India Post – Financial Services Increasing revenues …documents.worldbank.org/curated/en/698191468269661432/...India Post – Financial Services Page iii Mzansi money transfer offered

India Post – Financial Services

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India Post – Financial Services Increasing revenues for India Post through expanding channeling of financial services*

*connectedthinking

June 2008

“Final Draft Report” Prepared under the World Bank Technical Assistance to India Post

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Executive summary The Indian postal network is among the largest networks in the world in terms of area covered and population served, and constitutes an important mechanism of achieving transportation and communication. India has the largest postal network in the world with 1,55,333 post offices (2006-07) of which 89% are in the rural areas. Within India Post, the Post Office Savings Bank (POSB) is one of the oldest and largest financial institutions (with largest deposit base) in the country. The key objective of POSB is to provide people living in rural, semi-urban, remote and inaccessible areas of the country with an easy and reliable means of making investments, making remittances and operating savings accounts. POSB has a customer base of 162 million account holders with annual deposits exceeding Rs. 1,600,000 million and a branch network of 1,54,000 branches, which is double the size of all banks in the country put together. Products that are retailed from the post offices across the country include Savings Account, Recurring Deposit, Time Deposit, Monthly Income Scheme, Public Provident Fund, Senior Citizens Savings Scheme, Kisan Vikas Patras and National Savings Certificates. Over the years POSB has gained lot of mileage in the financial services sector, essentially due to better rate of interest on deposits and/or lower fees, very large network and better locations and years of trust and integrity. POSB heavily relies on Government-related income, for which there is little to no cost-related tariff-setting or market orientation: only 4% of revenues derived from financial services are not related to Government services. It is of strategic importance for POSB to increase market-based revenues so as to gain better control of its market-orientation and revenue structure. In addition, though POSB still retains competitive advantages over commercial banks, it will not be long before the competition replicates these advantages. Hence, in order to better leverage the vast network of the post offices and huge customer base, India Post requires evaluating the introduction of a wide range of products and services in the financial services area. This will also lead to improvement of the earnings from savings related products vis-à-vis the total earnings. Based on the overview of Indian banking industry, the following are the business drivers for potential opportunity areas for India Post -

• Banks (e.g. foreign, private banks) lack the network infrastructure to reach under-served segments in semi-urban and rural areas

• There is a demand for expansion of financial service offerings by the post office

Market Opportunities Study of global postal operators Worldwide, the global postal services operators are offering financial services under various schemes, and all of them propose money transfer operations. This segment is today highly competitive with several private sector money transfer operators developing niche services for specific corridors and expatriate populations. New technologies is nowadays pushing card-based and mobile-based money transfers solutions, making money transfers faster, cheaper, more accessible and more reliable. Three basic models emerged under card-based money transfers: the card to cash transfers in which the recipient does not have a card of his own, an easier option for remittances to regions in which card use is less ubiquitous, or to rural areas that do not have ATMs (e.g.


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Mzansi money transfer offered by Post Bank, South Africa); the card to card transfers (e.g. CashPlus service offered by UK Post Office); and the cash to card transfers in which the sender purchases and sends a prepaid debit card to the recipient (e.g. CashHome service offered by Singapore Post). Under mobile based money transfers, mobile banking and mobile payments emerged as the commonly used models by various banks globally. These services are currently not being offered by any postal service operator in developing countries, mostly due to upfront investments and human resources capacity building involved. Intra-India migration analysis An analysis of the intra-India migration pattern provides an indication of potential target regions for money transfer products (assuming that migration in a substantial proportion of cases leads to remittance of money back to the place of origin). Some of the key findings are:

• There has been a steady increase in the number of migrants in India over the past few decades (230 millions in 1991 to 307 millions in 2001), employment being the most common reason for migration (38% for males and 3% for females)

• A large percentage of migrants moving for employment are migrating from rural to urban areas of states with higher per capita income and more employment opportunities

• Top 5 states with highest net migration numbers (UP, Bihar, Andhra Pradesh, Tamil Nadu & Rajasthan) contribute to more than 50% of total migration

• Maharashtra witnessed largest in-migration of population during the last ten years from different states, with employment being the primary reason

• There is a significant number of migrants from Uttar Pradesh and Bihar moving to Punjab, primarily for employment

Using this analysis of the domestic migration pattern, India Post can identify key focus geographies (both at the source and destination) to effectively tap the domestic money remittance market. For example, Tamil Nadu, which has the highest net out-migration, could be one of the focus ‘destination’ geography. Similarly, Maharashtra with the highest net in-migration could serve as the focus ‘source’ geography. In addition to this, India Post can explore cross-selling opportunities both at source and destination by analysing use of remittance money. Other opportunities for India Post Based on the analysis of the operating environment of India Post financial services, financial products and services in the market (offered by global postal operators, domestic and foreign financial services players) and intra-India migration pattern analysis, some products and services which will help India Post increase its revenues have been identified. Some of these products and services have been introduced as localized initiatives by individual circles. However the experience of these local initiatives needs to be shared and based on India Post’s experience rolled out to other locations. Considering this, the following list of products and services for evaluation were identified –

• Quick cash to cash money transfer (combining features of traditional MO and iMO)


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• Correspondent banking (savings products and advances) • Card based money transfer (card/cash to card; Card to cash) • Mobile services (mobile payments; mobile banking) • One to many money transfer • Many to one money transfer • Mutual fund distribution • General insurance distribution

Prioritized product offerings for India Post The identified products and services for introduction were evaluated based on their business benefits and ease of execution. Business benefits were measured as a function of revenue potential (based on market size and market growth) and competitive edge (based on access to customer base and reach, ability to leverage brand and service responsiveness). Ease of execution was evaluated based on investment required, skills to execute and process implications. Further, based on prioritization and technology capability required for India Post to launch new financial products and services, we identified three services which should be rolled out on a priority basis. The short listed services include –

• Quick cash to cash money transfer (QCC): In this service, India Post IT network will be leveraged to transmit money transfer information to interconnected PO (similar to iMO) closest to destination and then sent further like a traditional MO. To launch this service India post will have to – o Identify locations where this service can be rolled out based on current state

of technology infrastructure in the post offices and target customer mapping o Redesign processes to transfer money transfer information electronically to

interconnected post offices (develop detailed process flows for part online money transfer, study as-is process for paper based money transfer and incorporate elements of online money transfer to the existing process)

o Design and implement to incorporate a module in the existing online money transfer application to accept payment, send money transfer information to the nearest interconnected post office & retrieve and sort money transfer information sent from different post offices

o Train operators to accept payments, retrieve and sort money transfer information and send money transfer request (identify batches for training and develop training calendar for all the batches)

• Correspondent banking (savings products): India Post to render services on behalf of a financial institution. For example,

o Making deposits to and withdrawals from savings accounts of correspondent banks/FIs

o Receipt and forwarding of banking instructions - proposals for opening demand, term and savings accounts etc.

To launch this service India post will have to – o Identify and evaluate potential partners on the basis of brand, reputation,

reliability, partner proposition, profitability and target consumer mapping o Establish terms of engagement (service levels, commissions) with the

partner


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o Ensure that post offices are equipped to manage the expected cash inflow and outflow

o Monitor project and staff progress and ensure if business benefits are realized

• Many to one bulk money transfer (MTO): This is money transfer from multiple customers to one entity. Some of the many to one bulk transfer services are -

o Collection of loan EMIs (offered by players like New Zealand Post) o Collection of bill payments (offered by players like Australia Post, UK

Post Office, New Zealand Post, South Africa Post Office, Japan Post) o Collection of regular investments etc. (offered by players like Australia

Post, UK Post Office) To launch this bulk money transfer service India post will have to –o Identify and evaluate potential partners on the basis of brand, reputation,

reliability, partner proposition, profitability and target consumer mapping o Establish terms of engagement (service levels, commissions) with the

partner o Identify and train staff for relationship managers and operations managers

(identify batches for training and develop training calendar for all the batches)

o Ensure that post offices are equipped to manage the expected cash inflow o Train employees for functions of clearing and settlements and preparing

MIS (identify batches for training and develop training calendar for all the batches)

Financial projections The business plan developed for the short listed products and services indicates that India Post can increase its top line by INR 1634 millions in year 1. The current revenues from other financial services (apart from savings and MO products) are around one fifth of the revenues estimated from these three services in Year 1. A snapshot of cash flow projections for the realistic scenario is shown in the table below –

Nil #Nil #Nil #Nil #Nil #Correspondent banking (savings products)

Current revenues from other financial services (apart from savings and MO products) is ~ 20%* of the revenues estimated from new services in Year 1

3434342525Total

2121212525Many to one money transfer

(3,668)(3,682)(2,293)(1,006)-Quick cash to cash money transfer**

Year VYear IVYear IIIYear IIYear IProduct

Incremental expenses (INR million)

43483451274021191634Total

1060984909832757Correspondent banking (savings products)

2,9712,1781,5691,103746Many to one money transfer

317289262184131Quick cash to cash money transfer


Incremental revenues (INR million)



3434342525Total





43483451274021191634Total






*Assuming 25% of the other revenues comes from other financial services (apart from savings and MO products); Staff expenses are not considered

**Quick cash to cash money transfer will result in cost savings i dicated in the table above; Additional Staff expenses not c idered.


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Key success factors for India Post financial services Looking at the financial services industry in India and the existing opportunities for India Post, the key success factors that emerged for India Post’s future direction in financial services is – Distribution spread

• Leverage large customer base and nation-wide reach, with presence in remote locations particularly in rural areas for own product offerings

• Evaluate tie-ups with banks, NBFCs, mutual funds & insurance companies, which lack the network infrastructure to reach underserved segments in semi-urban and rural areas, to provide them wider access for a range of offerings

Product management • Proactively sell postal financial products (e.g. extend iMO locations), undertake

product sequencing and bundling • Set up a product management function and define a product manager role focused

on ongoing interaction with customers, channels and partners to promote sales and identify/mitigate any bottlenecks

Customer centricity

• Undertake customer segmentation, analyse customer segment profitability and identify primary and secondary customer segments to target

• Develop tailored strategies for sales and service and focus on cross-selling to grow wallet share

Employee training • Assess training needs (technical and soft skills) • Measure training effectiveness and ensure coverage of a wider base of employees

IT enablement • Identify opportunities to use IT as an enabler to support operations, business

growth and customer analytics • Review solution architecture and identify coverage of IT applications to meet the

business requirements of postal financial services • Implementation and rollout of applications in a phased manner (e.g.

computerization of post offices; extension of iMO to other locations)

Next steps and key challenges The identified initiatives i.e. Quick cash to cash money transfer, Correspondent banking (savings products) and many to one money transfer would need to be implemented on a pilot basis. For the purpose India post would need to identify project owners, identify locations for pilot, redesign processes, provide training, and Identify & evaluate potential partners for implementation. India Post will also need to establish the reporting structure of program management which will monitor implementation of key initiatives identified during different phases of the engagement. To smoothly and effectively launch the identified services, India Post will also have to address some key challenges. These include –

• Managing cash requirements at post offices


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o Address existing shortfall of cash at post offices o Incorporate additional supply and demand of cash due to increased volumes

from identified products and services • Creating required pull (through customer awareness and service quality)

o For quick cash to cash and many to one money transfer services, attract consumers to the post office

• Pushing identified products and services to achieve sales targets o Drive sales o Monitor performance


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List of abbreviations AUM Assets Under Management BSE Bombay Stock Exchange CRR Cash Reserve Ratio DD Demand Draft EFT Electronic Funds Transfer FTE Full Time Equivalent HNWI High Net Worth Individuals HP Hire Purchase ICD Inter-Corporate Deposits iMO Instant Money Order IRDA Insurance Regulatory and Development Authority LIC Life Insurance Corporation MACS Mutually Aided Co-operative Societies MCA Ministry of Company Affairs MIS Monthly Income Scheme MO Money Order MTO Many to One money transfer service NBFC Non-Banking Finance Company NSC National Saving Certificate NSE National Stock Exchange OTM One to Many money transfer service PCARDB Primary Cooperative Agricultural and Rural Development Bank PLI Postal Life Insurance PNB Punjab National Bank POSB Post Office Savings Bank PPF Public Provident Fund RBI Reserve Bank of India RCB Rural Co-operative Bank RD Recurring Deposit RNBC Residuary Non-Banking Company RPLI Rural Postal Life Insurance RRB Regional Rural Bank SBI State Bank of India SCARDB State Cooperative Agriculture and Rural Development Bank SCB Scheduled Commercial Bank SCSS Senior Citizen Savings Scheme SEBI Securities and Exchange Board of India SEC Socio-Economic Classification SME Small and Medium Enterprises TD Term Deposit UCB Urban Co-operative Bank QCC Quick Cash to Cash money transfer service


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Table of contents

1 Background ................................................................................................. 3

1.1 Post Office Savings Bank (POSB) ......................................................... 3

1.2 Need for new financial products/services............................................... 4

1.3 Threat to POSB’s competitive advantage .............................................. 4

1.4 International trends in postal banking services ...................................... 5

2 Our approach and methodology................................................................ 7

3 Overview of Indian financial services industry ........................................ 9

3.1 Banking industry .................................................................................. 10

3.2 NBFC industry...................................................................................... 16

3.3 Insurance industry................................................................................ 21

3.4 Mutual funds industry........................................................................... 28

4 Assessment of India Post’s financial products and services ............... 32

4.1 Performance of financial products and services .................................. 32

4.2 Evaluation of existing financial products and services ......................... 41

4.3 Assessment of current business and operating model......................... 43

4.4 India Post’s strengths and weaknesses ............................................... 46

4.5 Key themes emerging for India Post’s financial services business ...... 47

5 Money transfer products .......................................................................... 49

5.1 Global innovations in money transfer products .................................... 49

5.2 Assessment of domestic money transfer products............................... 55

5.3 Intra-India migration pattern................................................................. 58

6 Evaluation of identified financial products and services ...................... 68

6.1 Evaluation framework .......................................................................... 69

6.2 Potential products and services evaluation.......................................... 70

6.3 Mapping of products to evaluation parameters .................................... 76

7 Strategic plan for India Post’s financial services................................... 78


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7.1 Operating model .................................................................................. 78

7.2 Target customer segments .................................................................. 83

7.3 Distribution channels............................................................................ 86

7.4 Partnerships......................................................................................... 89

7.5 Product marketing................................................................................ 91

7.6 Product management approach........................................................... 91

7.7 Cross-selling ........................................................................................ 92

7.8 Product bundling.................................................................................. 93

7.9 Training................................................................................................ 93

8 High level business plan for new products and services...................... 94

9 Pilot implementation plan ........................................................................ 95

9.1 Quick cash to cash money transfer...................................................... 95

9.2 Correspondent banking (savings products) ......................................... 95

9.3 Many to one money transfer ................................................................ 96

9.4 Challenges........................................................................................... 97

9.5 Project management and monitoring ................................................... 98

9.6 Change management ........................................................................ 100

10 Annexure I – Discounts on money orders ............................................ 102

11 Annexure II – Financial projections....................................................... 104

11.1 Quick cash to cash money transfer.................................................... 104

11.2 Many to one money transfer .............................................................. 104

11.3 Correspondent banking (savings products) ....................................... 108


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1 Background The Indian postal network is among the largest networks in the world in terms of area covered and population served, and constitutes an important mechanism of achieving transportation and communication. India has the largest postal network in the world with 1,55,333 post offices (2006-07) of which 89% are in the rural areas. At the time of independence, there were 23,344 post offices, which were primarily in the urban areas. Thus the network has registered a seven-fold growth since independence; the focus of this expansion is primarily in the rural areas. On an average, a post office serves an area of 21.13 sq. km. & population of 6,615, thus providing wide reach.

