Rural India’s FinTech Potential: Interview with Sasidhar Thumuluri, MD & CEO at Sub-K
By Leandra Monteiro
A good portion of India’s population still lives in rural areas. These rural areas and its population remain inadequately served by digitalisation. In comparison to India’s metropolitan areas, the rural economy is unstructured and still relies on trading in cash.
However, FinTech is fast becoming the face of financial inclusion in economically diverse and developing areas in India. Sub-K is one such FinTech that is helping to bridge the financial gap between the rural and urban parts of the country through digitalisation.
In conversation with IBS intelligence, Sasidhar Thumuluri, MD & CEO at Sub-K IMPACT Solutions Ltd discusses the potential of the Indian rural economy for the FinTech industry.
- What is the journey behind the launch of Sub–K?
Sub–K is an offshoot of BASIX which is a global pioneer in the financial inclusion domain. BASIX was founded by Vijay Mahajan who is considered the father of microfinance in India. With a grand vision of promoting a large number of livelihoods through comprehensive financial inclusion (savings, payments, credit and insurance) Vijay conceived the idea of leveraging mobile technology and local entrepreneurship for democratising financial services.
The focus was rural, women and the poor. Several experiments were done starting way back in 2001 when BASIX tried using handheld terminals and smart cards for building efficiency and trust in last-mile banking. Then came mobile banking and agent banking pilots. In the former mobile vans fitted with ATMs were driven in the hinterlands for enabling banking in the last mile. With increased penetration of mobile phones and connectivity in rural areas, local youth equipped with a basic mobile phone, loaded with a light software application, and a biometric device were employed as banking agents. The latter was found to be the most cost-effective and scalable model. With RBI permitting for-profit companies to act as business correspondents, Sub–K was launched as one of the first real-time micro-banking platforms in 2010.
- What are your key product offerings?
Sub–K started as a savings-centric model an entry point strategy wherein the objective was to enable a large number of unbanked rural population to open savings bank accounts and to perform basic banking transactions at the village level. A tech platform was built in-house that can perform real-time banking transactions using a feature phone and facilitated by agents deployed on behalf of banks. After successfully enrolling more than a million households on the liabilities side, microcredit was added to the product mix as a response to market need and thanks to early experiments by BASIX and its non-profit subsidiary Indian Grameen Services. Later MSME loans and micro-insurance have been added. Currently, Sub–K offers a suite of financial services – savings, payments, credit, insurance, and pensions through an assisted Fintech model.
- How do you plan to link the rural and urban populace with banks?
Sub–K is building a digital banking platform that will function as a financial services marketplace for underbanked rural and urban households. The goal is to offer a wide choice of products, starting from loans followed by other financial products, and deliver in the most efficient manner through the most convenient Digi-touch interfaces through this platform. We call it SARTHI – Seamless, Accessible Resourceful and Tech-centric Hybrid Interface.
SARTHI means Charioteer in Sanskrit, indicating the availability of assistance at every stage of the customer journey. Sub–K is hence built as an omnichannel Fintech. Sub–K Pay and Sub–K Vriddhi are B2C digital applications which allow customers to apply for loans and repay EMIs with ease. Sub–K Assist and Sub–K Mitra are salesforce applications built for easy customer on-boarding and servicing by feet on the street personnel and agents respectively. Many other digital enablements have been built as a part of SARTHI to support seamless customer journeys. The goal is to be a leading and preferred financial services platform that efficiently connects the bank with underbanked customers.
- What is the potential of the Indian rural economy for the FinTech industry?
Rural India is the next frontier of growth. Currently, more than 75% of rural households own a phone and more than 50% a smartphone. Data democratization is already taking place. With the power of phones and data, the rural economy is poised for unprecedented transformation. We are already seeing signs of this change in a more profound manner than expected. One example is how rural poor women are repaying their microfinance EMIs through Apps and QR codes.
In Sub–K’s ecosystem, the change happened in a matter of 18 months from 100% of borrowers repaying in cash to 25% permanently shifting to digital and another 25% switching between cash and digital based on convenience. This trend is phenomenal because this segment is considered the most difficult and last to adopt. We are expecting that 80% of them will choose to adopt digital payments and at least 50% of these will demand fully digital loans in less than 2 years. We are getting ready for this unfolding.
The potential for FinTech in propelling the rural economy is huge but it is very important that Fintech firms understand the sensitivities involved in dealing with this segment. Their privacy and protection are more critical than in urban areas given the low literacy levels and limited awareness of recourse mechanisms.
- What’s the pipeline for 2022 and beyond for Sub–K?
2022 would be the year of transformation for Sub–K. With Covid-19 behind us, hopefully, and all the lessons learned to deal with the crisis, we are ready to hard launch our new avatar, glimpses of which were introduced in our decennial celebrations in August 2020. Sub–K is poised to disrupt the industry its parent BASIX has helped create.
This year we are testing several ideas in the quest toward reimagining microfinance in a fully digital environment through an ambitious project christened ‘ReMiDE’ (pronounced as Remedy indicating the need to fix the traditional business practices). The next phase would be to apply these treatments in unsecured MSME and Agri lending domains, followed by micro-housing and personal loans, preparations for which are already done.
In near future, we will integrate savings, insurance, investments, and value-added services in the platform. By 2025 we would have facilitated more than INR 10,000 crores in loans and served more than 10 million customers, the majority being women and rural residents. Sub–K aspires to become India’s first truly digital micro-banking platform in India and spread its success to other developing economies.
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