Why this MIT graduate is building a digital banking platform for the poor

Sema Prem was born into an army family, and having spent her childhood in some of the most remote corners of India, she grew up determined to work to reduce the inequalities she witnessed on the move.

After graduating in engineering and business, in her first job, Seema was part of a team that launched mobile services in South India, and she still enjoys remembering that the first call mobile passed through his hands in the late 90s.

Later, the desire to solve some of the world’s most pressing challenges prompted her to pursue a scholarship for Massachusetts Institute of Technology (MIT), UNITED STATES. Working on a financial exclusion project at MIT, the opportunity for transformation presented itself.

During her project, Seema learned that more than 50% of the world’s population is unbanked, confirming that the the financial inclusion space was a huge untapped opportunity. She decided to leverage her experience in mobile services to solve this problem and submitted a business idea to the MIT100K entrepreneurship competition. Administered by the institute, the contest is a series of distinct and increasingly intensive competitions that students and scholars from MIT and the Greater Boston area attend to pitch their talent and ideas.

Seema won the Finalists position in the contest, which led to the birth of the Gurugram-based banking services company FIA World in 2012. Initially, Seema co-founded the company with Sameer Mathur, who was also at MIT, but Sameer is no longer with the organization.

The FIA ​​is working on supported banking services and is partnering with financial institutions to set up bank outlets across the country, which are staffed by micro-entrepreneurs from the local community who are appointed by the FIA ​​after a rigorous verification process.

What are these outlets for?

Operating as a mini bank branch, FIA outlets, also known as (aka) Customer Service Points (CSP), are equipped with a laptop computer, a biometric device and a printer. Using internet connectivity, CSPs are connected in real time to the bank’s core banking solution and operated by a banking mitra, aka business correspondent or banking agent.

It is here in the CSPs that the unbanked can walk in and perform basic financial transactions in real time. As it is biometric, it is also completely secure. Before starting any banking transaction, the banking agent is given a digital wallet that they must fund. When collecting deposits from customers, the amount is deducted from the agent’s wallet and when it reaches 0, the agent cannot collect any more deposits. Similarly, the amount of the portfolio increases with

cash given to customers.

“Given the rapidly changing behavior of customers towards the ownership of their financial transactions, which has been stimulated by the pandemic, the FIA ​​is building a mobile banking platform called FINTAP, which will bring together more than 20 financial services,” says Seema.

According to her, the products are complex in nature and difficult to understand or adopt in their current form by her customer segment – those with low education, low incomes and limited mobility.

“We are first working on redesigning the product to make it smaller. These are then offered in an automated and paperless way, often in 123 simple clicks to ensure faster adoption. For example, our clients save too much and invest very little, resulting in negative real returns. They save either in fixed deposits or in illiquid financial instruments like real estate and gold. We worked with a fund house to redesign mutual funds with the needs of the poor in mind – tiny payouts as low as Rs 100, variable payouts based on their cash flow and paperless registration,” says Seema.

Pandemic and growth

During the pandemic, FIA centers have been vital links that have continued to provide uninterrupted banking services and have banked over 2 million people (mostly women), disseminated vital covid information to over 30,000 villages and distributed $20 million in cash assistance to people in need. most.

Which explains why the company managed to achieve all impact results and metrics, and would have remained profitable despite the challenges and lockdowns that followed due to Covid.

“Nearly 45 million people have done business with us, more than 50% of whom were women. For FIA customers, it’s not just a number, but a way out of poverty. It is about financial empowerment and security. The crisis has validated the strength of our business model and its resilience in the face of the pressure of a global pandemic,” says Seema.

The early months of the pandemic saw many women excluded from the labor market, and Seema says the FIA ​​is now actively working to increase the number of female entrepreneurs as bank agents. “The company also offers targeted lending solutions for women-led micro-enterprises,” adds Seema. Today, FIA is a team of over 200 employees.

At the bar

In addition to Seema, the FIA ​​core team includes Biju Balakrishnan, chief technology officer (CTO), Deb Shanker Mukhopadhyay, chief strategy officer, and Rahul Yajnik, who heads up sales.

“Early in our growth, we received two grants of $350,000 each from the World Bank and the Millennium Alliance. This helped us scale our business quickly and grow to a certain size, which ensured its sustainability. FIA’s roadmap includes transitioning from an assisted bank to direct customer ownership of the last mile, setting up operations in Bangladesh and starting our lending operations to bridge a critical funding gap for businesses run by women. For this, we will raise funds in the short term,” says Seema.

As for the competition, there are other startups like Arth in this space. As early as last year, Arth had supported micro-entrepreneurs with capital for their multiple needs. It has over 3.5 lakh unique customers in over 18,400 PINs.

The FIA’s main source of income is the commissions it receives from banking partners for each transaction carried out at points of sale. There is a one-time registration fee and then a chargeable fee for each transaction. Partner financial institutions also offset marketing costs associated with delivering financial literacy programs and product training.

“Our centers are in underserved areas, which gives us near exclusivity. This guarantees constant attendance at our centers, guaranteeing stable and recurring income. Our extensive distribution network and growing customer base make us very attractive to new financial service providers. This allows us to inject new products into our network and, as our customer acquisition costs increase only slightly, this translates into greater efficiency and better profits. Our existing banking partners also view us as a strategic, outsourced extension of their operations, and they enter into multiple agreements that ensure growing revenues, strong relationships and brand loyalty,” says Seema.

In addition to income from banking partners, the FIA ​​also charges agents a one-time subscription fee for using the platform. The team declined to share the fee and the amount of the fee.

Future plans

Seema is convinced that the fintech journey of the FIA ​​is also about integrating the power of AI and machine learning to create financially independent and empowered individuals.

According to her, although there are more than a billion bank accounts, more than 85% of the accounts are used only for cash transactions. Moreover, Indians save too much and invest too little – essentially giving negative real returns.

The unbanked population in India also suffers from sub-optimal asset allocation – livestock, gold, real estate and less than 1% invest in capital markets. In addition, out-of-pocket health expenses push more than 100 million people into poverty each year due to lack of health coverage, Seema shares.

“The FIA ​​plans to fill this gap by creating the largest digital platform for the poor. FINTAP is a technology solution that will offer all financial services on a single platform, meeting all the financial needs of the poor – basic banking services, conducting digital transactions, creating jobs through lending solutions, creating wealth and investment and insurance protection. Our goal is to create one million jobs, over $10 billion in savings and over 100 million customers,” says Seema. What remains to be seen is whether the company’s feet-on-the-street approach will get it to those numbers.