Number of Post Offices

Source: India Post annual report (2005-06); PwC analysis

The focus of this report is on India Post’s financial services.

Post Office Savings Bank (POSB)

The POSB is one of the oldest and largest financial institutions (with largest deposit base) in the country. The Post Office Savings Bank Scheme is an agency function performed by the Department of Posts on behalf of the Ministry of Finance, Government of India. The Ministry of Finance remunerates the Department of Posts for the Savings Bank work at a rate fixed from time-to-time. The key objective of POSB is to provide people living in rural, semi-urban, remote and inaccessible areas of the country with an easy and reliable means of making investments, making remittances and operating savings accounts.

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Urban

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Post Office Savings Bank has a customer base of 162 million account holders with annual deposits exceeding Rs. 1,600,000 million and a branch network of 1,54,000 branches, which is double the size of all banks in the country put together. Products that are retailed from the post offices across the country include Savings Account, Recurring Deposit, Time Deposit, Monthly Income Scheme, Public Provident Fund, Senior Citizens Savings Scheme, Kisan Vikas Patras and National Savings Certificates.

Need for new financial products/services

In order to better leverage the vast network of the post offices and huge customer base, India Post is evaluating introduction of a wide range of products and services in the financial services area. India Post has experienced a need to re-examine its role and business activities in today’s changing environment.

Threat to POSB’s competitive advantage

POSB still retains competitive advantages over commercial banks, but it will not be long before the competition replicate these advantages. Better rate of interest on deposits and/or lower fees: With investments in technology and other areas, similar rates on deposits and the possibility of reduced government subsidies in the future, the costs and interest rate structure of POSB will be more similar to those of other banks. Profit margins will be difficult to maintain without managing the cost of outlets, delivery costs and staff. Competitive new products carry higher interest rates, such as certificates of deposit, and the POSB will need new expertise to sell more complex products. Very large network and better locations, notably in areas where population density is low: If the POSB branches can maintain a presence area which cannot be matched economically by large branch banking systems, they will retain outlet superiority in small towns and villages. POSB will then be in a position to become a fee-based distributor of products and services from banks and other financial institutions. The task over here is


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for the POSB to assess the value of its network and decide the role it wants to play in the alliances formed. Years of trust and integrity: Despite increasing fees, new competitors and higher interest rates paid by non-branch banks, the POSB’s image and reputation for trust and integrity will remain. The POSB can leverage its brand to win more business.

International trends in postal banking services

Financial services generate almost half of all revenue for postal operations in the Asia and Pacific region. Privatisation, competition and infrastructure have been the major drivers of change in the postbanks in the western world. Many of the postbanks are simultaneously undergoing privatisation and technical modernisation to ensure a focus on profitability, to enhance services and to place a greater emphasis on sales. In some countries, such as the UK, the Postbank has been purchased by a local bank. The sales and delivery model of most postbanks is to sell postbank products through post office outlets. However, in countries where privatisation of postbanks is occurring, post offices are demanding high fees from postbanks for the right to use their postal counters as a delivery channel. This in turn forces postbanks to pass on the fees, decreasing their price competitiveness.

Revenue source for postal operators

66%

63%

66%

43%

40%

32%

23%

22%

9%

6%

4%

14%

2%

11%

14%

24%

28%

45%

9%

4%

11%

27%

28%

9%

Latin America & Carribean

Industrialised Countries

Africa

Europe & CIS

Arab Countries

Asia & PacificLetter post

Postal parcels &logistics services

Postal financialservices

Other products

Source: UPU, Berne, 2006

Though most of the postal operators still provide basic financial services, the more sophisticated amongst them are increasingly going in for more other products and services. This however, has often been on the back of close technical collaboration with financial institutions. To manage sophisticated financial products, most of the postal operators have developed alliances with financial institutions. For example, New Zealand Post has a tie-up with Western Union and Travelex, Singapore Post has an alliance with Prudential, GE Money and Prudential Asset management. UK Post has a similar arrangement with Moneygram International.


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Financial products & services provided by postal operators could be categorised under five broad heads:

Postal operators usually offer these products and services as its own products or as a distributor of third party products.

Financial products and services offered by global postal operators


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Approach and methodology A structured, phased approach to assist India Post was adopted in developing a strategic plan and a detailed roadmap to improve and diversify its current offerings of financial products and services. The focus has been on expanding the scope of domestic money transfer operations based on an analysis of the Indian financial services market and global experiences of other postal operators. Our overall framework for this engagement could be summarised as below: The phased approach to assist India Post in developing the strategic plan and a detailed roadmap comprised of the following key areas:

• Review of postal financial services and proposition for new offerings • Review of domestic remittances • Formulation of strategy, business and pilot implementation plan


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PwC’s approach for developing a strategic plan for India Post

We have adopted a joint project team approach where we identified, discussed and developed recommendations working alongside the India Post and World Bank team. Our approach was supported by secondary research as well as meetings with a representative section of stakeholders, to ascertain their expectations. We have also taken inputs from PwC’s global financial services experts as applicable to develop ideas and validate recommendations for India Post’s strategic direction.


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Meetings with key stakeholders of India Post

CGM

Mr. S Samant, Business Development & Marketing

Ms. S Trivedi, Postal Life Insurance

DDGs Ms. R Handa, Ms. D. Kumar, Mr. M. Kumar, Mr. A. Srivastava Postal Financial Services

Director Mr. PK Swain, Postal Financial Services

Mr. V.K. Gupta, Technology

ADG Mr. Rajkumar Mr. Srivastava Mr. Natarajan

PO Circles Madhya Pradesh (Bhopal) Bihar (Patna) Uttar Pradesh (Allahabad, Varanasi) Maharashtra (Mumbai GPO)

The key discussion areas in the stakeholder meetings were as follows: Macro-economic and competitive environment

• Key business trends • Impact of regulations on India Post • Identification of India Post’s key competitors and their focus areas • Assessment of India Post’s competitive positioning

Assessment of India Post’s financial services business and operating model

• Customer segments served • Products and services offered • Distribution channels deployed • Operating model (people, process, IT) • Brand and image perception • Leverage of alliances

Overview of Indian financial services industry


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The Indian financial services could be categorized under following five heads: Keeping in mind the relevance of these sectors for India Post, we have discussed banking,

NBFCs, insurance and mutual fund industry (within investment management) in this report.

Banking industry

Overview

In the Indian banking industry, the public sector banks still have a majority share (65% deposit share and 61 % advances share). The new private sector banks have the second largest share (at 12% in deposits and 13% in advances). The key categories of players are:

Structure of Indian banking industry


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All figures for 2005-06; RCB figures for 2004-05

Source: RBI; PwC analysis

In comparison, India Post has deposits of INR 4,59,000 crore (source: India Post annual report 2006-07). The new private sector players have shown better performance in the growth of advances during 2001-06 period. The public sector banks have sustained good above average growth in advances.


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Growth and market shares in advances by category

S

ource: RBI; PwC analysis

The State Bank Group has achieved above average growth while having the largest advance base. Among the private players, ICICI Bank is an aggressive player with good growth in advances despite large advance base.

Growth and market shares in advances by players


The growth in deposits (2001-06) has also been the highest for the new private sector players. Growth in deposits for new private sector banks and urban co-operative banks has led to an increase in their market shares. Market share in deposits of old private


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sector banks and RRBs has declined between 2001-06 and market share of foreign banks has not changed much.

Growth and market shares in deposits by category

S

ource: RBI; PwC analysis

New private sector players like ICICI Bank, HDFC Bank etc. have shown impressive growth in deposits. Other banks are losing their share to these players.

Growth and market shares in deposits by players


The productivity of foreign (deposits per employee: INR 5.5 crore) and new private sector players (deposits per employee: INR 5.0 crore) has been significantly higher than


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old private sector players (deposits per employee: INR 2.6 crore) and public sector players (deposits per employee: INR 2.2 crore). Similar trend is visible for deposits per branch (source: RBI; PwC analysis). Over the past few years, foreign and public sector banks have also improved their operations efficiency as well as their return on assets. Most of the current players use a mix of various distribution channels for retail customers sales and service. Over the last few years, the focus has been increasing on use of alternate channels with branches primarily being used for sales. However, the success achieved by different players varies. A majority of the scheduled commercial banks have good reach in the urban areas; however India Post dominates the rural segment.

India Post has a national footprint as well as good depth of coverage in rural areas unlike competition with either limited coverage/national footprint. Out of 48,016 branches of public sector banks, 61%are in rural areas. Compared to this, out of India Post’s 1,55,333 branches, 89% are in rural. The co-operative banks have 1,09,924 branches in rural areas but these banks lack national footprint (i.e. the same co-operative bank is not present in different parts of the country).

Most foreign and new private sector banks have been targeting high net-worth individuals (HNWI) (SEC A1) and the upper customer segments (SEC A2, B1), the two most profitable customers segments. The middle segment (SEC B2, C1) is mainly targeted by public sector, old private sector and few new private sector banks. Similarly, for the lower segment (SEC C2, D) is a big segment for UCBs and public sector banks. The financial needs of lowest segment (SEC E, R1-R4) are met through banks, but also RRBs, MFIs and unorganised players. The key segments for India Post are middle segment and lower (SEC B2-E, R1-R4).

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1,950

259

14,483

>93%

61%

52%

21%

0%

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27

19

8

29

133

Public sector

Old private sector

New private sector

Foreign

Regional rural banks

Scheduled commercial banks

Co-operative banks

Category # banks # branches% rural

branchesBank group

India Post 1,55,333 81%

1,09,924

29,384

2,383

419

1

12,062

Public sector

Old private sector

New private sector

Foreign

Regional rural banks (14,483)

Scheduled commercial banks (54,791)

Co-operative banks (1,11,777)

Category Rural

concentration of offices/

branchesNational footprintBank group

India Post 1,25,350

Indian banking: rural marketLow HighLow High


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A summary of products and services offered by some key banking players is summarised below:

Key business and regulatory trends

Key business trends • Over the last few years, there has been rapid growth in the retail lending market • The increase in credit card penetration has been substantial • There has been an increased focus on SME (small and medium enterprises)

segment and microfinance • Banks are gearing themselves with specific wealth management offerings targeted

at HNWI segment • Consolidation is likely to take place in the banking sector • Technology initiatives undertaken have been taken by many banks, across

different categories e.g. core banking and customer analytics • Inbound investment by foreign players exceeds outbound investment by Indian

players Key regulatory trends

• A phased roadmap for foreign banks in India and guidelines on ownership has been issued by Reserve Bank of India (RBI)

• The Credit Information Companies (Regulation) Act, 2005 has been enacted for regulation of credit information companies and facilitating efficient distribution of credit

• Basel II guidelines are to be implemented by banks by March 2008/09


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• The Payments and Settlements Bill, 2006 has been introduced. The Bill seeks to designate the Reserve Bank as the authority to regulate payment and settlement systems

• RBI Act, 1934 has been amended by parliament. The amendment has empowered the Reserve Bank to determine the CRR without any ceiling or floor rate

Key insights for India Post

Based on the overview of Indian banking industry, the following are the business drivers for potential opportunity areas for India Post -

• Banks (e.g. foreign, private banks) lack the network infrastructure to reach underserved segments in semi-urban and rural areas

• There is a need for expansion of financial service offerings by the post office India Post could provide banks with wider access for a range of offerings by leveraging its network (e.g. credit card payments, application form collection, recovery of defaults, locating ATMs, deposits, withdrawals). India Post can also distribute third party offerings from banks (e.g. credit cards, bank loans) In order to tap these opportunities India Post could start evaluating potential alliance partners and tie-ups with banks.

NBFC industry

Overview

Hire-purchase companies, categorized under asset finance category, dominates the NBFC industry with assets of over INR 56,223 crore. There are currently 312 companies in this business. NBFC are regulated by the RBI while RBI has issued directives on deposit acceptances for companies regulated by MCA and Registrar of Chits. Insurance, housing finance, stock brokers and microfinance companies are exempted from RBI regulations. Overall structure of the industry with key categories is shown below:


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Structure of Indian NBFC industry

Source: RBI report - Trends and progress of banking 2005-06; # companies indicated above are

for NBFCs with public deposits

NBFCs when classified in terms of asset size indicate an imbalance. Few companies (18) with asset size above INR 500 crore account for a major share of the total market. There are large number of companies with asset size in the range INR 0.5 to 10 crore, but negligible market share in aggregate.

NBFCs according to asset size

Source: RBI, PwC analysis

Hire Purchase (HP) is the largest activity financed by NBFCs followed by Inter-Corporate Deposits (ICD) & loans. Even as all other categories have shown decline over


Page 18

past four years, the HP asset category has seen consistent growth indicating an overall increase in demand for credit. As NBFCs cannot accept public deposits of less than 1-year maturity, bank deposits continue to retain their dominance in the portfolio of household financial savings and the share of NBFCs in broad liquidity* (L3) is declining.

Gross financial assets of household sector

0%

10%

20%

30%

40%

50%

1996

1998

2000

2002

2004

2006

Bank deposits

Non-bankingdeposits

Insurancefunds

Provident andpension funds

Source: RBI; ICRA

While NBFCs have often been leaders in financial innovations, there have been instances of unsustainability, often on account of high rates of interest on their public deposits and periodic bankruptcies. Financial performance of NBFCs suffered a set back during 2005-06 as income earned by NBFCs declined marginally but the expenditure increased sharply. Cost to income ratio of NBFCs deteriorated sharply from 79.8% in 2004-05 to 90.3% in 2005-06. Gross NPAs as well as net NPAs of NBFCs also registered a sharp decline during FY2006. Some of the key corporate players in the NBFC sector are IDFC, SREI and Sundaram Finance. On the retail side, HDFC, Shriram Commercial Vehicle Finance and Bajaj finance are the major players. Some of the key products and services offered by NBFCs is shown below:


Page 19

Products and services offered by NBFCs

Source: Motilal Oswal Securities’ report on NBFC, March 2006 The NBFCs offer a wide range of services catering to requirements of different customer segments. The main classification could be made on products offered to retail and corporate customers. In comparison to these companies, India Post’s products mainly cater to the retail segment.

Key customer segments served by NBFCs

Though most of these companies employ multiple channels to reach its customers,


Page 20

branches still remain the primary contact point with the customers.

Distribution reach of key players

* indicates number of branches of India Post

Source: Motilal Oswal Securities’ report on NBFCs, March 2006


Key business trends • There is increased concentration in the sector with smaller players being weeded

out. • Although number of players is high, firms have different clientele based on their

borrowing costs and size of business. • Dependence on deposits has reduced and there has been an increase in borrowings

from banks/financial institutions (better rated NBFCs face little constraint in borrowings).

• Asset quality, which had deteriorated in the late-1990s, has recovered in recent years.

Key regulatory trends

• New NBFC norms have been announced by RBI and imposes restrictions on branch licensing/fresh NBFC.

• Periodicity of reporting has been changed from quarterly to monthly for NBFCs not holding public deposits.

• Reporting system has been made applicable to NBFCs with asset size above INR100 crore (the figure was above INR 500 crore earlier).

• There is a new requirement to furnish additional information relating to capital market exposure and foreign sources of funds.

• NBFCs with public deposits/deposits above INR 50 crore are required to rotate partners of audit firms after every 3 years.


