu) in an offline mode. These agents are provided with handheld devices that could read the card as well as the finger prints, work without power and carry forward customer transactions. But even for such a simple and robust technology the scale of implementation was important and because of that we had an objective of serving 25 million customers in duration of five years. And by using this Agent Model (Business Correspondent Model) we have reduced our operational cost drastically. The cost of serving a customer from a physical branch is around US$ 1.25. The cost of doing a self service transaction from a facility like ATM costs US$ 0.40. But the cost of doing transaction by an agent based system (business correspondent) model is US$ 0.10. Interview of Mr. Manish Khera, CEO of FINO by Ernst and Young

http://www.ey.com/GL/en/Issues/Business-environment/Seven-views-on-innovation---Innovative-approach-totargeting-low-income-customersS

FINO (COMPANY BACKGROUND) Financial Inclusion Network and Operations LTD. was founded on 13th July, 2006. The major objective behind the foundation of FINO was building technologies to enable financial institutions (FIs) serve the unbanked sector and also to service the technology requirements of entities servicing bottom of the pyramid customers. FINO is a multibank promoted, professional and financially strong with a Board comprising of customer banks and MFIs. FINO currently enjoys the largest acceptance amongst the FIs and has received various awards and recognition from reputed organizations. FINO is currently working on National Priority Projects such as MNREGA, RSBY, SSP, thus helping its clients to reach a critical mass to provide economies of scale to the entire bottom of the pyramid customers. BUSINESS MODEL of FINO FINO has a business model which is built on the concept of Fortune at the Bottom of the Pyramid. It focuses on providing end to end technology and operation solutions to achieve a breakthrough in scale and relevance of its operations which is considered to be of prime importance to deliver the maximum value to all the stakeholders in a sustainable way. FINOs vision statement states its social commitment and motto towards its customers and that is Enabling Financial Inclusion. The core value of FINO consists of: Entrepreneurship, Commitment, Integrity, Value Creation, Innovation and One Big Network. CHALLENGES FOR FINO Two core issues which FINO today faces are HR Issues and Information Gap. 1. HR Issue: Recruitment and retention is one of the major challenges faced by FINO as it strives to reach more number of clients and expand its geographical scope. Attracting a right talent proves difficult because candidate must have, a prerequisite, a right mindset which fits with the organizations vision and mission. Because of the continuous growth in competition, poaching of staff has become a major concern for FINO. 85% of the FINOs client is women but the number of women staff-member is considerably less especially in the senior management as well as lower management. 2. Information Gap: Lack of adequate knowledge about the companys product and policy, leads to a consumers dilemma. The perception of clients in the rural area of the required service is at times different from the service being provided by FINO. Sometimes information gap is created due to lack of convincing ability of the FINO Agent to the customers. This leads to a variation between the intended service provided and expected services received. 3. Other Issues: Besides these two core issues, there are several small issues which lead to service failure. Some of these issues are, financial risks, operational risks, funding issues, governance risk, external business environment risk etc.

How FINO Resolves These Issues To resolve HR issues in the organization FINO follows various processes. Right from the time of acquisition of talent to oversee their overall development in the organization, because the company believes its vision and dream of Financial Inclusion of the unbanked can only succeed, if it has a qualified and responsible talent. FINO provides and equal opportunity in case of acquisition of talent by carrying out various programs such as: Internal job posting, employee referral program, campus recruitments, via portal recruitments, ad-campaign in news papers and via other job related networks. FINO has an open door policy which focuses on developing talent for the future, inculcating teamwork and sense of ownership amongst them. From time to time FINO believes in rewarding the best performers by acknowledging their work and providing them leadership opportunities, training for future roles and fair compensation packages and incentives. These practices lead to employee loyalty towards FINO. It also helps it s employees to maintain a work life balance by providing them flexible working hours, of working 200 hrs. a month and 5 days a week. FINO also provides for the employees who seek higher education and are constantly working towards the achievement of organizations goal. These process adopted by FINO has led to an exponential growth of the company. This shows how the level of employee satisfaction as led to an overall growth in the level of customer satisfaction. FINO believes in strengthening its internal quality which will in-turn drive employee satisfaction. In order to resolve the Information Gap issue, FINOs business development team works continuously surveying the existing customers needs, because at FINO customer retention is as important as customer acquisition. It treats its customers as long term valuable partners who are key inputs as their business sources. It conducts satisfaction surveys every year to know how the customer feels towards the services provided by FINO. Based on these survey results, FINO further decides its positioning strategies. According to research report it suggests that a 5% increase in customer loyalty can increase the profit from 25% to 85%. FINO also tries to create customer value by providing them service according to their availability and feasibility.

The Path Ahead For FINO FINO has several dimensions to grow as an organization. Out of which the most important is coverage area and reach amongst customers. The growth plan of FINO includes acquiring 41 million customers by the end of year 2015. It also wants to gain customer base by providing them with a varied range of financial products. It is finally looking forward to go overseas and expand in foreign markets by partnering with foreign entities and fulfill its goal of Financial Inclusion.

Exhibit 1: Presence of FINO NORTH ZONE BIHAR DELHI HARYANA HIMACHAL PRADESH JAMMU & KASHMIR PUNJAB RAJASTHAN UTTARANCHAL UTTAR PRADESH SOUTH ZONE ANDHRA PRADESH KARNATAKA KERALA TAMILNADU EAST ZONE CHHATTISGARH MEGHALAY ORISSA WEST BENGAL WEST ZONE GOA GUJARAT MADHYA PRADESH MAHARASHTRA

Exhibit 2: Issues with Microfinance in FINO

Exhibit 3: Organizational Structure of FINO

Exhibit 4: Stakeholders in FINO

Exhibit 5: Materiality Issues

Exhibit 6: Exponential Growth of FINO (a)

Exhibit 6: Exponential Growth of FINO (b)

REFERENCES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. FINO FACT BOOK (companys Document) www.fino.co.in http://www.arthaplatform.com/news/49/fino-and-ncr-launches/ http://www.prnewswire.co.uk/news-releases/fino-adopts-gemalto-smartcards-to-acceleratemicrobanking-deployment-in-india-153761535.html http://www.ey.com/GL/en/Issues/Business-environment/Seven-views-on-innovation--Innovative-approach-to-targeting-low-income-customers http://fino.co.in/article.php?id=183 http://fino.co.in/article.php?id=108 http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4545 HBS Case Study on Haryali Kisan Bazar FINO BROUCHERE FINO SR Report Punjab National Bank Bancmate Case Study Dr. Amrit Patel, Rural Banking Policy in India Mary jo bitner et al, Employees role in service delivery,chapter 12,services marketing James S Heskett et al,Putting the service profit chain to work, page 2& 3, HBS Case Study