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 also has been issued PPI license from RBI.
It provides one of the largest and the 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 unbanked section of the population) through mobile banking. EKO has developed a portal “CONNECT” to service ‘Cash’ customers through this platform.
They have mainly two businesses –
API Business: It aims to deliver customised payment solution 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. But on the upside this service is extremely necessary for the target audience. For merchants registered in Haryana only CGST and SGST is charged and for other merchants all over India IGST rates are applicable.
Core business value chain
The company is bringing a new product i.e. Biometric enabled e-KYC and Aadhaar Enabled Payment Systems (AEPS) which is a must 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. .
Target customers include low to middle class people, with income of 10000-50000 monthly in cash.
It has 20000 outlets in 101 cities. Based mainly 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
Revenue model- 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 the 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 favourite method of transaction among the merchants.
This was done through reconciling transactional data. Total number of transactions from a single BC in a month was more than 2 lakh. The data could be taken out 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 a 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 were taken so as to reduce the repeat retailer IDs. We got the total amount of transactions happening through 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.
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.
The main challenge lies in making the banking services available to these migrant workers. Also, acceptability of these workers by the institutions possesses 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 include 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 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 makes the risk management of these transactions cumbersome.
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.
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Paytm Payments Bank.
Benefits of EKO include minimum capital expenditure, customer friendly technology, a very less manpower and uses a transaction process which is virtually same as that used by MNOs in their operations. And also a grievance redressal system is inbuilt for negative feedback. Except for its financial unsustainability it is flexible and robust system. It meets the requirements of the people as financial inclusion is important for their growth and development.