Private sector lender IDFC First Bank partners with the association of MFIs Sa-Dhan and Delhi-based fintech solutions provider NextGen in a bid to bring digital microfinance solutions to millions of feature phone users, which is around 45 per cent of the mobile phone-using population and about 94 million beneficiaries under the MFI ecosystem.

The association is poised to facilitate the section of society that was so far excluded from the digital payments landscape. IDFC Bank is the partner bank in 123PAY. 

A key capability to enable here is the UPI integration – enabling simple money transfers, bill payments, merchant payments, recurring payments and EMI collection. IDFC bank, with a vision to be a “digital first” bank, has partnered with NextGen to enable UPI on the NextGen 123Pay SIM overlay platform. 

“We as a digital-first bank, see a tremendous opportunity here to expand the UPI services on the untapped, un-banked and under-banked user segment and this partnership with NextGen with their SIM overlay and the microfinance industry under Sa-Dhan, helps us reach and digitize the users,” said an IDFC Bank spokesman.

NextGen founder Taron Mohan said, “With the 3-way partnership, come many additional benefits for the beneficiaries of the MFI ecosystem including UPI, banking and wallets, bill payments system, individual and merchant money transfers and an interface enabling raising requests of micro loans and insurance.”

NextGen intends to bring technical solutions like setting up an UPI Auto pay platform for regular EMIs as an auto pay function, riding on the UPI 123Pay service platform with NPCI.  

"Micro finance institutions have their presence in over 600 districts in India and there is a need to bring in technology-based solutions to reduce the operational costs for these institutions and enable easy finance availability in tier two and tier three cities / rural areas of India. In order to enable this solution, we must target the whole gamut of humble feature phone users," Mohan added.

Sa-Dhan has over 150 MFI institutions under its umbrella and their collective grievance is the handling of cash collection against the EMIs. Since most of these MFI clients do not possess a smartphone, the digital payment becomes difficult in this segment. Hence, there is an immediate need for a cohesive digital EMI collection solution to reduce their overall operational costs through the non-smart / feature phone segment, explained Taron. 

"Digitization in collections in the microfinance sector has been a great challenge as most of the MFI clients do not possesses smartphones. In this connection, the association with NextGen and IDFC First will help in developing a new payment and collection system by using feature phones with the technological intervention being provided by them. We see a great future for this initiative to bring this segment on the digital financial inclusion platform and achieving the Prime Minister’s digital mission." said Jiji Mammen, ED & CEO, Sa-Dhan. 

There are about 45 million Individual beneficiaries under the MFI organisations and most of them are on feature phones.