Page 21


Based on the overview of Indian NBFC industry, the following are the business drivers for potential opportunity areas for India Post -

• NBFCs have limited distribution reach (e.g. regional presence) • There is need for expansion of financial service offerings by the post office

India Post could provide wider reach to NBFCs to leverage India Post’s network (e.g. application form collection, disbursement, receiving repayment installments, recovery of defaults). India Post can also distribute third party offerings from NBFCs (e.g. personal loans, vehicle loans) In order to tap these opportunities India Post should evaluate potential alliance partners and tie-ups with NBFCs

Insurance industry

Insurance industry in India is regulated by Insurance Regulatory and Development Authority (IRDA). The two broad categories of insurance products are general and life insurance. Within these, players could be classified as public sector players, private sector players (with foreign JV) and domestic private players.


Page 22

Structure of Indian insurance industry

Overview of general insurance market

The Indian general insurance market still remains under penetrated as compared with the rest of the world. Compared to world average of 3.18%, general insurance premium as percentage of GDP in India is just 0.61% (source: IRDA annual report 2005-06). The private players growing at eleven times the growth of public sector insurers have gained 35% market share.

General insurance market shares

14%35%

86%65%

2003-04 2006-07

Private Public

Source: IRDA Journal, May 2007; IRDA annual reports 2003-06

Public sector general insurers account for 65% of the market share and are experiencing rapid growth. ICICI Lombard and Bajaj Allianz lead this segment. The overall growth in


Page 23

premium income was 22.37% in 2005-06 with 9.3% share of public sector (CAGR (2001-06): 7.6%) and 63% share for private sector (CAGR (2001-06): 84%). The competition is mainly fuelled by the top four private players which account for nearly 80% (in 2006) of the private sector market share. ICICI Lombard leads among its peers in this category. Among the public sector players, Oriental Insurance has shown the highest growth in the past three years. Public sector players will have to harvest their strengths to retain market leadership. The decline is market share has been most significant for New India Insurance (-7.3%) and United Insurance (-7.7%). The private players are building relationship with the most profitable customers and have lower claims ratio (ratio of net claims incurred to net premium earned) as compared to the public sector insurers. A brief overview of key products, customer segments, channels and players in general insurance is shown below:


Page 24

Products and services offered by general insurance companies

Overview of life insurance market

The Indian life insurance market also remains under penetrated as compared with the rest of the world. Life premium insurance as percentage of GDP for India (2.53%) is lower than the world average (4.34%). Entry of private players has intensified competition; however LIC still maintains the dominant position in the market. The industry growth for 2006-7 was 110% over the previous year while the same figure for private players was 90%. Public Players’ (LIC) growth over the previous year was 181%. Bharti AXA and Sahara Life are the emerging new players while Reliance Life and SBI Life have been growing aggressively.


Page 25

Market shares in terms of premium

Source: IRDA annual report 2005-06

Top players have increased their distribution reach to gain more market share. Bajaj Allianz has the largest distribution network amongst private insurance companies. It has presence in over 700 locations and has over 150,000 agents and around 150 corporate agents. 70% of its total sales come from its agent network while bancassurance accounts for 22% of its premium collection. ICICI Prudential also has one of the largest distribution network amongst private sector insurance companies. It has presence in 130+ locations through 180+ branches and around 75,000 agents. Around 35-40% of ICICI Prudential’s premium income is generated through non-agent network. SBI Life is leveraging the distribution network of its parent, SBI (over 9,000 branches all over India). India Post leverages its vast network of 1,55,333 branches (out of which 89% are in rural areas) to sell PLI and RPLI. Other channels for India Post include development officers (postal employees), field officers (retired ex-government employees) and direct agents appointed by state government.

ICICI Prudential, 7%

Met Life, 0%

Bajaj Allianz, 6%

ING Vysya, 1%

SBI Life, 3%

Kotak Mah, 1%HDFC Standard, 2%

Tata AIG, 1%Reliance Life, 1%AVIVA, 1%Max NYL, 1%Birla Sunlife, 1%Others, 0%

LIC, 75%

Other, 26%


Page 26

The products and services offered by life insurance companies could be categorised as life insurance, retirement solutions, investment plans and group schemes.

Products and services offered by life insurance companies


Page 27

Key customers segments served by key life insurance companies


Key business trends • Over years, there has been growing importance of retail segment and rural market

offers huge opportunities. • There are emerging new players (Bharti-AXA, Star Health & Allied Insurance

etc.) and likely hike in foreign equity will lead to increased interest. • Players are exploring alternative distribution channels to better sell and service

their customers. • There has been increasing focus on customer analytics to identify the right set of

profitable customers, assess their risk profile and price the products accordingly. Key regulatory trends

• Detariffing has been effective from January 2007. • FDI limit is likely to be increased to 49%. This will lead to increased interest of

foreign players. • Special category of insurance companies have been set up • All insurers pool in the third party premiums that they collect and all the third

party losses are paid out of this pool. As per the regulations of IRDA, all third party premiums collected by each and every insurer (effective from January 1, 2007) is ceded to the third party pool. The losses/surplus, if any, arising out of the pool will be borne by the Insurers in proportion of their overall business size in all classes of insurance.


Page 28


Based on the overview of Indian insurance industry, the following are the business drivers for potential opportunity areas for India Post –

• Insurance players in the life and non life areas are exploring traditional and alternate distribution channels to reach potential customers

• There exists a huge untapped market in semi-urban and rural India where insurance penetration is very low

Insurance players can leverage India Post’s large, nation-wide network with a significant presence in rural and semi-urban India to reach potential customers for their sales and service requirements (e.g. distribution of insurance products, collection of insurance premium, collection of claims related documents)

In order to tap this opportunity India Post should identify and evaluate potential partnerships with insurance companies; consolidate on existing partnerships

Mutual funds industry

Mutual funds industry is regulated by Securities and Exchange Board of India (SEBI). Total assets under management have grown sharply at over 45% per annum over the last four years. Currently, there are 30 players together managing assets worth INR 3,505 billion as on April 30, 2007.


Page 29

Structure of Indian mutual fund industry

Figures in brackets indicate number of players

Source: AMFI India

Reliance has the highest assets under management (AUM) followed by ICICI Prudential Mutual Fund and UTI. Other significant players are HDFC Mutual Funds, Franklin Templeton Investments, SBI Mutual Fund and Birla Sun Life Mutual Fund. Most of the other players have AUM less than USD 6 billion (as on May 31, 2007).

Ownership and size of key players in the Mutual Funds Industry

Source: AMFI India


Page 30

Share of private sector mutual funds in total AUM has increased from 70% to 80% and the top 5 fund houses manage 52% of the AUM.

Markets shares in terms of AUM

Source: AMFI India

Products under mutual funds schemes could be classified by structure, by investment objective or other schemes. The various available mutual fund schemes serve different needs such as risk tolerance, return expectations, etc. By structure

• Growth • Income • Balanced • Money market

By investment objective • Open-ended • Close-ended • Interval

Other schemes • Tax saving • Sector specific • Index schemes

Wide variety of mutual fund schemes exist to cater to different needs of customers and these schemes are offered through various distribution channels like internet, bank

18,007 28,085 29,103 45,119 56,317

5,9356,539

3,010 5,229 9,039

10,18019,885 30,750 50,602 85,397

15,459 33,143 30,885

74,144112,224

29,883 48,331 55,852

56,76862,983

0%

25%

50%

75%

100%

2003 2004 2005 2006 2007

Private Sector -PredominantlyForeign JVs

Private Sector -PredominantlyIndian JVs

Private Sector -Indian

Institutions

Bank Sponsored


Page 31

branches, sales force, financial advisors (tax consultants, chartered accountants), NSE/BSE brokers and India Post (which distributes mutual funds of UTI, SBI and Franklin Templeton).


Key business trends • MF houses are now offering Systematic Investment Plans (SIPs) and significant

retail participation is expected through the SIPs. • With increase in interest rates, close-ended fixed maturity products gaining

popularity. • Fund houses have filed offer documents with SEBI for introduction of Gold

Traded Funds. • With the growth in the number of wealthy individuals in India, portfolio

management services are being launched by asset management companies. • Technology initiatives such as application/redemption through internet and via

SMS have been introduced. • Keen interest being shown by more foreign players to enter the asset management

business in India. • As the markets mature it becomes increasingly difficult for fund managers to beat

the market, hence there might be a shift towards hedge funds and/or index funds. • Intensifying competition makes it necessary for fund houses to expand their

distribution network. Key regulatory trends

• “Know Your Customer” (KYC) and Anti Money Laundering (AML) guidelines have been introduced.

• Guidelines for gold traded funds and capital protection schemes have been introduced.

• There has been an increase in limits for mutual fund schemes to invest in overseas assets such as ADRs/GDRs/foreign securities within the overall limit of USD 3 billion.

• There have been changes in regulations for portfolio managers to ensure better safeguards of investor assets.


Many private and foreign players are keen on tapping the Indian market (e.g. have designed specific products for the non-urban investors) There exists potential opportunity to grow partnerships for distribution of mutual fund schemes enabling mutual funds to leverage India Post’s network and access a wide range of customers. In order to tap this opportunity India Post should identify (new) and evaluate (existing) potential partnerships with mutual fund companies


Page 32

Assessment of India Post’s financial products and services India Post offers a wide array of financial products and services. It has its own financial products as well as 3rd party products.

Financial products and services offered by India Post

Source: India Post’s annual report (2006-07); discussion with India Post’s officials; field visits

Performance of financial products and services

The top line of India Post has grown at a CAGR of 9% over the last three years. India Post has been able to reduce its financial deficit by 12% in 2005-06 due to the growth in revenue. Financial products and services contribute a significant proportion (61%) of India Post’s revenue. Remuneration from the Ministry of Finance (46%) for POSB mobilization is the main contributor to revenue. This clearly highlights the dependence on Government of India for FS revenues.

Product-wise share in India Post’s revenue


Page 33

Source: India Post’s book of information (2004-05); annual report (2006-07)

India Post performs an agency function and has no control over (a) determining the remuneration (from MoF) (b) deployment of funds (mobilized by India Post) to maximise revenue. Also there is no other major source of revenue in financial services (revenue from new partnership products not significant yet). While the remuneration from POSB has been growing, incomes from some of the core businesses do not reflect growth.

7% 7%

18% 15%

29% 29%

42% 46%

2004-05 2005-06

Remuneration fromMOF

Postage in cash

Sale of stamps

Commission on MO

Others


Page 34

Savings Bank products

India Post posted sizeable growth in deposits compared to its key competitors in the rural and semi urban market. Trends in 2007-08 may look different as post offices are already witnessing significant withdrawals from savings accounts mainly due to higher interest rates offered by banks. Leading private banks like ICICI Bank are growing at a much faster rate posing a future threat for India Post even in its core markets.

Total deposits (in INR crore)

Source: India Post’s annual report (2006-07); RBI

MoF remunerates India Post on the basis of number of live accounts and hence value per account does not have a major impact on the revenue. POSB products are currently under pressure in urban and semi urban markets (analysis based on discussion during field visits). Higher interest rates are offered by banks resulting in some circles having experienced significant withdrawals from postal savings bank accounts.

0

100,000

200,000

300,000

400,000

500,000

600,000

2001-02 2002-03 2003-04 2004-05 2005-06

State Bank Group ICICI Bank India Post


Page 35

Number of accounts and amount in accounts (2005-06)

6.096.47

0.86

2.46

0.20 0.05

50,190

183,077

36,878

16,790 15,91616,871

0.00

2.00

4.00

6.00

8.00

Savingsaccount

RD TimeDeposit

MIS PPF Sr. citizen

#ac

cou

nts

0

50,000

100,000

150,000

200,000

Am

ou

nt

inac

cou

nts

(IN

Rcr

ore

)

# accounts Amount in accounts

Source: India Post annual report (2006-07)

Analysis of Savings Bank products

(Based on discussions with India Post representatives)

Challenges • There is lack of centralized customer database. • No customer segmentation is undertaken resulting in lack of targeted sales and

service initiatives. • Each product operates in silos with low efforts to leverage the existing customer

base for cross-selling. • Rates of interest on POSB products are determined by the MoF resulting in

inability to respond to market changes. • Introduction of 80C of IT Act may have implications for NSC and PPF volume as

alternative investment options for tax savings have increased. Customers

• Savings deposits and mostly used by rural and semi-urban customers from low income groups.

• TD and MIS products are mainly availed by retired employees from government and private organizations. Typical RD customers include small businessmen, shop owners and housewives.

• NSC and PPF are tax saving instruments and availed by the salaried class in urban and semi-urban areas.

Opportunities • Significant cross-selling opportunities on a large, nation-wide base of over 160

million existing customers.


Page 36

• India Post could leverage untapped, under-served market in semi-urban and rural markets.

• India Post could consider introduction of services linked to savings accounts (e.g. direct debit for loan installments, utility bills etc.).

Competition • In the rural market, currently there is no significant competition for India Post. • In the semi-urban market, deposit products of nationalized, private, cooperative

banks and RRBs are a competition for India Post. • Deposit products of all the banks compete with India Post’s products in the urban

market.

Remittance products

India Post has largely been able to retain its customer base for domestic remittances; however, business growth is only marginal. Value per MO has increased substantially over the last five years (from INR 534 in 2000-01 to INR 694 in 2004-05).


Page 37

Value of MOs issued and commission earned

585,184618,826

865,000

687,502 705,217

31,912

26,39831,138 32,031

29,924

500,000

750,000

1,000,000

2000-01 2001-02 2002-03 2003-04 2004-05

#ac

cou

nts

0

10,000

20,000

30,000

40,000

Am

ou

nt

inac

cou

nts

(IN

Rcr

ore

)

Value of MO Commission earned


As MOs are subsidised, India Post loses INR 25.80 for every MO sent.

Average cost and revenue per MO


Analysis of remittance products


Challenges • There is lack of availability of cash in semi-urban and rural post offices. Post

offices currently do not carry out a periodical cash flow analysis to predict the cash levels required to meet requirements based on past trends.

• Inadequate efforts to retain the remittances within the postal banking system by encouraging beneficiaries to open accounts with the post office.

• A number of banking players (e.g. ICICI Bank) are adopting a proactive rural banking strategy and have begun penetrating rural areas. This could result in competition for India Post in domestic remittances.

Customers • Rural population migrated to urban and semi urban locations for employment

typically constitute the remitter profile. • Remittances sent by parents of students in urban and semi-urban locations is

another customer segment using these services.


Page 38

Opportunities • There are opportunities to encourage both the sender and the beneficiary to open

accounts with the post office for recurring money transfers focusing on the advantage of customer convenience and cost.

• Significant cross-selling opportunities are available for own and partner products and services.

• India Post could enhance customer satisfaction through timely availability of cash at the counter and reduce delay in transmission of MO.

• India Post could extend iMO to semi-urban and rural areas to grow customer base and ensure faster delivery of cash.

Competition • In the rural market, currently there is no significant competition for India Post. • Banking products like DDs, ATMs, outstation cheques, anywhere banking

through connected branches are major competition in semi-urban market. • In the urban market, DDs, EFT, phone banking, net banking, ATMs, anywhere

banking are competing with India Post products.

Insurance products

India Post has Postal Life Insurance (PLI) and Rural Postal Life Insurance (RPLI) as its own life insurance products. RPLI showed tremendous growth both in terms of volume (CAGR: 69%) and sum assured (CAGR: 82%) over last five years. Growth in PLI is relatively low (CAGR: 22% and 30% respectively).


