Digital Solutions for Pension Inclusion: Some examples from India

Transcription

1 Gautam Bhardwaj pinbox Solutions, Singapore Digital Solutions for Pension Inclusion: Some examples from India American Benefits Council 6 September 206

2 pinbox is a global social enterprise committed to digital pension inclusion in developing countries.

3 COMPULSIONS 3

4 Compulsions Gigantic pension coverage gap: ~450 million workers Life expectancy nearing OECD country levels ~90% of the 20 million current elderly do not get a pension; This population will double by 2030 and triple by With ~40 million taxpayers, fiscal transfers is not an option; India would need to spend $2 billion per week by 2050 to pay an old age pension of $ to its elderly. The only sustainable solution is to encourage self-provision by the current young workers. If India fails to urgently achieve broad-based pension inclusion, poverty among its elderly will rapidly emerge as the dominant cause of increased poverty in India. On the other hand, universal access and mass-market participation in a contributory pension program could generate >$0.5 trillion in retirement savings within the next decade.

5 Difficult Initial Conditions Mostly young, self-employed non-salaried individual workers spread across 3.5 million sq kms Frequent migration across jobs and locations Low intermittent incomes, potentially tiny contributions and modest balances highly sensitive to transaction costs Low literacy; Lower financial and retirement literacy: Concepts of 'retirement' or 'pension' do not resonate Sales channels have equally low financial literacy; Potential for miss-sales and miscommunication KYC challenges Insignificant insurance penetration Negligible use of banking or regulated payment systems

6 ekyc AND DIGITAL PENSION ACCOUNTS 6

7 Before ~45 mins to complete each hand-written application form Group meeting in field: on average 60% target clients agree to join Checking form and KYC at the branch 4 4 Time: Upto 8 days to process one application form 8 8 Cost: Rs.200 per form (20% of year-one contribution) 7 7 Transfer contribution to pension fund manager Courier forms to central data processing hub 4 4 Re-checking forms against KYC and data-entry Courier physical applications to CRA 7 7

8 After: Integration with NID for ekyc Biometric reader captures finger print. Transmits to UIDAI Group meeting in field: on average 60% target clients agree to join NID server verifies ID and sends back raw KYC data Time: 3 mins (instead of 8 days) to process each application Cost: Rs.5 per form (2.5% of earlier cost and 0.5% of year one contribution) Digital form and contribution transferred to CRA/ fund manager in real time direct from field Digital application with photo using ekyc data

9 D I G I TA L C O N T R I B U T I O N S 9

10 Before Field officer collects cash contributions from each new and existing client on a designated date Group meeting in field: on average 60% target clients agree to join 7 7 Lump sum transfer of reconciled funds to pension fund manager with data to CRA Cash deposit and reconciliation at branch office Time: Upto 7 days for reconciled contributions to be invested Problems: Risk of theft and reconciliation errors; Collection cycle cash-flow mismatch; High cost of cash management and theft prevention 3 3 Branch deposits cash into bank

11 After: Digital Payments for the Unbanked Each unbanked individual is provided a bank issued prepaid account and submits a standing instruction mandate that reflects her pre-committed savings amount and frequency. Client simply loads cash into her prepaid card at a convenient BC outlet as per her own cash-flow regardless of where she lives or works. A low-cost card reader attached to any mobile phone enables real-time cash-in, accounting and reconciliation in a simple transaction with zero fraud or error risk. Client's prepaid balance is kept in a bank escrow account. Pension fund Life insurance Health/ non-life Insurance Savings for known future expenses Prepaid account is automatically debited periodically as per the client's SI mandate. Reconciled aggregated contributions are transferred directly to regulated finance product providers. why does this work? Simple and easy to use. Identical to loading prepaid mobile talk-time. Real-time, automated reconciliation and cash digitization. Zero risk of fraud or errors. Security and governance. Prepaid balance kept in bank escrow a/c. Portable, convenient. Nationwide, interoperable cash-in outreach. Flexible: Allows contributions linked to each individual's own cash-flow. Automated contributions. Savings are deducted and transferred as per each person's standing Instruction mandates. Affordable: Fees linked to saving value. Do not penalize the poor.

12 USING IT FOR C U S TO M E R P R O T E C T I O N AND UNINTERRUPTED S E RV I C E S D E L I V E RY 2

13 Before Zero visibility on the sales process; Potential for miss-sales Tenure mis-match; Potential for services interruption Low visibility on complaints; Potential gaps in customer protection Non-uniform service quality; Potential for delayed claims settlement 3

14 After: National HelpLine Concurrent audit of client knowledge/ sales process compliance HelpLine calls back new clients to verify knowledge and understanding of concepts, product features, benefits, rights and processes; Also verifies field process compliance Direct two-way client connect; No clients are ever orphaned Clients simply call the HelpLine even if they change their location or stop interacting with the field partner; Reminders for upcoming contributions especially to irregular savers Simple, central complaints filing and redressal process Complaints and special client requests are centrally received, diligently monitored and automatically escalated on the basis of pre-decided TATs Single port for filing insurance claims; Uniform services quality HelpLine records claim requests and initiates claims settlement; Verifies receipt of pension benefits and insurance claims settlement 4

15 USING IT FOR NON-LINEAR OUTREACH AND DISTRIBUTION 5

16 Before ~40 million individuals work as home help (cooks, security guards, maids, drivers) Most will stop working in their early 50s. But will live till ~80 Disaggregated, hidden workforce; Difficult to locate, reach, educate and enrol for pension and insurance programs using traditional finance sales models at an affordable transaction cost Frequent migration across jobs and cities Demand aggregation could produce lower costs. But home help are traditionally not members of any group Low literacy, low financial literacy and negligible experience with modern finance 6

17 7

18 Web-based P2P Non-linear Distribution Platform Non-linear outreach and distribution model. Instantly reaches millions of individual home help across India through their employers without incurring the traditional finance sales and distribution costs. Financial literacy and knowledge delivery by educated employers using web-based tools. Zero incentives to miss-sell. Financial literacy process is neither time-bound nor transaction related. Digital application forms for an integrated social security solution impose near zero overhead on employers. Digital applications also mitigate the risk of data entry errors. Employers undertake data entry and KYC verification for their home help. 8

19 Technology for Lowers Costs Low non-linear costs through web-based outreach, product bundling, negotiated contracts with product partners, client aggregation and risk pooling. Employers bear courier and front-end enrolment processing cost (<$5/ home help - one-time). Periodic and on-demand account statements ed directly to employers. Unique, portable, client-centric individual accounts issued and administered by a central social security IT gateway. This platform integrates and manages the full ecosystem (products, payments, helpline, services), produces persistency MIS and stores individual client-level static, transactional and financial data over time across all products. 9

20 Thank You Gautam Bhardwaj