American Benefits Council | 16 September...

Global Pensions and Savings Conference | The World Bank

American Benefits Council | 16 September 2016

Digital Solutions for Pension Inclusion:Digital Solutions for Pension Inclusion:Some examples from IndiaSome examples from India

Gautam Bhardwaj | pinBox Solutions


pinBox is a global social enterprise committed

to digital pension inclusion in developing countries.


● Context

● Harnessing technology for

● Paperless enrolments

● Cashless contributions collection

● Low-cost non-linear distribution and outreach

OutlineOutline

4Global Pensions and Savings Conference | The World Bank

CONTEXTCONTEXT


- Lifetime poor and unpaid workers

- Workers already aged 50 years and above

- Informal sector workers who can save for old age

- Formal sector workers with pension benefits

India's Pension Coverage GapIndia's Pension Coverage Gap


~450 million excluded workers

Life expectancy near OECD levels

~90% of 120 million current elderly do not get a pension; This population will double by 2030 and triple by 2050

~40 million taxpayers: fiscal transfers is not an policy option

Solution? Encourage thrift and self-help for retirement by young excluded citizens

Without broad-based pension inclusion, poverty among the elderly will 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 long-term household savings within the next decade

CompulsionsCompulsions


● 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

● KYC challenges

● Insignificant insurance penetration

● Negligible use of banking or regulated payment systems

● Mandatory coverage will not work. Neither will tax incentives.

Difficult Initial ConditionsDifficult Initial Conditions


Sustainable Policy OptionSustainable Policy Option

Build scalable, technology-led mechanisms that provide secure and convenient access to simple and affordable pension and insurance solutions to citizens.

Put sustained energy and focus into encouraging thrift and self-help for old age income security by excluded young workers.

1111 2222 Harness modern developments in ID, digital payments, IT, behavioral economics and the deep interlinkages with financial inclusion initiatives.

3333


eKYC ANDeKYC ANDDIGITAL PENSIONDIGITAL PENSION

ACCOUNTSACCOUNTS

p i n B o x S o l u t i o n sp i n B o x S o l u t i o n s


Time: Upto 18 days to process one application form

Cost: Rs.200 per form (20% of year-one contribution)

Group meeting in field: on average 60% target clients agree to join

1111

~45 mins to fill each hand-written application; Collect KYC copy, photograph and first contribution

Each form and KYC is checked at field partner branch

4444

7777

1414141417171717

18181818

1111

Branch couriers forms to central data processing hub

Hub re-checks forms and KYC; Does data-entry

Hub couriers physical applications to product provider

Field partner transfers aggregated contributions

to fund manager

BeforeBefore


After: Integration with NID for Digital EnrolmentsAfter: Integration with NID for Digital Enrolments

Time: 3 mins (instead of 18 days) to process each application

Cost: Rs.5 per form (2.5% of earlier cost and 0.5% of year one

contribution)

Group meeting in field: on average 60% target clients agree to join 1111

NID server verifies ID and transmits KYC data including photo onto tablet

1111

11111111

1111

Digital application form and contribution transferred to

product provider in real time directly from field

1111

Biometric reader captures finger print. Transmits to UIDAI

Digital application form PDF with photo created using eKYC data from NID


CASHLESS CONTRIBUTIONSCASHLESS CONTRIBUTIONS



Time: Upto 18 days for initial reconciled contributions to be

invested

Problems: High risk of theft and reconciliation errors; Collection cycle–cash-flow mismatch; High

cost of cash collection, management, fraud prevention


18181818

1111

Lump sum transfer of reconciled funds to

pension fund manager along with subscriber data

BeforeBefore

1111

Field officer collects cash contributions from each new and existing client on a designated date

1111

3333

Cash deposit and reconciliation at branch office

Branch deposits cash into bank


Time: Real-time accounting, reconciliation and transfer of cash contributions to client's

prepaid escrow account

Cost/ Risks: Zero risk of theft or reconciliation errors; Modest

cost of contributions collection


Prepaid account is automatically debited periodically as per each client's SI mandate; Increases persistency

After: Automated, Digital ContributionsAfter: Automated, Digital Contributionsby Unbanked Citizensby Unbanked Citizens

Each unbanked individual is provided a bank-issued prepaid card.

3333

Thereafter, client periodically “loads” cash onto her prepaid card at a convenient BC outlet as per her own cash-flow

A low-cost card reader attached to any mobile phone enables real-time cash-in, accounting and reconciliation in a simple transaction with zero risk of fraud or errors. Client's prepaid account balance is kept in escrow with a bank.

Reconciled contributions are

transferred directly from prepaid escrow a/c to

regulated pension fund/ insurer

Client submits a standing instruction (SI) mandate that reflects her pre-committed savings amount and frequency.


Why did this work?Why did this work?

Simple and easy to use. Identical to loading talk-time on a prepaid mobile

Real-time, automated reconciliation and cash digitization. Zero risk of fraud or errors

Security and governance. Prepaid balance is kept in a bank escrow account in each client's name

Portable, convenient. Nationwide, interoperable cash-in outreach through BC outlets

Flexible: Allows each individual to make contributions in line with her own cash-flow

Automated contributions. Savings are deducted and automatically transferred to pension fund manager/ insurer as per each person's standing Instruction mandate without any intervention by individual clients

Affordable: Negotiated fees can be a small percentage of the contribution value and hence do not penalize the poor (as flat transaction charges would).

1111

2222

3333

4444

5555

6666

7777


NON-LINEAR DIGITAL PLATFORMNON-LINEAR DIGITAL PLATFORMTO REACH HOME HELPTO REACH HOME HELP

AND WORKERS INAND WORKERS INMICRO-ENTERPRISESMICRO-ENTERPRISES



● ~40 million individuals work as home help (cooks, security guards, maids, drivers)

● Most, especially women, will stop working in their early 50s. But will live till ~80

● Frequent migration across jobs and cities

● Demand aggregation could produce lower costs. But home help are traditionally not members of any union or group

● Low literacy, low financial literacy and negligible experience with modern finance

● Disaggregated, “invisible workforce”; Difficult to locate, reach, educate and enrol for pension and insurance programs using traditional finance sales models at an affordable transaction cost

BeforeBefore


See short animated video on the concept at https://goo.gl/yokNrU

See short animated video on how it works at https://goo.gl/Zulpfz

https://goo.gl/yokNrU

https://goo.gl/Zulpfz


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.

Digital platform for P2P enrolmentsDigital platform for P2P enrolments


Lowering costs with ITLowering costs with IT

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 emailed 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.


Things are beginning to work....Things are beginning to work....


But some important challenges remain....But some important challenges remain....


Thank YouThank You

pinBox is a global social enterprise committed to

digital pension inclusion in developing countries

http://www.pinboxsolutions.com

Gautam Bhardwaj | [email protected] | +91 98100 31784

http://www.pinboxsolutions.com/

mailto:[email protected]

American Benefits Council | 16 September...

Documents

Transcript of American Benefits Council | 16 September...