Ours is more than a business correspondent model: Spice Money's Dilip Modi

Spice Money has been imagined as a rural fintech company. A subsidiary of the listed DiGiSPICE Technologies, its Adhikari network covers 95 per cent of the country’s rural pin-codes and serves over 20 million customers every month. Dilip Modi, founder of Spice Money, spoke with Raghu Mohan about his platform. Edited excerpts:

Spice Money has been imagined as a financial bridge to rural India. How different will you be from legacy players and fintechs in the same space?

For us, all of them are partners — be it banks, NBFCs (non-banking financial companies) or fintechs. We are building a network of digital entrepreneurs with our Spice Money Adhikari ecosystem in rural India in an economically viable manner. We are able to do that because our hook product is the AePS (Aadhaar-enabled Payment System). When you think of the banking value chain, we are starting with building out a digital micro-ATM network, where every citizen with a bank account has a need to transact with that account.
 

Like in telecom, where you have a recharge point, in banking, you have an ATM point. We have created the largest digital micro-ATM network of over 100,000 and have reached where no one else has found it economically viable. Our platform caters to customers’ banks, NBFCs and fintechs. It just doesn’t make sense for everyone to go and create their own networks. So, whoever creates it, others can ride on it; and the unit economics will only get better for all concerned.

Is this basically an originator model?
 

It starts with the originator, but when you think of products like credit, savings, investments, and insurance, it moves beyond it to a data-provider model, because there’s a huge information gap. Because a lot of data is not yet organised. When it becomes so, this could lead to underwriting models, and most importantly, improve collections. A lot of microfinance companies have a huge cost of collection — of people going to the village and collecting the money and taking it back to the branch.
 

We are saying they don’t need people to go to the village and collect money; that our digital entrepreneurs (in the village) can become the point where the customer can come and repay the loan. And once you become the collection point, then credit innovation becomes possible.
 

Would it be fair to say that yours’ is an upgraded version of the business correspondent (BC) model?
 

I am tempted to say “yes,” but don’t want to. Because the BC model was imagined in a different context of driving financial inclusion in a world where all these enablings — stacks and ecosystems — were not there. But if you are coming from the context that the BC model was imagined to drive financial inclusion and the reach of banks into areas where they could not reach with their own branches and needed BC branches to do it, then I would say “yes.”
 

The point is: in a digital context, it becomes more of a platform compared to the earlier BC model. The objective is reach and driving inclusion, but it’s also contributing in a far more significant way to achieve that objective.

What should be the interchange on cash-out at micro-ATMs?
 

Today, on AePS the interchange is 0.5 per cent of the transaction amount, and at a maximum of Rs 15. We have already brought down the cost for the bank, where it’s in single digits. Working with us, it’s more cost-effective for the bank to enable their customers to withdraw money using mobile and Aadhaar rather than a physical ATM. And I am not even including the cost of the cash required to be put into ATMs, because here you are riding on the cash of the retail ecosystem.
 

I gather there’s a lobby for the interchange to go up for cash-out at micro-ATMs also.
 

There’s always a view that the cost of building out the infrastructure is going to go up as you try and scale up the network. And because of that, it has to be compensated in some way by way of an increase in the interchange. But I believe this is a volume game. You have to innovate, and add new products to the basket. We will see how that conversation goes, but we are not relying on the interchange going up.
 

When fully mature, what kind of a company will Spice Money be?
 

Our vision is to be one of the most admired brands in rural India. We want to be the bridge between anyone wanting to serve in that space. We see ourselves effectively becoming the default stack for rural — whether it’s the payments stack, commerce stack, or financial services stack. I see us becoming one of the largest financial and digital service platforms for a billion people, which will make us one of the largest platforms in the world, with the kind of customer base we are organising ourselves to serve.