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Financial inclusion may spell big gains for vendors

Vishwanath Kulkarni
C. Shiv Kumar

Royalty revenue for each bank account opened

Bangalore , Dec. 21

Financial inclusion is expected to provide a quantum increase to the revenue kitty of banking software vendors in the coming years, neutralising the effects of a global slowdown.

Financial inclusion is delivery of banking services at affordable cost to the vast sections of disadvantaged and low-income groups. The financial inclusion project has gained momentum with the Government and the Reserve Bank of India (RBI) providing the big push for the project. The project aims to reach out banking coverage semi-urban and rural areas.

Royalty revenues

Traditionally, vendors such as i-flex Solutions Ltd and Infosys Technologies Ltd have been charging royalty revenues on a per account basis from global clients for their banking software products. For users in India, where the royalty rates are relatively lower, the charges are a combination of both per account and the number of branch licences.

"We are looking at revenues based on the number of accounts that get opened here. One can imagine that if the accounts become 60 million or 100 million, the kind of revenues it shows will be much higher," said Mr Deepak Ghaisas, CEO of i-flex Solutions' India operations.

i-flex is part of the initiative that ICICI Bank has taken up along with IBM to address the microfinance segment. ICICI recently floated a new entity called FINO (Financial Information Network and Operations Pvt Ltd) that would provide technological solutions as well as services to finance providers to reach the underserved in the country.


"Microfinance is the way to go around," Mr Ghaisas said. "It is estimated that of the population exceeding a billion people, only 500 million of them have access to the banking facilities," he said.

FINO expects to target 300-400 million people who do not have access to basic financial services. Microfinance institutions, NBFCs, Regional Rural Banks, Co-operative Banks would directly or indirectly tieup with FINO to use services for which it would charge Rs 25-30 per account every year.

Mr Merwin Fernandes, Vice President and Business Head of Finacle, the universal banking solution of Infosys Technologies Ltd, said the revenues from financial inclusion would be in line with any expansion. "It depends on the number of licences added and the number of accounts generated,"

Mr Fernandes said, adding that per account realisation for software vendors is low in India.

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