Page 39

Number of policies issued and sum assured for PLI


Number of policies issued and sum assured for RPLI


Analysis of insurance products


Challenges • PLI is facing stiff competition from LIC and private players. • Commission sharing with the customers in the form of payment of first premium

by private agents impacts PLI business of India Post. • There are low cross-selling efforts for selling PLI/RPLI to India Post’s existing

customers. Customers

156,809 172,163212,967

276,880

344,403

1,3631,710

2,847

3,831

2,110

0

100,000

200,000

300,000

400,000

2000-01 2001-02 2002-03 2003-04 2004-05

#p

olic

ies

issu

ed

0

1,000

2,000

3,000

4,000

5,000

Su

mas

sure

d(I

NR

cro

re)

# policies issued Sum assured

162,208

368,527

702,542

1,083,152

1,335,847

6631,697

5,950

7,208

3,348

0

400,000

800,000

1,200,000

1,600,000

2000-01 2001-02 2002-03 2003-04 2004-05

#p

olic

ies

issu

ed

0

2,500

5,000

7,500

10,000

Su

mas

sure

d(I

NR

cro

re)

# policies issued Sum assured


Page 40

• PLI is primarily targeted at employees in government and allied organizations and nationalised banks.

• RPLI product is for the rural population Opportunities

• Significant cross-selling opportunities for own and partner offerings to existing customer base.

• Scope to undertake ongoing marketing initiatives to create awareness and grow business volumes.

Competition • Rural market: LIC • Semi urban market: LIC, private insurance players • Urban market: LIC, private insurance players

Partnership products

Since 2006, India Post entered into a number of partnership arrangements with leading banking and non-banking financial players for distribution of their products through the large post office network. Some of India Post’s current partnerships at the national level are listed below: International money transfer – Western Union Money Transfer Mutual funds – UTI Mutual Fund, Principal-PNB Asset Management, SBI Mutual Fund, Franklin Templeton Investments General insurance – The Oriental Insurance Company Pension funds – ICICI Prudential Life Insurance

Analysis of partnership products


Challenges • Customer awareness of partnership products is low. • Employees do not have the adequate technical and selling skills (e.g. few AMFI

certified employees). • Customers prefer to do business with agents; agents often share commission with

the customers. • Rural customers are not yet ready for some products (e.g. mutual funds,

insurance). • Marketing through promotional initiatives is low.

Customers • Mutual funds: urban and semi-urban customers. • Insurance: urban, semi-urban customers. • Western Union: urban, semi-urban and rural customers who have migrated

outside India. Opportunities


Page 41

• There are significant cross-selling opportunities to existing large customer base of 160 million.

• India Post should identify potential tie ups for high growth-high volume products. • India Post needs to review its employee incentive structure for generating

business. Competition

• Rural market: private agents. • Semi-urban market: private agents. • Urban market: private agents, NBFCs, banks.

Evaluation of existing financial products and services

We have developed a framework for mapping opportunities available to India Post in existing financial products and services. The framework has been explained below:

Market attractiveness

Size and growth of market An attractive product/service would be large in size and would have high growth rates. Demand A well established demand for a product/service would be more attractive than demand expected to emerge in future. Degree of competitive intensity Product/service with low competitive intensity (fewer players involved) would be preferred compared to a highly competitive market. Market concentration It is easier to target a market which is concentrated in terms of size and geography (e.g. not fragmented, not dispersed).

Strengths/India Post’s ability to tap market


Page 42

Access to customer base and reach Ease of access to existing or prospect customer base who already avail of India Post’s products and services. What is India Post’s ability to access through existing channels? Ability to leverage skills Ability to leverage skills that India Post possesses/has developed/can easily acquire in its existing products and services. Ability to leverage brand It would be easier to gain share in a market where India Post brand name is known and respected. Products and services have been mapped to their attractiveness and India Post’s ability to tap the market to decide where India Post should focus its efforts…

• Assess the relative attractiveness of the markets • Determine India Post’s relative competitiveness • Determine what India Post should seek to achieve in the business/market (i.e. how

it should be positioned). But the constraints (regulatory, capital & human) should be considered while taking decisions.

This will result in the selection of products/services and segments to target and help answer the following questions…

• Which products/services to offer? • Which customer segments (or sub-segments) to target? • What is India Post’s competitive scope (wide or narrow)? • What is the basis of competitive advantage for India Post (e.g. high value service

or low cost)? • What are the key success factors? • How to set priorities/timescales?

Based on the analysis of current financial products and services offered by India Post (own and third party), the mapping to the framework parameters is shown below:


Page 43

Assessment of current business and operating model

Customer segmentation India Post has a large and loyal customer base (160 million accounts), some of whom have had a long relationship history with India Post. No specific segmentation of customers is undertaken currently. However, a few products like the senior citizens scheme and RPLI are targeted towards specific segments. There is no mechanism in place to capture detailed customer information, extent of satisfaction or feedback to facilitate analysis and segmentation. India Post is currently adopting “one size fits all” approach and thus customer strategies for sales and service may not be tailored to segment requirements. There is no targeted marketing and specific offers depending on customer segment unlike some of India Post’s competitors (especially new private sector banks), this could potentially result in low campaign effectiveness.

Profitability measurement India Post does not currently measure customer profitability. Product profitability measurement is done for some products based on costing data. There is no mechanism in place to capture costs at the point of origination. The costs need to be allocated scientifically to facilitate calculation of product pricing and assess viability of own and partnership products. There may be customers who are not profitable; however, India Post is currently unable to identify them. A measurement mechanism would enable India Post to take specific actions to enhance profitability. A periodical assessment of product profitability of own and partner offerings would enable India Post to identify products for further focus, improvement or exit. It would also facilitate pricing decisions. Cross-selling


Page 44

There are low cross-selling efforts made currently. There is no structured process to identify cross-sell opportunities to increase customer product usage of India Post’s offerings. Frontline staff deployed may not have the necessary skills (e.g. level of experience, technical knowledge of offerings, selling skills). Post office staff is busy with regular business activities and thus unable to specifically focus efforts on selling. There are no tools to understand customer profile and needs. There is an opportunity loss in terms of potential business from existing customers that could have been achieved at a low cost. Fee-based income Fee income as a proportion of India Post’s total revenue is low. India Post has a number of alliance partnerships to distribute third party products (e.g. general insurance, mutual funds and pension funds) that provide fee earning opportunities. Income from distribution of partnership products is currently low, thus not making a significant impact. India Post has a large, untapped account holder base that could be targeted through aggressive marketing of own and third party offerings to achieve significant growth in its fee income.

Product development and marketing There is no structured product management function for financial services to provide thrust to different product lines (e.g. remittances, mutual funds) in the circles. There is a need to monitor effectiveness of new product launches and need to continually track competitor products and respond to market changes. Off-take of some products (e.g. mutual funds, insurance) is low because of lack of new product awareness by postal staff and customers. There is a need for structured product management to enable specific focus on growing sales and also improve feedback loop to refine campaigns/improve products. Distribution channels India Post offers a wide network of physical channels in the form of over 155,000 post offices to its customers for their sales and service requirements. Post offices are used heavily by customers and perceived to be a place where personal and work related interaction takes places, especially by some customers (e.g. senior citizens, rural customers). Additionally, mobile postal workers deliver some financial services products at the doorstep of the customer (e.g. money orders). Currently, no alternate channels (e.g. ATM, internet and phone) are deployed as part of India Post’s overall channel configuration. High usage of post offices for routine transactions results in operational focus and inability to maximise each customer interaction as a sales opportunity. There is a need for a multi-channel network strategy to facilitate customer convenience (e.g. ATMs), improve customer service delivery (e.g. phone, SMS) and leverage post offices better. Brand image and perception India Post undertakes corporate image and product specific marketing campaigns and has been increasing its visibility in the market. Some financial services products have been promoted by India Post (e.g. iMO). Alliance partners undertake advertising for partnership products offered through the post office (e.g. mutual funds, international


Page 45

money transfers) through various media (e.g. print, TV, banners, hoardings). India Post’s key competitors also undertake aggressive product based advertising (e.g. new private sector banks have begun focusing on rural customers and mass retail customers through focused campaigns). There is a need for more product focused campaigns for financial services offerings that could result in higher recall and off-take by customers. For example, aggressively advertise Finmarts, iMO, PLI and highlight key advantages of doing business with the post office (e.g. convenience, trust, reliability, responsiveness). India Post also needs to enhance display of promotions at post offices (e.g. product brochures, banners). It should supplement marketing efforts on partnership products through focused customer targeting. Employee training While training is provided to employees dealing with postal financial services, there remain areas to improve coverage and effectiveness. Alliance partners provide training on partnership products (e.g. insurance, mutual funds); however pan-India, coverage is still low (e.g. number of AMFI and IRDA certified employees are still low). India Post requires training in the area of technical product skills to increase own and customer awareness, selling skills and customer service orientation. Frontline staff at post offices requires more soft skills training to enable them to use each customer interaction as an opportunity to sell and service effectively. IT and MIS 17% of departmental post offices operate with stand alone IT systems; the rest of the post offices are manually operated. Different product lines are supported by individual applications (e.g. savings bank, iMOs, other remittances). Due to lack of connectivity and alternate channels, customers cannot avail of anywhere, anytime services from India Post. There is need for more timely and comprehensive MIS to facilitate performance assessment and monitoring. India Post should leverage technology to enable the business to improve customer service and convenience. It should continue to rollout IT applications to more locations and connect post offices to facilitate speedier decision making and anywhere banking. Also there is a need to improve MIS to improve timeliness and quality of information provided.

Localised initiatives In addition to nation-wide initiatives in financial services, a number of initiatives are undertaken by individual circles. For example, the Maharashtra circle is providing loan origination, assessment, disbursement and repayment services to a public sector bank for small loans on a pilot basis on a fee paying model. Experience of these local initiatives needs to be shared and based on the experience, these could be rolled out to other locations. There is a need to track national and local initiatives in a structured manner and incorporate key learning from pilots and extend to other locations to grow India Post’s revenue. Organisation structure


Page 46

The Directorate – Financial Services provides overall strategic direction for the financial services activities of India Post. The circles are responsible for execution of this strategy as part of their operations encompassing all postal activities (i.e. mail, parcel, others). The teams reporting to the CPMG are responsible for all lines of business of India Post. Post offices within a circle may identify some employees to also focus on sales and services of specified financial services products but no product management team is providing thrust to financial services. Focus on financial products and services may not be adequate resulting in low leverage of the vast opportunities that exist in this sector by tapping India Post’s large customer base through proactive selling.

India Post’s strengths and weaknesses

Strengths

Image and perception • India Post has a strong brand name • Perception of security, reliability and trustworthiness

Market position and presence • USO • It has presence across the length and breadth of India

Performance • Deficit reflected a declining trend over last year

Customers • Large customer base (~ 16 crore) • Loyal base with long standing relationships • Only trusted banking option for rural population

Products • Products suit the profile of the rural population and small savers • New product innovation and development (e.g. iMO, partnership products)

Channels • Vast network across the country (over 1.55 lakh post offices) • Very high penetration in rural India (89% of the outlets)

People • Experience in dealing with traditional products

IT • Leveraging internet for new product offering (e.g. iMO)

Organisation • Circles empowered to take local initiatives in financial services

Weaknesses

Image and perception • Not perceived to be a full-fledged financial services provider


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• Lack of promotion at branches (e.g. product brochures, banners) • Marketing initiatives are limited

Market position and presence

• USO appeal may not guarantee future growth due to emergence of aggressive competition and savvy, less loyal customers

Performance • Main source of revenue continues to be remuneration from MoF on savings

scheme • Need to improve customer and product profitability

Customers • Very low cross-selling • No customer segmentation and hence no focused marketing initiatives • Absence of structured process for measuring customer satisfaction or take on

board customers’ feedback Products

• Absence of product management resulting in focus on each product not being ensured

• Partnership products yet to achieve significant volumes • New product rollout and monitoring process needs strengthening

Channels • Very high dependence on counters for selling products • Low usage of alternate distribution channels

People • Skills not adequate for selling financial products (e.g. mutual funds, insurance) • Low sales orientation • Low focus on technical and soft skills training

IT • Standalone systems; currently available in ~ 3% locations • Significant manual processes resulting in high turnaround time • Low use of analytics • Slow implementation of IT plans

Organisation • Circles are responsible for execution of financial services strategies; formulated at

HQ • No product teams to drive sales across the country

Key themes emerging for India Post’s financial services

business

Distribution spread • Leverage large customer base, nation-wide reach and presence in unique, remote

locations for own offerings


Page 48

• Grow revenue by enabling other financial services providers to enhance reach using postal network

• Replicate successful pilot initiatives undertaken in circles to other locations Product management

• Strong thrust to identified own and partner offerings in financial services o Proactively sell postal financial products (e.g. extend iMO locations) o Undertake product sequencing and bundling o Distribute partner offerings to identified customer segments

• Strengthen product management. o Set up a product management function for identified areas o Product manager role should be focused on ongoing interaction with

customers, channels and operations to promote sales and identify/mitigate any bottlenecks

o Seek inputs from post offices; undertake customer surveys; scan competitor products; refine products

Customer centricity • Identify primary and secondary customer segments to target and serve and

develop tailored strategies for sales and service o Undertake customer segmentation o Analyse customer segment profitability o Focus on cross-selling to grow wallet share

• Review distribution network to provide an optimal mix of direct and physical channels to meet customer sales and service requirements

Employee focus • Assess training needs focusing on technical and soft skills

o Measure training effectiveness and ensure coverage of a wider base of employees

• Review organisation structure to facilitate implementation of India Post’s strategic direction for financial services to enable clear direction of the business

IT enablement • Identify opportunities to use IT as an enabler to support operations, business

growth and customer analytics o Review solution architecture and identify coverage of IT applications to

meet the business requirements of postal financial services o Implementation and rollout of applications in a phased manner (e.g.

computerisation of post offices; extension of iMO to other locations etc.)


Page 49

Money transfer products

Global innovations in money transfer products

In the last few years increasing demand for remittance services has lead to growing use of electronic transfers across the globe. More and more operators are gradually moving from paper based products to electronic transfers.

Electronic transfers enable faster, convenient and reliable transfer of money compared to traditional paper based products. Of about 160 Universal Postal Union (UPU) member post operators offering money-transfer services, more than 50 offer some form of electronic money-transfer service (Source: UPU, 2004; Centre for Financial Services Innovation, 2007).

Card based money transfer (by postal operators)

Three different models for card based money transfers are currently being used around the world based on use of a card on the sending end, receiving end, or both, of a money transfer.

Card to cash model

• Recipient does not have a card of his own, but can retrieve the transferred funds directly in cash

• It requires the least education to acquire new customers • It is a natural option for remittances to regions in which card use is less

ubiquitous, or to rural areas that do not have ATMs • Companies already in remittance business, who are introducing card-based

products are best positioned to offer this option


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South Africa Post Office (SAPO) offers card to cash money transfer product, Mzansi money transfer service, to cater to the needs of the un-banked population of South Africa. Target customer/market positioning

Mzansi money transfer is a low-cost money transfer facility associated with the Mzansi account (a basic, no-frills, debit card-based transactional and savings account), aimed at the poor, especially individuals entering the formal banking sector for the first time. The service makes it possible to transfer money between un-banked/banked customers from any participating bank, post office and ATMs. Amount can not be more than R 5,000 (approx. USD 700) per transaction or per day. ATM transactions cost the same regardless of which bank’s ATM is used. In the financial year 2005/06 more than 850,000 Mzansi accounts were opened, giving around 40% market share to SAPO. Distribution channels This service uses the existing distribution networks of banks and post offices i.e. more than 5,000 bank and post office outlets, and ATMs. The Postbank does not have its own ATM network. Key success factors

• Low transaction and account maintenance costs • Extensive branch with network connectivity/ATM network

Card to card model

• Two cards are issued with access to the same account • Usually, the primary cardholder can transfer specified amounts of funds to the

sub-account that is accessible to the recipient cardholder • Users (at receiving end) not familiar with card-based platforms may find

difficulty adopting the product • Users in many regions may be unable to utilize this model due to the lack of a

payments network that accepts cards


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Cashplus Mastercard is a prepaid credit card (card to card money transfer product) offered by Post Office in UK and could be topped-up at any of the UK Post Office branches. Money could be transferred using Cashplus by having an additional card to the primary card. Target customer/market positioning

Unbanked customers can avail of the facility as no bank account is required. A good credit history is not a pre-requisite and no credit check is conducted. The card is very convenient as it can be used to shop online (by phone or in store), used on holiday trips or to share money with family and friends any where in the world. It offers online account management to check card balance and review card statements and transactions. Distribution channels Top-up can be done at 14,500 locations, including any UK post office. The card can be used at over 25 million retail outlets and over 1 million ATMs worldwide, wherever there is a MasterCard acceptance mark. Key success factors

• Extensive distribution network with connectivity • Convenience due to various possible usage modes (online, phone, at stores,

ATMs) • Wider acceptance of the card

Cash to card model

• The sender purchases and sends a prepaid debit card to the recipient • Sender can then reload funds onto the card • One of the challenges in this model is that the card needs to be reliably delivered • Users (at receiving end) not familiar with card-based platforms may find

difficulty adopting the product • Users in many regions may be unable to utilize this model due to the lack of a

payments network that accepts cards Singapore Post provides cash to card based money transfer service to Philippines, in partnership with Equitable PCI Bank.


