Benefits of Eko India Financial Services

Introduction

EKO India Financial Services is an Indian Fintech company founded in 2007 with the mission of enabling any financial transaction for anybody from anywhere. It is a Business Correspondent (BC) and has also been issued a PPI license from RBI. It provides one of the largest and most efficient domestic money transfer services in the country in collaboration with banks like SBI, ICICI, Axis Bank, etc. It also provides no-frills bank accounts, deposit, and withdrawal services (nearly 80% of whom are migrants or the unbanked section of the population) through mobile banking. EKO has developed a portal “CONNECT” to service ‘Cash’ customers through this platform.

Business Model

They have mainly two businesses:

• API Business: It aims to deliver customized payment solutions to its customers. For this, the company has built powerful REST APIs that other organizations can leverage. The company also provides Domestic Money Transfer APIs which it carries on separately as its API business. In this business, it does not provide its portal but just the money transfer services through integration with API partners’ websites. The company is a pioneer in providing APIs. It will also soon start to sell IMPS APIs, Verification APIs, EKYC APIs, Recharge APIs.
• Retail Business: Here, it has built a technology-driven retail network to offer seamless money transfer and payment services through its state-of-the-art Portal “Connect”.

There is no control over how much the merchants charge on each transaction, which is a drawback and discourages people from using the DMT services. However, this service is extremely necessary for the target audience. For merchants registered in Haryana, only CGST and SGST are charged, and for other merchants all over India, IGST rates are applicable.

Core Business Value Chain

Product: The company is bringing a new product, i.e., Biometric enabled e-KYC and Aadhaar Enabled Payment Systems (AEPS), which is essential in today’s time considering the linkage of Aadhaar with every transaction. It will also save the company some amount and increase its profit margin per transaction. Transactions done through e-KYC reduce the costs incurred on bank charges by 30% (for non-KYC, it is Rs. 2.5 per transaction, for KYC, it is Rs. 1.75 per transaction). The company also enjoys the first-mover advantage for bringing in Cash withdrawal facilities at its Customer Service Points (CSPs), which are local kirana stores through AEPS.

Customer Base

Target customers include low to middle-class people, with an income of 10,000-50,000 monthly in cash. It has 20,000 outlets in 101 cities, mainly based in urban areas, including Delhi, Mumbai, Chennai, Hyderabad, Bangalore, Lucknow, Kanpur, and Jaipur, as these cities have most of the remittance transactions.

Services Supply Chain

Technology Used: The revenue model of the company is through commissions which we studied closely by going through transaction details. GST is applicable as the services industry component. The company charges a commission of 6% on every transaction, which is higher than other players in this segment. The services provided by Eko Financial Services are above par, and there is zero server downtime, due to which it has become the favorite method of transaction among the merchants.

This was done through reconciling transactional data. The total number of transactions from a single BC in a month was more than 2 lakh. The data could be extracted for analysis from the company administration portal in CSV format, which can be opened in Excel. The data was arranged by Retailer ID, which is unique for every retailer. The API partner data was also sorted, and this whole data was split into two different files for separate analysis.

Then the data was put on a pivot table, and the sum of transactions of retailers was taken to reduce the repeat retailer IDs. We got the total amount of transactions happening through the Eko portal, which came out to be an enormous more than 30 crore every month. We multiplied it by 0.6 and obtained the revenue of the company.

Acquisitions/Investors

Business and Traction: Eko, which runs a two-tier network involving distributors and retailers, charges its customers 1.5% commission. Of that, the distributor and retailer pocket close to 1.2%. The rest 0.3% comes to Eko. In 2016, it posted a top line of Rs 75 crore, of which around Rs 65 crore went to distributors and retailers. Eko’s net revenue was Rs 10 crore.

Challenges Faced

The main challenge lies in making the banking services available to these migrant workers. Also, the acceptability of these workers by the institutions poses a great challenge. The workers face social and financial exclusion and also have to make their way to be accepted in the banking environment.

The first challenge is the access to the formal financial environment, which includes the problem of KYC of these workers, which is very difficult in their case due to lack of IDs or Address Proofs. There is also an institutional challenge, which includes inadequate technology and lack of human capital required to carry out these small transactions, which pose a threat to bank profitability and make the risk management of these transactions cumbersome.

A social challenge is a challenge related to mindset, for example, a security guard shooing away a worker who has come to an urban branch to remit money. All these challenges at the individual, regulatory, and institutional level need to be tackled to support the remittance market in India.

Competitors

• ItzCash
• Oxigen
• GI Technology
• Airtel Payments Bank
• Paytm Payments Bank

Conclusion

Benefits of EKO include minimum capital expenditure, customer-friendly technology, very less manpower, and uses a transaction process that is virtually the same as that used by MNOs in their operations. An inbuilt grievance redressal system is available for negative feedback. Except for its financial unsustainability, it is a flexible and robust system. It meets the requirements of the people as financial inclusion is important for their growth and development.

References

• EKO India Financial Services. (n.d.). Retrieved from https://www.eko.co.in
• Reserve Bank of India. (n.d.). Retrieved from https://www.rbi.org.in