“A business that makes nothing but money is condemned to remain poor,” said Henry Ford.
One does not necessarily have to agree with Ford to understand that all business, at the end of the day, has to have a philosophical core that goes beyond making money and the everyday exigencies of earning a livelihood. Financial inclusion is thus the buzz word and several models have come up around it.
The tricity, or a percentage of the upper income group, is, I presume, familiar with newer models of transferring and using money through mobiles on platforms provided by telecom operators like Airtel and Vodafone. Besides cutting down on the use of cash, an avowed goal of the Reserve Bank of India and successive governments for some time now, it also promotes financial inclusion. The earnings for operators for providing the service might not be that lucrative at the moment, but the initiative is meant for the long haul, as it is expected to lead to a substantial cost reduction in the ease of doing business.
Consider this: with 97% of transactions in the country based on cash, even a 1% reduction in these would lead to a saving of Rs 100 crore a year for the government, on the cost of printing the paper money and other associated costs. Another problem that a cashless economy can substantially ease is the shortage of change, a huge relief for the hassled vegetable vendor and the bus conductor.
Mobile companies are not the only ones doing their bit for financial inclusion, there are other business plans in vogue that aim to make money out of money in a far more literal manner than most businesses tend to. Pre-paid cash cards are another option that is trending in the market and has the potential to grow. There are 27 such companies allowed to function in the Indian market and their business proposition is simple. They primarily target people without a bank account and offer them a way to store their cash and remit money domestically.
“Our revenue comes from the Rs 100 one-time fee charged for the activation of the card, the first time, on a payment of Rs 500. After the card is activated, the instrument is on and can be used to store up to Rs 50,000,” said Mudit Bhatnagar, vice-president and head marketing, ItzCash, on a recent visit to Chandigarh. Bhatnagar says that their model is a high-volume, low-margin design and claims that Punjab contributes 7% to its pan-Indian revenues and is betting big on the relatively suave, but unbanked segments of workingclass people like our tea vendors, grocery stall owners and the like, to drive growth in his business. Interestingly, the Essel Group company, started out as a solutions provider to the common but vexed problem of getting people to pay their bills for the DTH service in a convenient manner.
How does Bhatnagar plan to reach his target customers?
“We open franchisees, which are not traditional showrooms, but we look for people who are computer literate with an internet connection and can market the concept in their respective communities with passion. Marketing the concept remains a challenge,” said Mudit.