Page 52

Target customer/market positioning The product is targeted at migrants in Singapore from Philippines. The user has a choice of delivery modes that best suits their needs - VISA FASTcard (cash to card transfer) or credit to receiver’s bank account (cash to cash transfer) or cash pick-up at Equitable PCI Bank & cash door-to-door delivery service (cash to cash). Among different delivery modes, VISA FASTcard mode has the lowest remittance fee which is USD 3.3 (in addition to a one time card issuance charge of USD 6) irrespective of the amount transferred (maximum transfer limit is approx. USD 1,100). Distribution channels This service could be availed at 47 selected post offices in Singapore. Receiver can get money from 6,000 ATMs in Philippines and 877,000 plus ATMs worldwide & can make point-of-sale purchases at 62,500 participating merchants. Key success factors

• Reliable delivery of cards to the receiver • Wide network of ATMs, branches & participating merchants • Network connectivity

Mobile transfers (by other financial services providers)

In a typical mobile money transfer, there are four entities involved in the transaction. Currently, there are three popular money transfer models leveraging mobile technology…


Page 53

Cash to mobile transfer

An example of cash to mobile transfer is Smart Communications in Philippines. The sender is a migrant from Philippines who deposits the money to be remitted with one of Smart Communications’ remittance partner in that country. Smart communications has partners like Forex International, Hong Kong; CBN Grupo, Greece etc. Smart’s partner sends a text message to the beneficiary in the Philippines, informing him of the transfer. Remittance is credited into the Smart Money electronic wallet account of the recipient. Some of the Smart partners are McDonald's, SeaOil gas stations, 7-Eleven shops etc., where cell phone users can go to pick up cash directly. Smart Card can be used to withdraw cash from ATMs or directly used for purchases where it works like a debit card. Recipient must have a Smart Money electronic wallet account to receive the money.

Mobile to mobile money transfer

This model is used by GCash in Philippines. Sender registers with GCash by sending a text message. Cash is converted into GCash (cash-in) by visiting any GCash partner outlet. One can transfer funds from his Bank of the Philippine Islands (BPI) account to his GCash wallet and there is no charge on cash-in. Globe Telecom, a telecom service provider in Philippines is the sending agent. GCash has also collaborated with BPI to expand its reach. Globe Telecom outlets, BPI outlets are the paying agents. For international remittance, GCash has partners in the top countries with the highest concentration of migrant workers from Philippines. Money transfer is confirmed with a text message. The recipient can then convert GCash into cash (or cash-out) with the GCash partner outlets. One can also transfer funds from the GCash wallet to his BPI account for withdrawal from any BPI ATM. Charge for cash-out is 1% of the amount to be withdrawn.


Page 54

Another example of such model is of Standard Bank in South Africa. Customers open accounts using software downloaded or already embedded on their SIM cards. One can make cash deposits at any partner retailers or a Standard Bank branch. Payments between MobileMoney accounts and transfers to other bank accounts are possible. Standard Bank has partnered with cell phone company MTN to cater to the unbanked population of South Africa. There are no monthly service fees and no minimum balances. Standard bank ATMs, branched or selected MTN service providers. MobileMoney CashCards can be upgraded to a MobileMoney MasterCard card, which enables purchasing from merchants who accept MasterCards. All transactions (e.g. card and/or ATM transactions) are notified in real-time.

Bank account to bank account money transfer

This money transfer model is used by CitiMobile in US. After enrolling with CitiMobile, the customer needs to download the CitiMobile application. The sender needs to have web access on his mobile device. Citibank does not charge the customer for using CitiMobile; the wireless carrier may charge for its web service. CitiMobile works on a wide range of phones across several U.S. wireless carriers like AT&T-Cingular, Sprint, Verizon etc. The recipient can access funds transferred to his bank account through ATMs, Citibank branches, direct purchases at merchant outlets etc. The funds are transferred to the recipient’s bank account with Citibank.


Page 55

Assessment of domestic money transfer products

Along with India Post, public and private sector banks are the main players in the domestic money transfer in India (in the organized sector). Banks offer a variety of products for domestic money transfers in India.

Use of electronic mode of payment is increasing both in terms of volume & value. While use of cheques is highest in terms of both volume and value, RTGS use in terms of value is fast catching up. The volume of RTGS transactions is very small as their usage is primarily for large transactions. Some of the banks in India have launched pre-paid cards because of the advantages of these products. These cards offer convenience as there is no need to carry cash. A customer can have better financial management. Itemized statements and online reporting make tracking expenses and monitoring card activity easier than cash or cheques. Cardholders can better budget their finances by limiting spending to the amount of funds that have been loaded to a prepaid card. Prepaid cards do not require an existing banking relationship, thus could be used by unbanked population.


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We have analyzed the money transfer products of State Bank of India (SBI) and ICICI Bank as representative banks of public and private sector respectively. These are the largest banks in their respective sectors in India.

Money transfer products of State Bank of India

State Bank of India offers all traditional money transfer products. The Bank has the highest physical access among all banks in India. They have a total of 13,844 branches and 5,443 ATMs. The total branches and ATMs of public sector banks are 48,016 and 12,608 respectively (Source: RBI, SBI). Given below is a comparison of fee structure and coverage of various traditional products of SBI and India Post. The money transfer products have a lower feee structure compared to India Post products.

Fee structure, transfer time and reach for SBI products

Source: RBI, SBI, India Post; PwC analysis

SBI has also introduced some new innovative products for money transfer… Payroll Card “A prepaid solution for payment of salaries” Payroll card is a pre-paid ATM-cum-debit card issued in INR in association with VISA. Using this card, salary, payment of TA/medical/incentives is made available to the employees immediately. Maximum reload of INR 50,000 per month per employee and minimum of INR 100 is allowed. Transaction limit at POS is set at INR 2,500 per day and cash limit of INR 15,000 per day. Periodical payments can be loaded on to the card from a single point. Gift card “Gift unlimited choices to your loved ones”


Page 57

Gift card is a substitute for gift vouchers sold by many retail houses. The card is issued in association with VISA and usable at all VISA enabled merchant establishments and POS. Maximum reload of INR 20,000 and minimum reload of INR 500 is allowed. Balance enquiry, account statement (internet) is free of charge. ATM withdrawal fee of USD 1.75, Euros 1.50 or UK Pounds 1.25 is levied. Biometric cards SBI has introduced “Tiny Card” with biometric identification (uses fingerprint technology to authenticate customers). The cards are being used as a means of payment of government benefits directly to the poor persons, such as pension payments and wages under the rural employment guarantee program. The card is currently in the pilot stage in Mizoram, Uttarakhand and Andhra Pradesh before a large scale roll-out across India. The Institute for Development and Research in Banking Technology (IDRBT), along with banks, is rolling out a pilot project at Warangal in Andhra Pradesh to offer biometric cards to people in rural areas. Union Bank of India, SBI, Andhra Bank and UTI Bank, among others, are participating in this project. Under the pilot project, each bank will appoint a village business facilitator to identify account holders before offering biometric cards to villagers for use at the terminals deployed in the area. All these initiatives are in the pilot stage and their success rate is still not confirmed.

Money transfer products of ICICI Bank

Similar to SBI, ICICI Bank also offers all traditional money transfer products with similar fee structure. However, ICICI Bank has limited reach compared to SBI. ICICI Bank has only 667 branches and 2,681 ATMs. Overall, the private sector banks in India have 6,516 branches and 12,608 ATMs.

Fee structure, transfer time and reach for ICICI Bank products

Source: RBI, ICICI Bank, India Post; PwC analysis


Page 58

ICICI Bank also offers few new innovative products for money transfer… Annuity cards The card has been developed by ICICI Bank along with ICICI Prudential Life Insurance for the annuity plan holders, who usually get the annuity paid through bank cheques. The monthly annuity will be loaded on the prepaid card held by the customer. The customer is able to use the annuity card at the merchant outlets and all the ICICI Bank ATMs. Pay direct card Pay direct card (a re-loadable prepaid card) is an easy & faster solution for payment to employees, associates etc. There are no minimum balance requirements. The card can be used to withdraw cash from any VISA ATM and do online POS transactions with daily limit of INR 25,000. The card is free of transaction fee. Cardholders receive an alert via SMS whenever the card is reloaded and statements are mailed to given e-mail id of the card-holder monthly. Easy cash card Easy cash card is a re-loadable prepaid card with no minimum balance requirement. The card can be used to withdraw cash from any VISA ATM and do online POS transactions with daily limit of INR 25,000. Purchase card This is a card based payment solution that streamlines and effectively controls procurement processes of corporates. Purchase card can be used for all indirect expenses that an organization would be incurring. These expenses can be routed through the purchase card. A credit limit is assigned to the corporate on the card and the corporate can thereafter use the card for making payments to all vendors & suppliers. The corporate gets a credit period of up to 50 days and can thereafter repay ICICI Bank as per the billing due date. Purchase card can be used on any VISA or MasterCard network. Distribution card Distribution cards are a receivables management solution and suits large businesses. It enhances process efficiencies and receivables control. Some of the advantages of this card are that company’s invoice-to-cash cycle reduces to 24 hours without any risk or collection/cash management system hassles. The company’s intermediaries save on remittance costs without having to open any account with ICICI Bank. All transactions pan-India get credited to the company's account with all relevant MIS and other requirements. The dealer gets infusion of capital and a flexible facility to settle transactions, enabling him to scale up his business.

Intra-India migration pattern

There has been a steady increase in the number of migrants in India over the past few decades. The total number of migrants by place of birth (those who are enumerated at a village/town at the time of census other than their place of birth) has increased to 307 million in 2001, an increase of 34% from 1991 figure (Source: Census of India). Intra-district and inter-district migration constitute a high percentage of total migration because of movement among females after marriage.

Type of migration (2001)


Page 59

Source: Census of India

A large percentage of migrant population (32%) by last residence (the place in which he is enumerated during the census is other than his place of immediate last residence) migrated more than 20 years earlier. The next highest percentage (22%) is for population which migrated between 10-19 years ago. The percentage number decreases with decreasing number of years. There is a very small percentage for population which has migrated in the last one year. This shows that once migrated, the population is not moving back to its original residence. The most common reason for migration is for work or employment. 38% of males migrate because of this reason, which translates to 12.3 million migrants. This percentage is small for females at just 3%. Marriage is the main reason for migration in case of females.

Intra-district;

59%

Inter-district;

25%

From abroad

; 2%

Inter-state; 14%


Page 60

Reason for migration (2001)38

%

3% 6% 2%

10% 25

%

16%

3% 0% 1%

65%

5%

19%

7%

Wor

k/em

ploy

men

t

Bus

ines

s

Edu

catio

n

Mar

riage

Mov

edaf

ter

birt

h

Mov

edw

ithho

useh

olds

Oth

er

Males

Females


A large percentage of migrants moving for work/employment are migrating from rural to urban areas of states with higher per capita income and more employment opportunities.

Intra/inter state migration streams among migrants by last residence (2001)


Top five states with highest net migration numbers contribute to more than 50% of total migration. Maharashtra has the highest number of net in-migrants followed by Delhi. The state with highest net out-migrants is Uttar Pradesh followed by Bihar.


Page 61


Largest percentage of migrants to Maharashtra is from Uttar Pradesh (28%), with 42% migrating for work/ employment.

Inter-state migration to Maharashtra with duration 0-9 years (2001)


Rest; 892,157 ;

27%

Andhra Pradesh; 193,813 ;

6%

Bihar; 228,563 ;

7%Madhya Pradesh; 275,990 ;

9%

Gujarat; 245,968 ;

8%

Karnataka; 473,979 ;

15%

Uttar Pradesh; 921,142 ;

28%


Page 62

Uttar Pradesh also contributes for highest percentage of migrants to Delhi (41%), followed by Bihar (20%). Work/employment again emerges as the key reason for migration (37%).

Inter-state migration to Delhi with duration 0-9 years (2001)


These two states, Uttar Pradesh and Bihar, also contribute to more than 50% of total migrants to Punjab for work/employment.

Inter-state migration to Punjab with duration 0-9 years (2001)


Rest; 393,836 ;

18%West

Bengal; 86,249 ; 4%

Rajasthan; 90,317 ; 4%

Haryana; 174,889 ;

8%

Uttaranchal; 113,519 ;

5% Bihar; 424,093 ;

20%


41%

Rajasthan; 51,710 ;

8%

Bihar; 149,375 ;

24%

Himachal Pradesh; 55,795 ;

9%

Haryana; 114,031 ;

19%


40%


Page 63

Some of the major Urban Agglomerations (UA) have a significant % of migrant population from other states. Migrants form nearly 15% of Delhi UA’s total population. Similar figure for Greater Mumbai UA stands at around 10%.

Number of in-migrants from other states with duration 0-9 years (2001)


The average value of remittances (with MO data taken as a proxy for actual remittances from these areas) varies across difference destinations.

Total value of MOs (including TMOs) issued during 2004-05 for top 5 circles

Source: Book of Information, India Post, 2004-05

88,216 94,964297,279 353,156

1,571,181

1,988,314

Hyderabad UA Chennai UA Kolkata UA Bangalore UA GreaterMumbai UA

Delhi UA

42,345 55,769 59,863 92,964 122,577

1,395

413292

1,0271,088

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Gujarat Karnataka Kerala Tamil NaduMaharashtra

Val

ue

of

MO

sis

sued

(in

INR

lakh

s)

0

200

400

600

800

1,000

1,200

1,400

1,600

Ave

rag

eva

lue

of

MO

(in

INR

)

Value of MOs issued (in INR lakhs) Average value of MO (in INR)


Page 64

Analysis of migration from rural Bihar

Source for this section: Changing Patterns of migration from rural Bihar, by Anup Karan, Institute

for Human Development, New Delhi, 2000. This study was based on the primary survey data

collected at two points of time after a gap of approximately 18 years from randomly selected 6

villages of north Bihar. Out of these 6 villages, 2 each are from three districts viz. Gopalganj,

Madhubani and Purnea. The data had been collected under two major research projects

conducted during 1981-83 and 1999-2000. Besides this, the later study (1999-2000) also

conducted a census survey in 18 villages (including above mentioned 6 villages) covering a

population of more than 38 thousand from more than 6,400 households. The data collected from

census survey was largely used to evaluate the socio-economic conditions of the study area, and

migrants and to examine the intensity of permanent migration from the villages under study.

The survey results showed that in comparison to non-migrant population, people involved in non-agricultural labor and private service are more likely to migrate.

