Khata Kholo Har Darwaza Kholo – Eko’s Branchless Banking (Part 2)

This is part 2 of our coverage on Eko‘s Branchless Banking solution play (Part 1 is here).

Eko-SBI-Migrants = Win-Win-Win

As you may recall from our earlier analysis (Banking for India’s Domestic Migrants), nearly 50% of migrants prefer to use banks for remittances but only 30% actually use banks. They yearn for the security and reliability of formal banking channels but resort to informal channels to save time and money. A solution like Eko, straddling the formal and informal channels, provides the credibility that comes with an SBI (or ICICI) bank account and a convenience that even beats that of current informal channels – a clear win for migrants. It’s a win for SBI & ICICI because the Business Correspondent role played like Eko allows them to keep their costs low while acquiring a growing pool of Bottom of Pyramid customers.

Customer Acquisition & Marketing

Eko spends a considerable chunk of their monthly burn in marketing $. As you can imagine, it’s all offline marketing and includes things like nukkad nataks (street plays). For Eko’s profitability, it’s not sufficient that customers just open new accounts but that they actively start using the various banking services.

Revenue Model

The SBI Business Correspondent agreement was signed in Jan 2009 and a similar agreement with ICICI was signed more recently – in Jul 2010. Both banks offer similar commission structures for account opening and transactions so I wondered what criteria Eko used to decide when/where to open Eko-SBI outlets versus Ek0-ICICI outlets. According to Abhishek, an outlet/CSP’s bank affiliation is based jointly by Eko and the bank. SBI has a better brand recognition in rural India so most of the rural outlets are Eko-SBI. By the end of March 2011, of the 1300+ CSP outlets, nearly 70% were SBI and the rest were ICICI.

Commissions from remittance transactions accounts for 70-80% of Eko’s revenue. The rest of the revenue includes commissions from account opening, deposit and withdrawal transactions. Eko earns a net commission of 10-15% from all transactions and currently loses money on opening accounts.

Not just for poor migrants

Bill Gates’s words might well prove prophetic. Upon seeing an Eko demo in 2009, he famously remarked that this solution isn’t just for poor people. While Eko created this solution with migrants and bottom of pyramid customers in mind, they aren’t the only ones using it today. Analysis of their logs have revealed that folks at NIIT, IIT’s and a few prominent corporates are also using Eko for money transfer. While B2B represents only 10% of the overall transaction volume, in terms of transaction value, it is 30%. The B2B space is suddenly looking very attractive for Eko. The network of Eko outlets in the metro hubs is also attracting interest some business customers. A biryani restaurant chain is exploring the use of Eko outlets for daily cash management (a pilot program currently underway).


Eko has plenty of competition but I got the sense Abhishek is not losing too much sleep worrying about them. Not because he’s cocky but because Eko (and possibly the other players also) are all growing. Abhishek rattled off the following as apples-to-apples competition: Obopay, FINO, A Little World, and of course the SBI-Airtel joint venture.

Other competitors include general purpose mobile payment companies, Post Office, cash and havala couriers (though I believe their days are numbered), and closed loop wallets like Oxigen.

I asked Abhishek about the elephant in the room (Airtel-SBI JV). With an initial investment of Rs. 200 crores and a customer acquisition target of 3 million in the first year and an overnight CSP network of 1.5 million, the JV presents a formidable challenge not just to Eko but to the other startups in this space. Abhishek was measured in his response. He acknowledged that the well-capitalized JV backed by Airtel’s retail network needed to be taken seriously but for now it was just “wait and see”.


Eko was initially bootstrapped in 2007 with 2.5 crores ($0.5 million) from friends and family. In Mar 2009, they received a grant of $280,000 from CGAP which was followed by another grant of $1.5 million in Jun 2010. In the latter half of 2010, they closed a venture round with Colorado-based 4B Capital Fund. The investment was to be made in multiple tranches, two of which seem to have happened according to this VCCircle article. According to Abhishek, 4B Capital Fund subsequently went through some entropy so the implication is that Eko has started a fresh round of VC fundraising.


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