Occupation of head of the household of migrating and non-migrating

households in Bihar

Delhi, Punjab and Haryana are popular destinations among migrants from Bihar. Nearly 60% of population migrating from Bihar looks for employment related opportunities at these destinations. Most of the migrant laborers are absorbed into the occupations such as, rickshaw pulling, building construction, carpentry or masonry work, and various other types of casual work in informal sector. Income level of migrants is dependent on SEC classification parameters (education level and occupation) at destination.

43%

27%

7%3% 2%

8%

2%

9%

27% 26%

16% 14%

4% 5%1%

7%

Selfemployed inagriculture

Agriculturallabour

Non-agricultural

labour

Privateservice

Governmentservice

Pettybusiness

Otheroccupation

Non-w orkers

Non-migrating households Migrating households


Page 65

Income (INR per month) distribution by education level

2,2632,796

3,939

4,653

6,154

Illiterate Literate or up toprimary

Middle orequivalent

High school orequivalent

Degree andabove

Similarly, the frequency and average amount remitted is also dependent on education level and occupation at destination.

Income (INR per month) distribution by occupation at destination

There is a drop in percentage of migrants who remit money regularly with increasing education level (up to degree level). This could possibly be because migrants with lower education level do not earn sufficient amount to migrate their families along with them. These regular remittances support their families at their native place. With increasing education level, the families also migrate with the head of the household, resulting in lesser number of remittances. On the occupation front, though agricultural laborers are least likely to remit money regularly, number of migrants offset the low frequency and amount compared to other segments.

3,290

1,8522,814

10,101

2,5811,667

Agri labourer Non-agrilabourer

Privateservice

Govt. service Business Others


Page 66

Distribution of frequency and average amount remitted with occupation at

estination

By analyzing the primary use of remittance money, India Post could potentially identify opportunities to cross-sell its own and 3rd party products. For example, 27% of remitted money is used for medical treatment purposes. India Post could potentially explore possibilities of cross-selling medical insurance to such customers.

Primary use of remitted money

49%

52%

44%

68%

47%

33%

23%

34%

44%

29%

47%

67%

28%

14%

13%

4% 6% 0%

20,6

48

5,66

7

8,08

1

6,83

0

5,36

7 5,96

8

0%10%20%30%40%50%60%70%80%

Agrilabourer

Non-agrilabourer

Privateservice

Govt.service

Business Others

Ifse

nd

rem

itta

nce

0

5,000

10,000

15,000

20,000

25,000

Ave

rag

eam

ou

nt

of

rem

itta

nce

per

ann

um

(IN

R)

Remit money regularly

Don’t remit money at all

Don’t remit money regularly

Average amount of remittance per annum (INR)


Page 67

By analyzing the domestic migration pattern, India Post could identify key focus geographies (both at the source and destination) to effectively tap the domestic money remittance market. It should also analyse customer profiles in the identified geographies to be able to design products as per their specific requirements. In addition to this, India Post could explore cross-selling opportunities both at source and destination by analysing use of remittance money.


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Evaluation of identified financial products and services Based on our analysis of the operating environment of India Post financial services, financial products and services in the market (offered by global postal operators, domestic and foreign financial services players) and intra-India migration pattern analysis, we selected the following products and services for evaluation –

• Quick cash to cash transfer This service will combine the features of traditional MO and iMO. India Post IT network will be leveraged to transmit money transfer information to interconnected PO (similar to iMO) closest to destination and then sent further like a traditional MO.

• Correspondent banking (savings products) India Post can render services on behalf of a financial institution. For example, making deposits to and withdrawals from savings accounts of correspondent banks/FIs; receipt and forwarding of banking instructions - proposals for opening demand, term and savings accounts etc.

• Card/cash to card transfer In this mode of money transfer, sender uses his card or cash at a PO or ATM to transfer money and the recipient can use his card at a PO, ATM to withdraw money or use it at a POS.

• Card to cash transfer In this model, the sender loads a card at a PO or ATM and can then transfer money stored in his card. A security code will be generated which will be given to the recipient to withdraw money from a PO at the destination.

• Mobile payments This service would provide option of mobile payments using mobile technology (in partnership with mobile operator), wherein the customer’s account with India Post will be debited/credited as per nature of transaction.

• Mobile banking For using mobile banking, the sender and receiver will have an account with India Post and money could be transferred through SMS, inbuilt phone applications or WAP enabled phones.

• Many to one money transfer This service would include money transfer from multiple customers to one entity.

• One to many money transfer This service would involve money transfer from one entity to multiple customers

• Distribution of third party products General insurance: India Post could distribute general insurance products like auto insurance, crop insurance etc. These products could be marketed as a third party or as India Post’s products (white labeled). Mutual funds: India Post could distribute mutual fund products of other players. These products could be marketed as a third party or as India Post’s products (white labeled).


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Evaluation framework

Potential products and services for introduction have been evaluated on their business benefit and ease of execution. The highest priority should be given to the products with high business benefit and maximum ease of execution, leveraging existing capabilities of India Post.

New product offerings evaluation matrix

Business benefit would include following factors: • Revenue potential

o Market size o Market growth

• Competitive edge o Access to customer base and reach o Ability to leverage brands o Service responsiveness

Ease of execution would include: • Investment required • Skills to execute • Process implications


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Potential products and services evaluation

Given below is a high level description of the products on framework parameters.

Evaluation of potential products and services

Quick cash to cash transfer

Revenue potential There is a potential to achieve higher revenues (even if same tariff is charged as MO) because of faster service. Competitive edge The service would reduce time for money transfer and thus provide an edge over existing products, especially given the geographic reach of India Post. Investment Some investments will be required to ensure optimum mix of electronic and paper based money transfer operations. Skills to execute Limited training will be required to handle front office electronic transfer operations as staff is already familiar with iMO working. Process implications India Post will need to redesign business processes to move towards a centralized platform. It will also need to review cost allocation between electronic and paper based mode of money transfer. Critical success factors

• Networked branches • Product awareness • Operating skills

Revenue potential

Competitive edgeBus

ines

sbe

nefit

s

Car

d/ca

shto

card

Car

dto

cash

Mob

ilepa

ymen

ts

Mob

ileba

nkin

g

Qui

ckca

shto

cash

Retail money transfer

Man

yto

one

tran

sfer

One

tom

any

tran

sfer

Bulk money transfer

Mut

ualf

und

Gen

eral

insu

ranc

e

3rd party products

Low HighLow High

Correspondent Banking

Sav

ing

prod

ucts

Skills to execute

Process implications

Eas

eof

Exe

cutio

n

Investment

Note: The higher the colour of the circle, the better is the product/service on the evaluation parameter – ‘business benefit’ and ‘ease of execution’. For example, the fully coloured circle for ‘investment’ should be read as – ‘ease of execution for investment is higher’


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Card/cash to card transfer

Revenue potential India Post could earn income from this product as money transfer fee and income from saving account created at the sender and receiver end (commission income). Competitive edge The product will provide increased flexibility to transfer money using a PO or ATM. It will have the option to withdraw money at PO and ATM or transact at POS. The transaction will have a reduced transfer time over traditional products. Investment Network connectivity required for the products success will need heavy investment. There will be additional investment on alliance with VISA/MasterCard (to enable the card to be used at all ATMs). Skills to execute This will be a self service channel and thus would require limited training to handle front office operations. Process implications India Post will need to design new business processes to move towards a centralized card based platform. Critical success factors

• Networked branches • Product awareness • Product acceptance

Card to cash transfer

Revenue potential India Post could earn income from this product as money transfer fee and income from saving account created at the sender end (commission income). Competitive edge The product will provide increased flexibility to transfer money using a PO or ATM. The transaction will have a reduced transfer time over traditional products. Investment Network connectivity required for the products success will need heavy investment. There will be additional investment on alliance with VISA/MasterCard (to enable the card to be used at all ATMs). Skills to execute This will be a part self service channel and thus would require some training to handle front office card based money transfer operations. Process implications India Post will need to design new business processes to move towards a centralized card based platform. Critical success factors

• Networked branches


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• Product awareness • Product acceptance

Mobile payments

Revenue potential India Post could earn income from this product from saving account created with India Post (commission income). India Post could also earn revenues from money transfer fee (shared with mobile operator). Competitive edge The product will provide high coverage for disbursement of cash and will have a reduced transfer time over traditional products. Investment This product would require considerable investment as mobile service provider would prefer India Post to provide single interface to debit/credit customers account. Skills to execute Limited training will be required as India Post will not handle front office operations. Process implications India Post will need to design processes to provide required business interface with alliance partners and redesign processes to provide near time information on customer’s account. Critical success factors

• Networked branches • Tie-up with mobile payment service providers (e.g. mobile operators) • Product awareness • Product acceptance

Mobile banking

Revenue potential India Post could earn income from this product as money transfer fee and income from saving account created with India Post (commission income). Competitive edge The product will provide high coverage for disbursement of cash and will have a reduced transfer time over traditional products. Investment Mobile banking transactions will require single application, centralised hardware and network and thus considerable investment. Skills to execute Limited training will be required as this is a self serviced channel and India Post will not handle front office operations. Process implications


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India Post will need to undertake process re-engineering driven by the need of a single application housed in a centralised environment. Critical success factors

• Networked branches • Centralized application • Product awareness • Product acceptance

Many to one money transfer

Revenue potential Under this service, transaction fee would be charged from the entity. The potential to earn revenues could be very large given the scope to introduce multiple services. Competitive edge A distinct competitive advantage would be the distribution network of India Post providing wide coverage to the client. It would enable to provide reduced time for transfer (especially given that India Post is member of clearing house). Investment The service would require some investment to be able to provide electronic transfer/MIS facility to the client. Skills to execute Basic training may be required for special functions of clearing and settlements, preparing MIS etc. Process implications India Post will need to undertake design process for collection, settlement and payments. Redesign processes will need to leverage economies of scale and scope. Critical success factors

• Distribution reach • Member of clearing house

One to many money transfer

Revenue potential Under this service, transaction fee would be charged from the entity. The potential to earn revenues could be very large given the scope to introduce multiple services. Competitive edge A distinct competitive advantage would be the distribution network of India Post providing wide coverage to the client. It would enable to provide reduced time for transfer (especially given that India Post is member of clearing house). Investment The service would require some investment to be able to provide electronic transfer/MIS facility to the client.


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Skills to execute The need for special skill requirement will be low as most of the transactions would be account to account or in-hand transfer. Process implications India Post will need to design processes for disbursement of cash and overall improvement in efficiency. Critical success factors

• Distribution reach

Distribution of third party general insurance products

India Post could distribute general insurance products like auto insurance, crop insurance etc. These products could be marketed as a third party or as India Post’s products (white labeled). Revenue potential General insurance is an under penetrated market in India. There has been healthy industry growth in the last few years. There is immense scope to distribute multiple insurance products. Competitive edge A distinct competitive advantage would be the distribution network of India Post providing wide coverage to the client. Investment No significant investments would be required to distribute these products. Skills to execute India Post staff would require some certifications to enable India Post to act as an agent for an insurance company. Process implications There will not be any significant process implications for launching these services. Critical success factors

• Distribution reach • Brand and reputation of the partner • Partner proposition • Required skills and product knowledge

Distribution of third party mutual funds

Revenue potential General insurance is an under penetrated market in India. There has been healthy industry growth in the last few years. There is immense scope to distribute multiple mutual fund products. Competitive edge A distinct competitive advantage would be the distribution network of India Post providing wide coverage to the client.


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Investment No significant investments would be required to distribute these products. Skills to execute India Post staff would require some certifications to enable India Post to sell mutual fund products. Process implications There will not be any significant process implications for launching these services. Critical success factors

• Distribution reach • Brand and reputation of the partner • Partner proposition • Required skills and product knowledge


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Mapping of products to evaluation parameters

One of the most important aspects in the above mentioned products and services has been the need for a technology platform (in terms of hardware, software and networking) which could be used to launch some of the technology enabled products like card and mobile based money transfers. India Post will only be able to launch some of the products discussed above after the required technology infrastructure has been setup. The figure below highlights the possible timeframe to launch few products based on India Post’s existing IT plans (information gathered based on interaction with India Post’s representatives).

Technological capabilities required to launch potential products and

services

Based on this evaluation, products and services have been mapped to the evaluation matrix…

Mapping of potential products and services to evaluation matrix

Decentralised hardware

Distributed applications

No network



No network

* Technology timelines based on discussion with Director Technology, India Post.



Internet (4,000+), Intranet (< 650)



Internet (4,000+), Intranet (< 650)

National Data Centre

Centralised applications

Intranet (1,300*)



Intranet (1,300*)



Intranet (26,000*)



Intranet (26,000*)



Intranet (26,000 + 35,000 ED*)



Intranet (26,000 + 35,000 ED*)


Single application

Intranet (26,000 + 35,000 ED*)


Single application

Intranet (26,000 + 35,000 ED*)

current situation

6 months*

2 years* 5years*

c d e

Quick cash to cashMany to one transfersOne to many transfersCorrespondent banking (savings products)

Card to cash transfersCard/cash to card transfersMobile payments

Mobile banking

Product launch capability

c d e

HighHigh

ines

sb

enef

it

5

43

2

1

6

7

8

1. Quick cash to cash

2. Many to one transfer

3. One to many transfer

4. General insurance

5. Mutual fund

Priority 3 Priority 110


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Based on the evaluation matrix mapping, quick cash to cash, many to one money transfer, one to many money transfer and general insurance distribution emerge as the top priority products for India Post. In addition to these products, India Post should also give priority to distribution of general insurance and mutual fund products. All these products have high business benefit while requiring high ease of execution. Other technology enabled products like card and mobile based money transfers require very high investments and the acceptance of such products with the users, especially in rural India, is not established yet. India Post should reconsider launching these products once it has acquired the technology capability to launch these products.


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Strategic plan for India Post’s financial services

Operating model

Quick cash to cash money transfer

This service will combine the features of traditional MO and iMO. India Post IT network will be leveraged to transmit money transfer information to interconnected PO (similar to iMO) closest to destination and then sent further like a traditional MO.

Operating model for quick cash to cash money transfer

Value proposition The products would be positioned as fast, reliable and product with no need of a bank account to transfer money.


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Process flow

Structure Sending end operator

• Take money order request • Send request to the nearest interconnected destination post office • Acknowledge receipt of payment

Intermediary post office operator • Retrieve money transfer information from different post offices • Sort money transfer information based on common destination • Send money transfer as traditional money order

Receiving end operator • Receive money order • Send cash to beneficiary

Correspondent banking (savings products)

India Post could render services on behalf of a financial institution. For example, • Making deposits to and withdrawals from savings accounts of correspondent

banks/FIs • Receipt and forwarding of banking instructions - proposals for opening demand,

term and savings accounts etc. These services can be further enhanced when the post offices are connected with National Date Centre and the exchange of information between the post office and financial institution is possible on a real/near time basis. Value proposition for the client

• Economic: reduction in banking (e.g. collection) cost of the financial institution • Convenience: the client will have to interface with only India Post

Value proposition for the beneficiary


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• Convenient because of extensive post offices reach Target consumer mapping

SEC R1 SEC R2 SEC R3 SEC R4 SEC A SEC B SEC C SEC D SEC ETarget consumer

mapping

Account Holder 9 ±9 ± ± ± 9 9 9


Under many to one money transfer, India Post could potentially provide services like… Collection of loan EMIs

• Global examples: New Zealand Post Collection of bill payments

• Global examples: Australia Post, UK Post Office, New Zealand Post, South Africa Post Office, Japan Post

Collection of regular investments • Global examples: Australia Post, UK Post Office

These services could have a distinct set of value propositions for the client as well as the beneficiary… Value proposition for the client

• Economic: reduction in collection cost and paperwork of payee organisation • Convenience: the client will have to interface with only India Post

Value proposition for the beneficiary • Convenient because of extensive post offices reach • Ability to pay different bills at same location

Operating model for many to one money transfer


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Process flow for many to one money transfer

Structure Relationship Manager at HQ

• Maintain business relationship with client • Coordinate with different circles to resolve client issues • Monitor SLA

Operations Manager at Head PO • Manage receipts of funds from branch & sub PO • Oversee clearing and settlement process • Coordinate with other head POs to send/receive remittance advice • Provide MIS to client

One to many money transfer

This could include services like… Pension payment

• Global examples: UK Post Office, South Africa Post Office, Japan Post Salary payment

• Global examples: Japan Post Distribution of interest & dividend

• Global examples: UK Post Office The product would be positioned as… Value proposition for the clients


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• Economic: Savings in administrative cost presently being incurred for printing of paper instruments in MICR format and dispatching them by registered post

• Convenient: The client will have to interface with only India Post Value proposition for the beneficiary

• Prompt payment on the due date • Convenient to withdraw money at the nearest post office

Operating model for one to many money transfer

Other features of the service… For beneficiaries holding an account with India Post

• Partner client should make the payment around 5 days before the due date • When the cash is realised by the recipient post office, a remittance advice would

be sent to the destination post office (electronically or paper based) • The beneficiary’s account will be updated accordingly • Beneficiaries will have to come to the post office to withdraw money

For beneficiaries not holding an account with India Post • Partner client should make the payment around 10 days before the due date • This time lag will reduce substantially once the post offices are networked and the

remittance advice can be sent from one post office to another electronically


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• The beneficiary will receive cash on or before the due date and acknowledge the same

Process flow for one to many money transfer

Structure Relationship Manager at HQ

• Maintain business relationship with client • Coordinate with different circles to resolve client issues (e.g. delay in payment to

beneficiaries) • Monitor SLA

Operations Manager at Head post office • Manage receipts of funds from the client • Oversee clearing and settlement process • Coordinate with destination head PO to send/receive remittance advice • Provide MIS to client

Target customer segments

India Post needs to adopt customer segmentation enabling it to provide financial products and services to its customer catering to their specific needs. Customer segmentation will enable India Post to…

• Enhance customer focus • Prioritize market segments • Align customer-channel-product strategy • Proactively respond to competitive pressures • Respond to market and regulatory changes

…and answer few key questions… • Who are India Post’s customers (demographics, behavior, likes and dislikes)?


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• What product types to different customers buy? • What are their channel preferences and barriers? • What is the potential value of their relationship to India Post? • What makes them stay with us/likely to leave India Post?

India Post is already offering some products specific to certain customer segments. India Post’s Rural Postal Life Insurance (RPLI) is based on geographic segmentation and is targeted specifically for its rural customers. Senior Citizen Savings Scheme (SCSS) is designed based on age segmentation to benefit citizens who have attained age of 60 years or above on the date of opening of the account or have attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement. Retired personnel of defence services can also open such accounts. India Post could consider Socio-Economic Classification (SEC) as a potential basis for customer segmentation. SEC for urban population is based on occupation and education.

SEC classification for urban population

SEC for rural population is based on education of chief wage earner and type of house.


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SEC classification for rural population

Products and services could be mapped to the identified customer segments. Given below is the potential mapping of India Post’s products and services (own and third party) to different customer segments as per their specific needs and requirements…

Mapping of India Post’s products and services to urban SEC segments


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Mapping of India Post’s products and services to rural SEC segments

For quick cash to cash money transfer, India Post could target all traditional money order customers. For correspondent banking, India Post could target Old and New Private sector banks and NBFCs. In case of many to one money transfer, target clients could be - Collection of loans EMI

• Banks • NBFCs • Micro-finance institutions

Collection of bill payments • Telecommunication companies • Electricity supply companies

Collection of regular investments • Insurance companies • Asset management companies

Distribution channels

India Post currently uses only face-to-face distribution channels to reach out to its customers

• Post offices (includes Head Post Offices, Sub-Post Offices, Extra Departmental Sub-Post Offices, Extra Departmental Branch Post Offices)

• Postal financial marts • Small savings agents (includes Standardised Agency System (SAS), Mahila

Pradhan Kshetriya Bachat Yogana (MPKBY) and Public Provident Fund (PPF) agents)

• Postal representatives Going forward, in addition to these traditional channels, India Post could also consider introducing some new distribution channels - Drop boxes


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Drop boxes could placed at post offices and used to collect cheques for payments, deposits etc. for India Post as well as on behalf of its other partners (e.g. credit card applications, credit card and loan payments). Mobile post office India Post’s roving post offices could help provide postal services in areas with scattered population clusters. Mobile post offices would enable India Post to cover areas where having a post office is not commercially feasible and thus increase the effective reach especially in remote areas. The customers would have the convenience of availing all postal and financial services provided by a post office at their doorstep. Once introduced, India Post will need to create awareness of the roving outlet facility visit timings and frequency to each population cluster to enable them to benefit from its presence in their respective areas.

Illustrative working of a mobile post office

Once India Post is able to extend network connectivity to its post office and obtain other technological advancements, it could consider deploying remote distribution channels like… Internet Internet could be used to provide product information of India Post and partner products and services (including web links to partner sites e.g. for online premium calculation), account information, transactional support, status tracking of applications etc. ATM


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ATMs could be used to provide customers with facilities like cash withdrawal, account balance information, ability to recharge their stored value cards, pay bills etc. ATMs could also be used to enable customers to withdraw cash from accounts with other banks. Kiosks Kiosks would enable those customers who do not have access to internet facilities to avail the benefits of online querying their accounts, product information and transactions. These could be initially placed at key locations and rolled out to other locations based on customer response. IVR and call centres Customer service representative assisted call centres and IVR could be used to provide support to India Post’s sales and service activities (e.g. product information, account queries, transactional support, outbound marketing, complaint handling). Customer migration to these potential remote channels would provide speed, cost efficiency, ease of operation and accuracy, thus benefiting both the customers as well as India Post. When introduced, India Post could potentially adopt the following approach…

• Awareness (Do customers know about what they can do on the web?)• Ability (Do they have what they need?)• Incentive (Do they want to?)• Experience (Have they done it, at least once?)• Sanction (Dissuade them from doing anything else?)• Segmenting customer base by activities and prioritising selected groups to the

web India Post will also need to map its distribution channels to different customer segments.

Mapping of distribution channels to urban SEC population

Mapping of distribution channels to rural SEC population


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Partnerships

India Post will need to identify (new) and evaluate (existing, new) partners for distribution of third party products (e.g. general insurance and mutual fund products). The current partnerships with AMC and Insurance companies have not resulted in much revenue for India Post. Key reasons include –

• Product training: The post office employees are not trained adequately to sell third party products. For example, very few are AMFI certified to sell mutual funds (as a result of which they do not have sufficient product knowledge). The training conducted by alliance partners is not very effective as the training (including the training material) is often not in vernacular language.

• Motivation: The current incentive structure does not motivate the employees to sell third party products.

• Soft skills: The post office employees lack the soft skills to sell and market the third party products.

There is a need for a structured partnership evaluation framework to ensure that India Post gains a significant value from such partnerships. To ensure that India Post enters into a profitable and beneficial partnership, it needs to answer a few key questions…

• What are the products and services that India Post would like to offer to its customer segments? o As a manufacturer (own offerings) o As a distributor (partner offerings) o As a service provider (leverage own capabilities to provide services to

partners) Once these questions have been answered and India Post will need to identify potential partners…


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• Identify broad categories of financial services partners that IP would like to work with o Type (e.g. bank, NBFC, insurance company) o Category (e.g. PSU, private, MNC, other)

• Identify appropriate partners by applying a structured evaluation framework Once partners have been identified, India Post needs evaluate the partnership options and then develop a business and operating model for the partnership…

• Outline details of the partnership – what are the objectives of the partnership and how will it operate?

• Rationale – what evidence is there of need and what additional benefits will there be to existing arrangements?

• Strategy – which strategic priorities will your partnership meet? • Resources – what human, physical and financial resources will be needed to

support this partnership? • Results – what will be achieved by implementing this partnership? • Monitoring – what sources of information will you use for your performance

measures and how often will you review performance? To evaluate a potential partnership, India Post could use the following two step filtering process… Step I – Identify partner attributes

• Brand & reputation: The partner should have a strong image and perception. India Post should look at partner’s credentials and market share in selected product line

• Reliability: Ease of dealings; consistency and reliability in operations • Partner proposition: Does the alliance add value to India Post’s value proposition

to its customers? • Profitability: Will the results have a positive impact on India Post’s bottomline? • Ongoing support from the partner: Evaluate partner’s ability to provide ongoing

support to India Post in terms of marketing and training • Timely payment: Will the partner provide fees/revenue sharing to India Post with

detailed MIS in a responsive manner Step II – Evaluate partner products and services attributes

• Attributes: Are their attractive product features that would appeal to India Post’s customer segments?

• Convenience: How easy is it for the customer to access the partner for both sales and service?

• Service quality: How responsive is the service delivery (e.g. turnaround times, ease in resolution of complaints)?

• Ease of operation: What is the extent of simplified procedures? What’s India Post’s ability to leverage its capabilities in distributing partner products?

• Provisioning of training: Is the partner providing ongoing enhancement of India Post staff capabilities in technical training to grow sales?


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Product marketing

India Post will need to position itself as faster and reliable provider of wide range of financial services with unmatched reach and convenience. India Post will need to follow aproduct driven strategy positioning India Post as offering outstanding value products and services. India Post should leverage deep customer intimacy, especially personal relationship of postal representatives at the rural level. Additionally, the relationship with the customer begins with account opening and should be nurtured to grow the overall value to India Post. An example of account opening process could be… India Post should focus on scale and brand driven product provision, competing on a variety of factors (e.g. price, features like speed, reach etc.) and striving to sell its own

and third party financial products. It should focus on customer convenience, holistic service and consistency of interaction. There is a need to undertake marketing campaigns (e.g. brochures, banners, pamphlets etc.) to provide simple and clear communication of product features and benefits. The head office should seek inputs from post offices, undertake customer surveys, scan competitor products and refine products by improving feedback loop. It will need to review customer feedback on an ongoing basis to improve products and services and make the customer experience better.

Product management approach

India Post will need a structured product management approach to enable specific thrust on growing sales. India Post will need to set up a product management function which would focus on ongoing interaction with customers and post offices to promote sales and identify/mitigate any bottlenecks.

Product management approach


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India Post should assign Product Managers to spearhead management of identified products and encompass new product launch, product development and promotion. It should identify required skill sets for Product Management and identify suitable candidates for the position. Product performance vis-à-vis internal targets, competitor position and emerging trends should be evaluated and tracked to refine products (including features, pricing, positioning, distribution) based on customer feedback, performance and competitor offerings and also introduce new products. Sales targets should be allocated between post offices within the circle and India Post should aggressively focus on growing product sales. Achievement of sales targets should be monitored on a regular basis. Feedback should be provided based on performance and corrective action should be taken as and when required. India Post will need to provide support to sales efforts through marketing and promotion.

Cross-selling

India Post could cross-sell its products to the existing customers by adopting a product


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sequencing approach. Some of the potential cross-selling opportunities could be… To achieve higher cross-selling, India Post will need to incentivise post offices and staff to cross-sell by redefining the role of front line staff and setting KPIs for cross selling and customer profitability. Goals should be set that are quantifiable and measurable and ensure that employees understand and support the goals. India Post could introduce customer service award, great idea award and high performance post office award to encourage employee participation and ownership. On the customer side, India Post could potentially introduce promotional discount schemes to encourage product usage. For example, India Post could offer three coupons with 40% discount on fee for sending money orders to all savings account holders. This would encourage the non-account holders sending money orders to open savings account with India Post. There is an opportunity to earn additional INR 50 crore, if 25% of non-account holders open account with India Post because of this offer (Refer to annexure Ifor detailed calculations). In addition, India Post could enhance its ability to cross-sell in the long term by enriching customer information to facilitate deeper understanding. India Post will need to identify critical personal information needed for each customer (e.g. age, income, profession, asset ownership etc.) in order to build a database.

Product bundling

India Post could consider product bundling to provide a more compelling value proposition to its customers. India Post is currently offering personal accident insurance as a bundled offer with every savings account opened with itself. India Post may consider offering other combined product offers based on customer interest, feedback and revenue impact in terms of fee income. Some examples could include offering RD account with postal savings deposit account with a facility to auto debit each month or providing third party bundled products (e.g. vehicle insurance with vehicle loan applications received)

Training

Internal education and awareness program will be needed to ensure clear understanding of all products and services. There is a need to review, develop and implement training programs in selling skills, customer service orientation and soft skills. Training effectiveness should be measured and coverage of a wider base of employees needs to be ensured. India Post should encourage sharing of successful sales experiences by staff during training programs.


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High level business plan for new products and services We have developed a high level business plan for the proposed products and services…

• Quick cash to cash money transfer • Correspondent banking (savings product) • Many to one money transfer

…indicating incremental revenues and expenses for India Post with a time horizon of five years. Financial plan includes sensitivity analysis for three different scenarios…

• Realistic scenario • Optimistic scenario • Conservative scenario

Financial projections for realistic scenario (For detailed assumptions, calculations and results of other scenarios, refer to annexure II)



3434342525Total





43483451274021191634Total








3434342525Total





43483451274021191634Total






*Assuming 25% of the other revenues comes from other financial services (apart from savings and MO products); Staff expenses are not considered

**Quick cash to cash money transfer will result in cost savings as indicated in the table above; Additional Staff expenses not considered.

# Indicates non staff incremental expenses not significant;


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Pilot implementation plan


Project owner: Product Manager at IP HQ Other involvement: DDG FS, CPMG, Product Manager at circles Activity 1:

• Identify locations where this service can be rolled out based on o Current state of technology infrastructure in the post offices o Target customer mapping

Responsibility: India Post (Product manager, DDG FS) Time duration: 0-24 months (add locations on an ongoing basis) Activity 2:

• Redesign processes to transfer money transfer information electronically to interconnected post offices o Develop detailed process flows for part online money transfer o Study as-is process for paper based money transfer o Incorporate elements of online money transfer to the existing process

Responsibility: India Post, external consultant Time duration: 1 month Activity 3:

• Design and implement to incorporate a module in the existing online money transfer application to o Accept payment o Send money transfer information to the nearest interconnected post office o Retrieve and sort money transfer information sent from different post offices

Responsibility: India Post IT department, external consultant Time duration: 1 month Activity 4:

• Train operators to accept payments, retrieve and sort money transfer information and send money transfer request o Identify batches for training o Develop training calendar for all the batches

Responsibility: India Post Time duration: 0-24 months



• Identify & evaluate potential partners on the basis of o Brand, reputation and reliability o Partner proposition and profitability


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o Target customer/consumer segments Responsibility: India Post, external consultant Time duration: 1 month Activity 2:

• Establish terms of engagement (service levels, commissions) with the partner Responsibility: India Post Time duration: 1 month Activity 3:

• Identify & train staff for managing relationship (at HQ) and operations o Identify batches for training o Develop training calendar for all the batches

Responsibility: Partner, India Post Time duration: 1 month Activity 4:

• Ensure that post offices are equipped to handle the expected cash inflow and outflow

Responsibility: India Post Time duration: Ongoing Activity 5:

• Monitor project and staff progress and ensure if business benefits are realized Responsibility: India Post Time duration: Ongoing



• Identify & evaluate potential partners on the basis of o Brand, reputation and reliability o Partner proposition and profitability o Target consumer mapping

Responsibility: India Post, external consultant Time duration: 1 month Activity 2:

• Establish terms of engagement (service levels, commissions) with the partner Responsibility: India Post Time duration: 2 months Activity 3:

• Identify & train staff for relationship managers & operations managers o Identify batches for training o Develop training calendar for all the batches

Responsibility: Partner, India Post


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Time duration: 1 month Activity 4:

• Ensure that post offices are equipped to handle the expected cash inflow Responsibility: India Post Time duration: Ongoing Activity 5:

• Train employees for functions of clearing and settlements & preparing MIS o Identify batches for training o Develop training calendar for all the batches

Responsibility: India Post Time duration: 2 months

Challenges

India Post will have to address some of the challenges to make the ongoing implementation smooth and effective.

• Manage cash requirements at post offices o Address existing shortfall of cash at post offices o Incorporate additional supply and demand of cash due to increased volumes

from identified products and services • Create required pull (through customer awareness and service quality)

o For quick cash to cash and many to one money transfer services, attract consumers to the post office

• Push identified products and services to achieve sales targets o Drive sales o Monitor performance

Managing cash requirements at post offices

Cash forecasting is not conducted at the Post offices to assess requirement of cash in a particular period. Request for cash is made by the Post office only after facing a shortfall. There is low authorization limit for holding of cash at each post office. Also, there is shortage of cash vans for delivery of cash at remote locations. In addition to this, there are limited arrangements with nationalized banks to handle cash disbursement. Shortfall of cash creates significant customer dissatisfaction at the post offices. Cycle time increases for domestic remittances through inland money order as the money is made available to the customers only on receipt of cash from HO/SO. Savings Bank customers are also dissatisfied and their urgent needs are not fulfilled. There are few challenges in managing cash at the post offices. Security arrangements at post offices are not adequate to retain higher amount of cash. Safety of physical cash being transferred from post office is also a concern. In addition to all this, there is opportunity cost for holding higher cash at the post offices. Each post office needs to carryout a periodical cash flow planning to assess their cash needs. Post offices should forecast their cash requirements based on receipt and payment patterns (e.g. seasonal, cyclical, long term trends). The maximum amount of cash


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retained by post offices should be reviewed periodically and movement plan for cash vans should be optimized based on the post office-wise schedule for delivery of cash. Sub post offices should be authorized to withdraw and deposit in the nearest branches of local nationalized banks.

Illustrative cash delivery network optimization

Project management and monitoring

Program management is an integral part of any implementation plan and is expected to drive overall execution of strategy. Program Management is the selection and ongoing co-ordination of a portfolio of projects that change organizations to achieve benefits of strategic importance. A Program Office comprises of a program coordinator supported by a program team responsible for initiation and planning of projects, change management and communications, risk management, trouble-shooting and overseeing implementation of individual projects by project teams. In the light of the importance of the implementation of key identified initiatives, the involvement of top level management of India Post is critical to achieve the required

business objectives. India Post will need to establish the reporting structure of program management.


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The steering group will provide strategic guidance and direction. The group will review and approve plans and key milestones and ratify significant project decisions. They will authorize start/stop of individual projects including allocation of resources. PMO orchestrates and is responsible for successful delivery of the program. It facilitates communication among senior management and project teams. It is responsible for interaction with business and support representatives for validation and development of program plan with key business and project milestones. It provides mechanism for monitoring and tracking progress regarding schedule, budget, resources and technical performance, and benefits tracking and manages the key risks and project interdependencies. Project management ensures successful delivery of the project. It develops project plans, including estimates, work breakdown structure and schedules. It also tracks project progress and maintain plans to ensure project team meets objectives within defined timescales and budget. Other tasks involve identifying key project milestones, co-ordinate and direct project team resources, ensure all deliverables and benefits are achieved and project constraints, issues and risks are identified. India Post could use the six pillars framework to ensure successful program management. Stakeholders are committed

• The right sponsor is engaged • Regular steering committee meetings are held and documented • Appropriate representation of stakeholders • Timely actions/decisions taken

Business benefits are realized • Clear articulation of business case • Solution will provide desired benefit at acceptable cost

Work and schedule are predicted • Interim and final milestones agreed upon • Appropriate approach selected • Confidence in accuracy of reports and estimates

Scope is realistic and managed • Feasible delivery commitments • Project boundaries are appropriately defined • Agreed roles and responsibilities • Changes to scope are reflected in agreed costs and schedules

Team is high performing • The project is appropriately and fully staffed • Morale is healthy • The environment supports productive and effective teamwork

Risks are mitigated • Risks are identified • Efforts made to address risks • The quality of work products is appropriate


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India Post would need to track progress of each identified project on these pillars on a regular basis.

A continuous monitoring of the projects would ensure that issues are highlighted and resolved at an early stage.

Change management

India Post will need to define change strategy and assess change readiness for implementing these projects. It will need to create a change vision by developing a compelling proposition. It would require building commitment by communicating with all stakeholders. It will need to develop culture conducive to change (in terms of values, behaviour and mindset). India Post must communicate benefits of actions before implanting any initiatives. Immediate stakeholder attitudes may not embrace the prospect of change but proper change management is integral to any project and enables commitment and ownership to ensure successful completion.


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Annexure I – Discounts on money orders Commission paid by MoF per account = INR107 Based on visits to Post Offices in Bihar and MP Average amount per Money Order (MO) = INR 694.12 Calculated based on figures from Book of Information (2004-05) Frequency of sending MOs in a year Figures used for calculating weighted average 1 5% 1 2 15% 2 3 15% 3 4 15% 4 5 20% 5 More than 5 30% 8 Total 100% Average number of MOs sent in a year (for which India Post have to offer a discount) = 2.75 All frequency figures assumed; average number of MO calculated based as weighted average of assumed numbers, with maximum number of discounts limited at 3 MO charge = 5% Discount given to customers with account per MO = 30% Equation used: Commission paid by MoF per account - (Average amount per MO * MO charge * Discount rate * Average number of MOs sent in year) = Amount earned by IP per new account Amount earned by IP per new account = INR 78.37 Total number of MOs sent in a year = 95.79 million From India Post annual report 2005-06 % MOs sent by customers with accounts = 5% Assumed Number of MOs sent by customers without accounts = 91.00 million Number of customers sending MOs without account = 33,091,091 Number of MOs sent by customers without accounts / Average number of MOs sent in a year % non-account customers sending MOs opening accounts because of this new offer = 25% Number of new accounts opened = 8,272,773 Total amount earned by IP from this new offer = INR 64.83 crore Total revenues lost = INR 13.71 crore from customers currently having account with India Post and sending MO Total amount earned by IP from this new offer = INR 51.12 crore Amount earned by IP per new account * Number of new accounts opened

Sensitivity analysis

% non-account customers sending MOs opening accounts because of this new offer

Amount earned by India Post from this offer (INR crore) 10% 15% 20% 25% 30% 35% 40% 45% 50%

10% 27.68 43.80 59.93 76.05 92.18 108.30 124.43 140.55 156.67 15% 23.81 39.15 54.48 69.82 85.15 100.49 115.82 131.16 146.49 20% 19.95 34.49 49.04 63.59 78.13 92.68 107.22 121.77 136.31 25% 16.08 29.84 43.60 57.35 71.11 84.86 98.62 112.38 126.13 30% 12.22 25.19 38.15 51.12 64.08 77.05 90.02 102.98 115.95 35% 8.35 20.53 32.71 44.88 57.06 69.24 81.42 93.59 105.77 40% 4.49 15.88 27.26 38.65 50.04 61.43 72.81 84.20 95.59 D

isco

untg

iven

tocu

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wit

hac

coun

tper

MO

45% 0.63 11.22 21.82 32.42 43.02 53.61 64.21 74.81 85.41


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50% (3.24) 6.57 16.38 26.18 35.99 45.80 55.61 65.42 75.22


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Annexure II – Financial projections


Assumptions (realistic scenario) Number of money orders being issued yearly = 95,790,000 from India Post annual report, 2007 Increase in money order volume in year 1 = 5% Increase in money order volume by year 2 = 7% Increase in money order volume by year 3 = 10% Increase in money order volume by year 4 = 11% Increase in money order volume by year 4 = 12% Average revenue per MO = INR 27.39 India Post annual report, 2007 Average cost per MO = INR 53.2 India Post annual report, 2007 Reduction in cost per MO in year 2 due to electronic transfer = 25% Reduction in cost per MO by year 3 due to electronic transfer = 50% Reduction in cost per MO by year 4 due to electronic transfer = 75% Reduction in cost per MO by year 5 due to electronic transfer = 75% Revenues

Year 1 Year 2 Year 3 Year 4 Year 5 Increase in MO volume (% relative to existing)

5% 7% 10% 11% 12% Number of money orders issued (in ‘000)

100,580 102,495 105,369 106,326 107,380 Revenue (in INR ‘000)

2,754,873 2,807,346 2,886,057 2,912,293 2,941,154 Incremental revenue (in INR ‘000)

131,184 183,658 262,369 288,606 317,466

Sensitivity analysis – Incremental revenues (INR crore)

Increase in MO volume in year 1 (% relative to existing) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%2.62 5.25 7.87 10.49 13.12 15.74 18.37 20.99 23.61 26.47

Expenses

Expenses Year 1 Year 2 Year 3 Year 4 Year 5 Cost per money order (Rs) 39.9 26.6 13.3 13.3 Expense (Rs million) 4,089 2,802 1,414 1,428 Incremental expense (Rs) (1,006) (2,293) (3,682) (3,668)


Assumptions Realistic Optimistic Conservative


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Revenue from telephone bill collection Total no of fixed line subscribers 40,820,000 http://labourbureau.nic.in Total no of mobile subscribers 171,200,000 http://labourbureau.nic.in Year on year growth in total subscriber base 23.4% http://labourbureau.nic.in Potential market share in year 1 4% 6% 2% Increase in market share per year 1% Commission per bill collection INR 5 Expense from telephone/electricity bill collection Time taken to process one payment at HO 1 minute Working days per month 22 Working hours per day 8 Unit FTE cost per month INR 10,000 Total number of POs 153,000 Number of HOs & SOs 26,000 Number of Head post offices 500 Number of networked post offices - Year 1 4,000 Number of networked post offices - Year 3 26,000 Cost per parcel INR 81 India Post annual report, 2007 Cost per letter post INR 7 India Post annual report, 2007 Revenue from electricity bill collection Number of electrified households – urban 47,028,369 http://www.censusindia.net Number of electrified households – rural 60,180,685 http://www.censusindia.net Y-o-Y growth of electrified households – urban 4.6% Based on CAGR between 1991-2001 Y-o-Y growth of electrified households – rural 5.9% Based on CAGR between 1991-2001 Commission per bill collection INR 5 Potential rural market share in year 1 5% 10% 3% Increase in rural market share per year 1% Potential urban market share in year 1 2% 5% 1% Increase in urban market share per year 1% Revenues – Telephone bills (realistic scenario)

Year 1 Year 2 Year 3 Year 4 Year 5 Potential addressable market size (in ’000)

212,020 261,633 322,855 398,403 491,629 Potential market share

4% 5% 6% 7% 8% Potential market share (# subscribers in ’000)

8,481 13,082 19,371 27,888 39,330 Revenues (in INR ’000)

508,848 784,898 1,162,277 1,673,291 2,359,819 Expenses – Telephone bills (realistic scenario)

Year 1 Year 2 Year 3 Year 4 Year 5 FTE cost per year (in INR ’000)

96,373 148,655 220,128 316,911 446,935


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Transfer cost per year (in INR ’000) 12,516 12,516 10,668 10,668 10,668

Revenues – Electricity bills (realistic scenario)

Year 1 Year 2 Year 3 Year 4 Year 5 Potential addressable market size - urban (in ’000)

47,028 49,192 51,454 53,821 56,297 Potential addressable market size - rural (in ’000)

60,181 63,731 67,491 71,473 75,690 Potential market share – urban

2% 3% 4% 5% 6% Potential market share – rural

5% 6% 7% 8% 9% Potential market share (# subscribers in '000)

3,950 5,300 6,783 8,409 10,190 Revenues (in INR '000)

236,976 317,978 406,955 504,537 611,398 Expenses – Electricity bills (realistic scenario)

Year 1 Year 2 Year 3 Year 4 Year 5 FTE cost per year (in INR ’000)

44,882 60,223 77,075 95,556 115,795 Transfer cost per year (in INR ’000)

12,516 12,516 10,668 10,668 10,668

Sensitivity analysis – Revenue from electricity bill collection

Potential market share –urban Year I revenue from electricity bill collection (INR crore) 1% 2% 3% 4% 5% 6% 7%

1% 6.43 9.25 12.08 14.90 17.72 20.54 23.36 3% 13.65 16.48 19.30 22.12 24.94 27.76 30.58 5% 20.88 23.70 26.52 29.34 32.16 34.98 37.81 7% 28.10 30.92 33.74 36.56 39.38 42.21 45.03 10% 38.93 41.75 44.57 47.40 50.22 53.04 55.86 15% 56.98 59.81 62.63 65.45 68.27 71.09 73.91 20% 75.04 77.86 80.68 83.50 86.33 89.15 91.97

Pot

enti

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arke

tsha

re–

rura

l

25% 93.09 95.91 98.74 101.56 104.38 107.20 110.02

Sensitivity analysis – Year I revenue from telephone bill collection (INR

crore)


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Potential market share 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%12.7 25.4 38.2 50.9 63.6 76.3 89.0 101.8 114.5 127.2


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Facts Number of Post Offices 155,333 Number of Post Offices catering exclusively to rural areas 125,350 Total number of rural households 138,271,559 Total number of rural households AHI>90,000 28,883,520 Realistic Scenario Assumptions Year 1 Year 2 Year 3 Year 4 Year 5 Target customers - Rural AHI>90000

28,883,520 28,883,520

28,883,520 28,883,520

28,883,520

Rural households (AHI>90,000) to be served per post office

20 22 24 26 28

Total number of accounts 2,507,000

2,757,700

3,008,400 3,259,100

3,509,800

Total number of account per target rural households (AHI >90000)

8.7% 9.5% 10.4% 11.3% 12.2%

Services Fee per Transaction

Avg. Ticket Size

No. of Transactions per Year

Total Fee per Account per Year

Account maintenance 30

Cash Deposit 1% 400 12 48

Cash Withdrawal 1% 100 24 24

Account statement 50 4 200

Revenue Projections

Year 1 Year 2 Year 3 Year 4 Year 5

757,114,000 832,825,400 908,536,800 984,248,200 1,059,959,600

Optimistic Scenario Assumptions Year 1 Year 2 Year 3 Year 4 Year 5

Target customers - Rural AHI>90000

28,883,520 28,883,520 28,883,520 28,883,520 28,883,520


25 27 29 31 33

Total number of accounts 3133750 3,384,450 3635150 3885850 4136550


10.8% 11.7% 12.6% 13.5% 14.3%

Revenue Projections 946,392,500 1,022,103,900 1,097,815,300 1,173,526,700 1,249,238,100

Conservative Scenario

Assumptions Year 1 Year 2 Year 3 Year 4 Year 5 Target customers - Rural AHI>90000

757,114,000 757,114,000 757,114,000 757,114,000 757,114,000


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15 17 19 21 22

Total number of accounts 1880250 2,130,950 2381650 2632350 2757700


0.2% 0.3% 0.3% 0.3% 0.4%

Revenue Projections 567,835,500 643,546,900 719,258,300 794,969,700 832,825,400

Documents

India Post – Financial Services Increasing revenues …documents.worldbank.org/curated/en/698191468269661432/...India Post – Financial Services Page iii Mzansi money transfer offered